80 FR 70298 - Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Short Inpatient Hospital Stays; Transition for Certain Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient Prospective Payment System; Provider Administrative Appeals and Judicial Review

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services

Federal Register Volume 80, Issue 219 (November 13, 2015)

Page Range		70298-70607
FR Document		2015-27943

This final rule with comment period revises the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2016 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this final rule with comment period, we describe the changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. Further, this document includes certain finalized policies relating to the hospital inpatient prospective payment system: Changes to the 2- midnight rule under the short inpatient hospital stay policy; and a payment transition for hospitals that lost their status as a Medicare- dependent, small rural hospital (MDH) because they are no longer in a rural area due to the implementation of the new Office of Management and Budget delineations in FY 2015 and have not reclassified from urban to rural before January 1, 2016. In addition, this document contains a final rule that finalizes certain 2015 proposals, and addresses public comments received, relating to the changes in the Medicare regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports.

Federal Register, Volume 80 Issue 219 (Friday, November 13, 2015)

[Federal Register Volume 80, Number 219 (Friday, November 13, 2015)]
[Rules and Regulations]
[Pages 70298-70607]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-27943]

[[Page 70297]]

Vol. 80

Friday,

No. 219

November 13, 2015

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 410, 412, et al.

Medicare Program: Hospital Outpatient Prospective Payment and
Ambulatory Surgical Center Payment Systems and Quality Reporting
Programs; Short Inpatient Hospital Stays; Transition for Certain
Medicare-Dependent, Small Rural Hospitals Under the Hospital Inpatient
Prospective Payment System; Provider Administrative Appeals and
Judicial Review; Final Rule

Federal Register / Vol. 80 , No. 219 / Friday, November 13, 2015 /
Rules and Regulations

[[Page 70298]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 413, 416, and 419

[CMS-1633-FC; CMS-1607-F2]
RIN 0938-AS42; 0938-AS11

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

ACTION: Final rule with comment period; final rule.

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SUMMARY: This final rule with comment period revises the Medicare
hospital outpatient prospective payment system (OPPS) and the Medicare
ambulatory surgical center (ASC) payment system for CY 2016 to
implement applicable statutory requirements and changes arising from
our continuing experience with these systems. In this final rule with
comment period, we describe the changes to the amounts and factors used
to determine the payment rates for Medicare services paid under the
OPPS and those paid under the ASC payment system. In addition, this
final rule with comment period updates and refines the requirements for
the Hospital Outpatient Quality Reporting (OQR) Program and the ASC
Quality Reporting (ASCQR) Program.
Further, this document includes certain finalized policies relating
to the hospital inpatient prospective payment system: Changes to the 2-
midnight rule under the short inpatient hospital stay policy; and a
payment transition for hospitals that lost their status as a Medicare-
dependent, small rural hospital (MDH) because they are no longer in a
rural area due to the implementation of the new Office of Management
and Budget delineations in FY 2015 and have not reclassified from urban
to rural before January 1, 2016.
In addition, this document contains a final rule that finalizes
certain 2015 proposals, and addresses public comments received,
relating to the changes in the Medicare regulations governing provider
administrative appeals and judicial review relating to appropriate
claims in provider cost reports.

DATES: Effective Date: This final rule with comment period and final
rule are effective on January 1, 2016.
Comment Period: To be assured consideration, comments on the
payment classifications assigned to HCPCS codes identified in Addenda
B, AA, and BB with the ``NI'' comment indicator and on other areas
specified throughout this final rule with comment period must be
received at one of the addresses provided in the ADDRESSES section no
later than 5 p.m. EST on December 29, 2015.
Application Deadline--New Class of New Technology Intraocular
Lenses: Requests for review of applications for a new class of new
technology intraocular lenses must be received by 5 p.m. EST on March
1, 2016, at the following address: ASC/NTIOL, Division of Outpatient
Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services,
7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES: In commenting, please refer to file code CMS-1633-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to http://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address only: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1633-FC, P.O. Box 8013,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1633-FC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-7195 in advance to schedule
your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Advisory Panel on Hospital Outpatient
Payment (HOP Panel), contact Carol Schwartz at (410) 786-0576.
Ambulatory Surgical Center (ASC) Payment System, contact Elisabeth
Daniel at (410) 786-0237.
Ambulatory Surgical Center Quality Reporting (ASCQR) Program
Administration, Validation, and Reconsideration Issues, contact Anita
Bhatia at (410) 786-7236.
Ambulatory Surgical Center Quality Reporting (ASCQR) Program
Measures, contact Vinitha Meyyur at (410) 786-8819.
Blood and Blood Products, contact Lela Strong at (410) 786-3213.
Cancer Hospital Payments, contact David Rice at (410) 786-6004.
Chronic Care Management (CCM) Hospital Services, contact Twi
Jackson at (410) 786-1159.
CPT and Level II Alphanumeric HCPCS Codes--Process for Requesting
Comments, contact Marjorie Baldo at (410) 786-4617.
CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck
Braver at (410) 786-9379.
Composite APCs (Extended Assessment and Management, Low Dose
Brachytherapy, Multiple Imaging), contact Twi Jackson at (410) 786-
1159.
Comprehensive APCs, contact Lela Strong at (410) 786-3213.

[[Page 70299]]

Hospital Observation Services, contact Twi Jackson at (410) 786-
1159.
Hospital Outpatient Quality Reporting (OQR) Program Administration,
Validation, and Reconsideration Issues, contact Elizabeth Bainger at
(410) 786-0529.
Hospital Outpatient Quality Reporting (OQR) Program Measures,
contact Vinitha Meyyur at (410) 786-8819.
Hospital Outpatient Visits (Emergency Department Visits and
Critical Care Visits), contact Twi Jackson at (410) 786-1159.
Inpatient Only Procedures List, contact Lela Strong at (410) 786-
3213.
Medicare Cost Reports: Appropriate Claims and Provider Appeals,
contact Kellie Shannon at (410) 786-0416.
New Technology Intraocular Lenses (NTIOLs), contact John McInnes at
(410) 786-0791.
No Cost/Full Credit and Partial Credit Devices, contact Carol
Schwartz at (410) 786-0576.
OPPS Brachytherapy, contact Elisabeth Daniel at (410) 786-0237.
OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier
Payments, and Wage Index), contact David Rice at (410) 786-6004.
OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar
Products, contact Elisabeth Daniel at (410) 786-0237.
OPPS Exceptions to the 2 Times Rule, contact Marjorie Baldo at
(410) 786-4617.
OPPS Packaged Items/Services, contact Elisabeth Daniel at (410)
786-0237.
OPPS Pass-Through Devices and New Technology Procedures/Services,
contact Carol Schwartz at (410) 786-0576.
OPPS Status Indicators (SI) and Comment Indicators (CI), contact
Marina Kushnirova at (410) 786-2682.
Partial Hospitalization Program (PHP) and Community Mental Health
Center (CMHC) Issues, contact Dexter Dickey at (410) 786-6856.
Rural Hospital Payments, contact David Rice at (410) 786-6004.
Stereotactic Radiosurgery Services (SRS), contact Elisabeth Daniel
at (410) 786-0237.
Transition for Former Medicare-Dependent, Small Rural Hospitals,
contact Shevi Marciano at (410) 786-4487.
Two-Midnight Policy--General Issues, contact Twi Jackson at (410)
786-1159.
Two-Midnight Policy--Medical Review, contact Steven Rubio at (410)
786-1782.
All Other Issues Related to Hospital Outpatient and Ambulatory
Surgical Center Payments Not Previously Identified, contact Marjorie
Baldo at (410) 786-4617.

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

Electronic Access

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

Addenda Available Only Through the Internet on the CMS Web site

In the past, a majority of the Addenda referred to in our OPPS/ASC
proposed and final rules were published in the Federal Register as part
of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC
proposed rule, all of the Addenda no longer appear in the Federal
Register as part of the annual OPPS/ASC proposed and final rules to
decrease administrative burden and reduce costs associated with
publishing lengthy tables. Instead, these Addenda are published and
available only on the CMS Web site. The Addenda relating to the OPPS
are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the
ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html.

Alphabetical List of Acronyms Appearing in This Federal Register
Document

AHA American Hospital Association
AMA American Medical Association
AMI Acute myocardial infarction
APC Ambulatory Payment Classification
APU Annual payment update
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L.
106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Pub. L. 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAHPS Consumer Assessment of Healthcare Providers and Systems
CAP Competitive Acquisition Program
C-APC Comprehensive Ambulatory Payment Classification
CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter-associated urinary tract infection
CBSA Core-Based Statistical Area
CCM Chronic care management
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CED Coverage with Evidence Development
CERT Comprehensive Error Rate Testing
CFR Code of Federal Regulations
CI Comment indicator
CLABSI Central Line [Catheter] Associated Blood Stream Infection
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP Condition of participation
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American
Medical Association)
CR Change request
CRC Colorectal cancer
CSAC Consensus Standards Approval Committee
CT Computed tomography
CV Coefficient of variation
CY Calendar year
DFO Designated Federal Official
DIR Direct or indirect remuneration
DME Durable medical equipment
DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and
Supplies
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DSH Disproportionate share hospital
EACH Essential access community hospital
EAM Extended assessment and management
EBRT External beam radiotherapy

[[Page 70300]]

ECG Electrocardiogram
ED Emergency department
EDTC Emergency department transfer communication
EHR Electronic health record
EJR Expedited judicial review
E/M Evaluation and management
ESRD End-stage renal disease
ESRD QIP End-Stage Renal Disease Quality Improvement Program
FACA Federal Advisory Committee Act, Pub. L. 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FTE Full-time equivalent
FY Fiscal year
GAO Government Accountability Office
GI Gastrointestinal
GME Graduate medical education
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Pub. L.
111-152
HCP Health care personnel
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HCUP Healthcare Cost and Utilization Project
HEU Highly enriched uranium
HH QRP Home Health Quality Reporting Program
HHS Department of Health and Human Services
HIE Health information exchange
HIPAA Health Insurance Portability and Accountability Act of 1996,
Pub. L. 104-191
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
HPMS Health Plan Management System
IBD Inflammatory bowel disease
ICC Interclass correlation coefficient
ICD Implantable cardioverter defibrillator
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10 International Classification of Diseases, Tenth Revision
ICH In-center hemodialysis
IME Indirect medical education
IDTF Independent diagnostic testing facility
IGI IHS Global Insight, Inc.
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IORT Intraoperative radiation treatment
IPFQR Inpatient Psychiatric Facility Quality Reporting
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
IT Information technology
LCD Local coverage determination
LDR Low dose rate
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Pub. L.
114-10
MAP Measure Application Partnership
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MEG Magnetoencephalography
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act under Division B,
Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Pub. L. 110-275
MLR Medical loss ratio
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L.
110-173
MPFS Medicare Physician Fee Schedule
MR Medical review
MRA Magnetic resonance angiography
MRgFUS Magnetic Resonance Image Guided Focused Ultrasound
MRI Magnetic resonance imaging
MRSA Methicillin-Resistant Staphylococcus Aures
MS-DRG Medicare severity diagnosis-related group
MSIS Medicaid Statistical Information System
MUC Measure under consideration
NCCI National Correct Coding Initiative
NDC National Drug Code
NEMA National Electrical Manufacturers Association
NHSN National Healthcare Safety Network
NOS Not otherwise specified
NPI National Provider Identifier
NPR Notice of program reimbursement
NPWT Negative Pressure Wound Therapy
NQF National Quality Forum
NQS National Quality Strategy
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Pub. L. 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information
Technology
OPD [Hospital] Outpatient Department
OPO Organ Procurement Organization
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PAMA Protecting Access to Medicare Act of 2014, Pub. L. 113-93
PCHQR PPS-Exempt Cancer Hospital Quality Reporting
PCR Payment-to-cost ratio
PDC Per day cost
PDE Prescription Drug Event
PE Practice expense
PEPPER Program Evaluation Payment Patterns Electronic Report
PHP Partial hospitalization program
PHSA Public Health Service Act, Pub. L. 96-88
PMA Premarket approval
PN Pneumonia
POS Place of service
PPI Producer Price Index
PPS Prospective payment system
PQRI Physician Quality Reporting Initiative
PQRS Physician Quality Reporting System
PRM Provider Reimbursement Manual
QDC Quality data code
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update
RTI Research Triangle Institute, International
RVU Relative value unit
SAD Self-administered drug
SAMS Secure Access Management Services
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SES Socioeconomic status
SI Status indicator
SIR Standardized infection ratio
SNF Skilled nursing facility
SRS Stereotactic radiosurgery
SSA Social Security Administration
SSI Surgical site infection
TEP Technical Expert Panel
TIP Transprostatic implant procedure
TOPs Transitional Outpatient Payments
USPSTF United States Preventive Services Task Force
VBP Value-based purchasing
WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background
A. Executive Summary of This Document
1. Purpose
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Legislative and Regulatory Authority for the Hospital OPPS
C. Excluded OPPS Services and Hospitals
D. Prior Rulemaking
E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel
or the Panel)
1. Authority of the Panel
2. Establishment of the Panel
3. Panel Meetings and Organizational Structure
F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule
With Comment Period
G. Public Comments Received on the CY 2016 OPPS/ASC Proposed
Rule
II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative Payment Weights
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure Claims
c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
2. Data Development Process and Calculation of Costs Used for
Ratesetting
a. Claims Preparation
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure
Claims
(1) Splitting Claims

[[Page 70301]]

(2) Creation of ``Pseudo'' Single Procedure Claims
c. Completion of Claim Records and Geometric Mean Cost
Calculations
(1) General Process
(2) Recommendations of the Panel Regarding Data Development
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
(2) Brachytherapy Sources
e. Comprehensive APCs (C-APCs) for CY 2016
(1) Background
(2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016
(3) CY 2016 Policies for Specific C-APCs
f. Calculation of Composite APC Criteria-Based Costs
(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(2) Mental Health Services Composite APC
(3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006,
8007, and 8008)
3. Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
b. Packaging Policies for CY 2016
(1) Ancillary Services
(2) Drugs and Biologicals That Function as Supplies When Used in
a Surgical Procedure
(3) Clinical Diagnostic Laboratory Tests
4. Calculation of OPPS Scaled Payment Weights
B. Conversion Factor Update
C. Wage Index Changes
D. Statewide Average Default CCRs
E. Adjustment for Rural SCHs and EACHs Under Section
1833(t)(13)(B) of the Act
F. OPPS Payment to Certain Cancer Hospitals Described by Section
1886(d)(1)(B)(v) of the Act
1. Background
2. Payment Adjustment for Certain Cancer Hospitals for CY 2016
G. Hospital Outpatient Outlier Payments
1. Background
2. Outlier Calculation
3. Final Outlier Calculation
H. Calculation of an Adjusted Medicare Payment From the National
Unadjusted Medicare Payment
I. Beneficiary Copayments
1. Background
2. OPPS Copayment Policy
3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
A. OPPS Treatment of New CPT and Level II HCPCS Codes
1. Treatment of New CY 2015 Level II HCPCS and CPT Codes
Effective April 1, 2015 and July 1, 2015 for Which We Solicited
Public Comments in the CY 2016 OPPS/ASC Proposed Rule
2. Process for New Level II HCPCS Codes That Became Effective
October 1, 2015 and New Level II HCPCS Codes That Will Be Effective
January 1, 2016 for Which We Are Soliciting Public Comments in this
CY 2016 OPPS/ASC Final Rule With Comment Period
3. Treatment of New and Revised CY 2016 Category I and III CPT
Codes That Will Be Effective January 1, 2016 for Which We Solicited
Public Comments in the CY 2016 OPPS/ASC Proposed Rule
B. OPPS Changes--Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. APC Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background
2. Additional New Technology APC Groups
3. Procedures Assigned to New Technology APCs for CY 2016
a. Transprostatic Urethral Implant Procedure
b. Retinal Prosthesis Implant Procedure
D. OPPS Ambulatory Payment Classification (APC) Group Policies
1. Airway Endoscopy Procedures
2. Cardiovascular Procedures and Services
a. Cardiac Contractility Modulation (CCM) Therapy
b. Cardiac Rehabilitation
c. Cardiac Telemetry
3. Diagnostic Tests and Related Services
4. Excision/Biopsy and Incision and Drainage Procedures
5. Eye Surgery and Other Eye-Related Procedures
a. Implantable Miniature Telescope (CPT Code 0308T)
b. Other Ocular Procedures
6. Gastrointestinal (GI) Procedures
7. Gynecologic Procedures and Services
8. Imaging Services
6. Orthopedic Procedures
9. Skin Procedures
10. Pathology Services
11. Radiology Oncology Procedures and Services
a. Therapeutic Radiation Treatment Preparation
b. Radiation Therapy (Including Brachytherapy)
c. Fractionated Stereotactic Radiosurgery (SRS)
12. Skin Procedures
a. Negative Pressure Wound Therapy (NPWT)
b. Platelet Rich Plasma (PRP)
13. Urology and Related Services
14. Vascular Procedures (Excluding Endovascular Procedures)
15. Other Procedures and Services
a. Ear, Nose, Throat (ENT) Procedures
b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)
c. Stem Cell Transplant
IV. OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
a. Background
b. CY 2016 Policy
2. Annual Rulemaking Process in Conjunction With Quarterly
Review Process for Device Pass-Through Payment Applications
a. Background
b. Revision to the Application Process for Device Pass-Through
Payments
c. Criterion for Newness
3. Provisions for Reducing Transitional Pass-Through Payments to
Offset Costs Packaged Into APC Groups
a. Background
b. CY 2016 Policy
B. Device-Intensive Procedures
1. Background
2. Changes to Device Edit Policy
3. Adjustment to OPPS Payment for No Cost/Full Credit and
Partial Credit Devices
a. Background
b. Policy for CY 2016
4. Adjustment to OPPS Payment for Discontinued Device-Intensive
Procedures
V. OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. OPPS Transitional Pass-Through Payment for Additional Costs
of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Drugs and Biologicals With Expiring Pass-Through Status in CY
2015
3. Drugs, Biologicals, and Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY 2016
4. Provisions for Reducing Transitional Pass-Through Payments
for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged
Into APC Groups
a. Background
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
c. Payment Offset Policy for Contrast Agents
d. Payment Offset Policy for Drugs, Biologicals, and
Radiopharmaceuticals That Function as Supplies When Used in a
Diagnostic Test or Procedure (Other Than Diagnostic
Radiopharmaceuticals and Contrast Agents and Drugs and Biologicals
That Function as Supplies When Used in a Surgical Procedure)
B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
Without Pass-Through Status
1. Background
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
b. Cost Threshold for Packaging of Payment for HCPCS Codes That
Describe Certain Drugs, Certain Biologicals, and Therapeutic
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
c. High Cost/Low Cost Threshold for Packaged Skin Substitutes
d. Packaging Determination for HCPCS Codes That Describe the
Same Drug or Biological but Different Dosages
3. Payment for Drugs and Biologicals Without Pass-Through Status
That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and
Other Separately Payable and Packaged Drugs and Biologicals
b. CY 2016 Payment Policy
4. Payment Policy for Therapeutic Radiopharmaceuticals
5. Payment Adjustment Policy for Radioisotopes Derived From Non-
Highly Enriched Uranium Sources
6. Payment for Blood Clotting Factors
7. Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital
Claims Data

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C. Self-Administered Drugs (SADs) Technical Correction
D. OPPS Payment for Biosimilar Biological Products
1. Background
2. Payment Policy for Biosimilar Biological Products
3. OPPS Transitional Pass-Through Payment Policy for Biosimilar
Biological Products
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs,
Biologicals, Radiopharmaceuticals, and Devices
A. Background
B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
A. Payment for Hospital Outpatient Clinic and Emergency
Department Visits
B. Payment for Critical Care Services
C. Payment for Chronic Care Management Services
VIII. Payment for Partial Hospitalization Services
A. Background
B. PHP APC Update for CY 2016
1. PHP APC Geometric Mean Per Diem Costs
2. PHP Ratesetting Process
a. Development of PHP claims
b. Determination of CCRs for CMHCs and Hospital-Based PHPs
c. Identification of PHP Allowable Charges
d. Determination of PHP APC Per Diem Costs
e. Development of Service Days and Cost Modeling
f. Issues Regarding Correct Coding and Reasonable Charges
C. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Changes to the Inpatient Only List
X. Nonrecurring Policy Changes
A. Advance Care Planning Services
B. Changes for Payment for Computed Tomography (CT)
C. Lung Cancer Screening With Low Dose Computed Tomography
D. Payment for Procurement of Corneal Tissue Used in Procedures
in the HOPD and the ASC
1. Background
2. CY 2016 Change to Corneal Tissue Payment Policy in the HOPD
and the ASC
XI. CY 2016 OPPS Payment Status and Comment Indicators
A. CY 2016 OPPS Payment Status Indicator Definitions
B. CY 2016 Comment Indicator Definitions
XII. Updates to the Ambulatory Surgical Center (ASC) Payment System
A. Background
1. Legislative History, Statutory Authority, and Prior
Rulemaking for the ASC Payment System
2. Policies Governing Changes to the Lists of Codes and Payment
Rates for ASC Covered Surgical Procedures and Covered Ancillary
Services
B. Treatment of New and Revised Codes
1. Background on Current Process for Recognizing New and Revised
Category I and Category III CPT Codes and Level II HCPCS Codes
2. Treatment of New and Revised Level II HCPCS Codes and
Category III CPT Codes Implemented in April 2015 and July 2015 for
Which We Solicited Public Comments in the Proposed Rule
3. Process for Recognizing New and Revised Category I and
Category III CPT Codes That Will Be Effective January 1, 2016
a. Current Process for Accepting Comments on New and Revised CPT
Codes That are Effective January 1
b. Modification of the Current Process for Accepting Comments on
New and Revised Category I and III CPT Codes That are Effective
January 1
4. Process for New and Revised Level II HCPCS Codes That Will Be
Effective October 1, 2015 and January 1, 2016 for Which We Are
Soliciting Public Comments in This CY 2016 OPPS/ASC Final Rule With
Comment Period
C. Update to the Lists of ASC Covered Surgical Procedures and
Covered Ancillary Services
1. Covered Surgical Procedures
a. Covered Surgical Procedures Designated as Office-Based
b. ASC Covered Surgical Procedures Designated as Device-
Intensive--Finalized Policy for CY 2015 and Policy for CY 2016
c. Adjustment to ASC Payments for No Cost/Full Credit and
Partial Credit Devices
d. Adjustment to ASC Payments for Discontinued Device-Intensive
Procedures
e. Additions to the List of ASC Covered Surgical Procedures
f. ASC Treatment of Surgical Procedures That Are Removed From
the OPPS Inpatient List for CY 2016
2. Covered Ancillary Services
a. List of Covered Ancillary Services
b. Exclusion of Corneal Tissue Procurement From the Covered
Ancillary Services List When Used for Nontransplant Procedures
c. Removal of Certain Services from the Covered Ancillary
Services List That are Not Used as Ancillary and Integral to a
Covered Surgical Procedure
D. ASC Payment for Covered Surgical Procedures and Covered
Ancillary Services
1. ASC Payment for Covered Surgical Procedures
a. Background
b. Update to ASC Covered Surgical Procedure Payment Rates for CY
2016
c. Waiver of Coinsurance and Deductible for Certain Preventive
Services
d. Payment for Cardiac Resynchronization Therapy Services
e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy
Composite
2. Payment for Covered Ancillary Services
a. Background
b. Payment for Covered Ancillary Services for CY 2016
E. New Technology Intraocular Lenses (NTIOLs)
1. NTIOL Application Cycle
2. Requests to Establish New NTIOL Classes for CY 2016
3. Payment Adjustment
4. Newness Criterion
5. Announcement of CY 2016 Deadline for Submitting Requests for
CMS Review of Applications for a New Class of NTIOLs
F. ASC Payment and Comment Indicators
1. Background
2. ASC Payment and Comment Indicators
G. Calculation of the ASC Conversion Factor and the ASC Payment
Rates
1. Background
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2016 and
Future Years
b. Updating the ASC Conversion Factor
3. Display of CY 2016 ASC Payment Rates
XIII. Requirements for the Hospital Outpatient Quality Reporting
(OQR) Program
A. Background
1. Overview
2. Statutory History of the Hospital OQR Program
B. Hospital OQR Program Quality Measures
1. Considerations in the Selection of Hospital OQR Program
Quality Measures
2. Retention of Hospital OQR Program Measures Adopted in
Previous Payment Determinations
3. Removal of Quality Measures From the Hospital OQR Program
Measure Set
a. Considerations in Removing Quality Measures From the Hospital
OQR Program
b. Criteria for Removal of ``Topped-Out'' Measures
4. Hospital OQR Program Quality Measures Adopted in Previous
Rulemaking
5. Hospital OQR Program Quality Measure Removed for the CY 2017
Payment Determination and Subsequent Years
6. New Hospital OQR Program Quality Measures for the CY 2018 and
CY 2019 Payment Determinations and Subsequent Years
a. New Quality Measure for the CY 2018 Payment Determination and
Subsequent Years: OP-33: External Beam Radiotherapy (EBRT) for Bone
Metastases (NQF #1822)
b. Proposed New Hospital OQR Program Quality Measure for the CY
2019 Payment Determination and Subsequent Years: OP-34: Emergency
Department Transfer Communication (EDTC) (NQF #0291)
7. Hospital OQR Program Measures and Topics for Future
Consideration
8. Maintenance of Technical Specifications for Quality Measures
9. Public Display of Quality Measures
C. Administrative Requirements
1. QualityNet Account and Security Administrator
2. Requirements Regarding Participation Status
D. Form, Manner, and Timing of Data Submitted for the Hospital
OQR Program
1. Change Regarding Hospital OQR Program Annual Percentage
Update (APU) Determinations
2. Requirements for Chart-Abstracted Measures Where Patient-
Level Data Are Submitted Directly to CMS

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3. Claims-Based Measure Data Requirements
4. Data Submission Requirements for Measure Data Submitted Via a
Web-Based Tool
a. Previously Finalized Measures
b. Data Submission Requirements for Web-Based Measure OP-33:
External Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822)
for the CY 2018 Payment Determination and Subsequent Years
c. Proposed Data Submission Requirements for Web-Based Measure
OP-34: Emergency Department Transfer Communication (EDTC) Measure
for the CY 2019 Payment Determination and Subsequent Years
5. Population and Sampling Data Requirements for the CY 2018
Payment Determination and Subsequent Years
6. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2018
Payment Determination and Subsequent Years
7. Extension or Exemption Process for the CY 2018 Payment
Determination and Subsequent Years
8. Hospital OQR Program Reconsideration and Appeals Procedures
for the CY 2018 Payment Determination and Subsequent Years
E. Payment Reduction for Hospitals That Fail to Meet the
Hospital Outpatient Quality Reporting (OQR) Program Requirements for
the CY 2016 Payment Determination
1. Background
2. Reporting Ratio Application and Associated Adjustment Policy
for CY 2016
XIV. Requirements for the Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
A. Background
1. Overview
2. Statutory History of the Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
3. Regulatory History of the ASCQR Program
B. ASCQR Program Quality Measures
1. Considerations in the Selection of ASCQR Program Quality
Measures
2. Policies for Retention and Removal of Quality Measures From
the ASCQR Program
3. ASCQR Program Quality Measures Adopted in Previous Rulemaking
4. ASCQR Program Quality Measures for the CY 2018 Payment
Determination and Subsequent Years
5. ASCQR Program Measures for Future Consideration
a. Normothermia Outcome
b. Unplanned Anterior Vitrectomy
6. Maintenance of Technical Specifications for Quality Measures
7. Public Reporting of ASCQR Program Data
C. Administrative Requirements
1. Requirements Regarding QualityNet Account and Security
Administrator
2. Requirements Regarding Participation Status
D. Form, Manner, and Timing of Data Submitted for the ASCQR
Program
1. Requirements Regarding Data Processing and Collection Periods
for Claims-Based Measures Using Quality Data Codes (QDCs)
2. Minimum Threshold, Minimum Case Volume, and Data Completeness
for Claims-Based Measures Using QDCs
3. Requirements for Data Submitted Via a CMS Online Data
Submission Tool
4. Claims-Based Measure Data Requirements for the ASC-12:
Facility 7-Day Risk-Standardized Hospital Visit Rate After
Outpatient Colonoscopy Measure for the CY 2018 Payment Determination
and Subsequent Years
5. Indian Health Service (IHS) Hospital Outpatient Departments
Not Considered ASCs for the Purpose of the ASCQR Program
6. ASCQR Program Validation of Claims-Based and CMS Web-Based
Measures
7. Extraordinary Circumstances Extensions or Exemptions for the
CY 2018 Payment Determination and Subsequent Years
8. ASCQR Program Reconsideration Procedures
E. Payment Reduction for ASCs That Fail to Meet the ASCQR
Program Requirements
XV. Short Inpatient Hospital Stays
A. Background for the 2-Midnight Rule
B. Policy Clarification for Medical Review of Inpatient Hospital
Admissions under Medicare Part A
XVI. Transition for Former Medicare-Dependent, Small Rural Hospitals
(MDHs) Under the Hospital Inpatient Prospective Payment System
A. Background on the Medicare-Dependent, Small Rural Hospital
(MDH) Program
B. Implementation of New OMB Delineations and Urban to Rural
Reclassifications
XVII. Final Rule: Appropriate Claims in Provider Cost Reports;
Administrative Appeals by Providers and Judicial Review
A. Proposed Changes Included in the FY 2015 IPPS/LTCH PPS
Proposed Rule
B. Summary of Related Changes Included in the FY 2015 IPPS/LTCH
PPS Final Rule
C. Specific Provisions of the FY 2015 IPPS/LTCH PPS Proposed
Rule
1. Background for Payments and Cost Reporting Requirements
2. Background for Administrative Appeals by Providers and
Judicial Review
3. Background for Appropriate Claims in Provider Cost Reports
D. Addition to the Cost Reporting Regulations of the Substantive
Reimbursement Requirement of an Appropriate Cost Report Claim
1. Proposed Provisions (New Sec. 413.24(j))
2. Statutory Authority and Rationale for Proposed Sec.
413.24(j)
3. Summary of Public Comments, CMS Responses, and Statement of
Finalized Policies for Sec. 413.24(j)
E. Revisions to the Provider Reimbursement Appeals Regulations
1. Elimination of the Jurisdictional Requirement of an
Appropriate Cost Report Claim
a. Proposed Revisions to Sec. Sec. 405.1835 and 405.1840
b. Summary of Public Comments and Our Responses and Finalized
Policies
2. Board Review of Compliance With Cost Report Claim
Requirements Under Sec. 413.24(j)
a. Proposed Addition of New Sec. 405.1873
b. Summary of Public Comments and Our Responses and Finalized
Policies
3. Related Revisions to Sec. 405.1875 Regarding Administrator
Review
4. Conforming Changes to the Board Appeals Regulations and
Corresponding Revisions to the Contractor Hearing Regulations
a. Technical Corrections to 42 CFR part 405, subpart R and All
Subparts of 42 CFR Part 413
b. Technical Corrections and Conforming Changes to Sec. Sec.
405.1801 and 405.1803
c. Technical Corrections and Conforming Changes to Sec. Sec.
405.1811, 405.1813, and 405.1814
d. Addition of New Sec. 405.1832
e. Revisions to Sec. 405.1834
f. Technical Corrections and Conforming Changes to Sec. Sec.
405.1836, 405.1837, and 405.1839
F. Collection of Information Requirements
G. Impact of Requiring Appropriate Claims in Provider Cost
Reports and Eliminating That Requirement for Administrative Appeals
by Providers
XVIII. Files Available to the Public Via the Internet
XIX. Collection of Information Requirements
A. Legislative Requirements for Solicitation of Comments
B. Associated Information Collections Not Specified in
Regulatory Text
1. Hospital OQR Program
2. ASCQR Program Requirements
XX. Response to Comments
XXI. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impacts for the OPPS and ASC Payment Provisions
4. Detailed Economic Analyses
a. Estimated Effects of OPPS Changes in This Final Rule With
Comment Period
(1) Limitations of Our Analysis
(2) Estimated Effects of OPPS Changes on Hospitals
(3) Estimated Effects of OPPS Changes on CMHCs
(4) Estimated Effect of OPPS Changes on Beneficiaries
(5) Estimated Effects of OPPS Changes on Other Providers
(6) Estimated Effects of OPPS Changes on the Medicare and
Medicaid Programs
(7) Alternative OPPS Policies Considered
b. Estimated Effects of CY 2016 ASC Payment System Policies
(1) Limitations of Our Analysis
(2) Estimated Effects of CY 2016 ASC Payment System Policies on
ASCs
(3) Estimated Effects of ASC Payment System Policies on
Beneficiaries
(4) Alternative ASC Payment Policies Considered

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c. Accounting Statements and Tables
d. Effects of Requirements for the Hospital OQR Program
e. Effects of Policies for the ASCQR Program
f. Impact of the Policy Change for Medical Review of Inpatient
Hospital Admissions Under Medicare Part A
g. Impact of Transition for Former MDHs under the IPPS
B. Regulatory Flexibility Act (RFA) Analysis
C. Unfunded Mandates Reform Act Analysis
D. Conclusion
XXII. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
In this document, we are updating the payment policies and payment
rates for services furnished to Medicare beneficiaries in hospital
outpatient departments (HOPDs) and ambulatory surgical centers (ASCs)
beginning January 1, 2016. Section 1833(t) of the Social Security Act
(the Act) requires us to annually review and update the payment rates
for services payable under the Hospital Outpatient Prospective Payment
System (OPPS). Specifically, section 1833(t)(9)(A) 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. In addition, under
section 1833(i) of the Act, we annually review and update the ASC
payment rates. We describe these and various other statutory
authorities in the relevant sections of this final rule with comment
period. In addition, this document updates and refines the requirements
for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC
Quality Reporting (ASCQR) Program.
Further, we are making certain changes relating to the hospital
inpatient prospective payment system (IPPS): Changes to the 2-midnight
rule under the short inpatient hospital stay policy; and a payment
transition for hospitals that lost their MDH status because they are no
longer in a rural area due to the implementation of the new OMB
delineations in FY 2015 and have not reclassified from urban to rural
under 42 CFR 412.103 before January 1, 2016.
In addition, we are finalizing certain 2015 proposed policies, and
addressing public comments, relating to the changes in the Medicare
regulations governing provider administrative appeals and judicial
review relating to appropriate claims in provider cost reports.
2. Summary of the Major Provisions
OPPS Update: For CY 2016, we are decreasing the
payment rates under the OPPS by an Outpatient Department (OPD) fee
schedule increase factor of -0.3 percent. This increase factor is based
on the hospital inpatient market basket percentage increase of 2.4
percent for inpatient services paid under the hospital inpatient
prospective payment system (IPPS), minus the multifactor productivity
(MFP) adjustment of 0.5 percentage point, and minus a 0.2 percentage
point adjustment required by the Affordable Care Act. In addition, we
are applying a 2.0 percent reduction to the conversion factor to
redress the inflation in OPPS payment rates resulting from excess
packaged payment under the OPPS for laboratory tests that are excepted
from our final CY 2014 laboratory packaging policy, as discussed in
section II.B. of this final rule with comment period. Under this rule,
we estimate that total payments for CY 2016, including beneficiary
cost-sharing, to the approximate 4,000 facilities paid under the OPPS
(including general acute care hospitals, children's hospitals, cancer
hospitals, and community mental health centers (CMHCs)), will decrease
by approximately $133 million compared to CY 2015 payments, excluding
our estimated changes in enrollment, utilization, and case-mix.
We are continuing to implement the statutory 2.0 percentage point
reduction in payments for hospitals failing to meet the hospital
outpatient quality reporting requirements, by applying a proposed
reporting factor of 0.980 to the OPPS payments and copayments for all
applicable services.
Rural Adjustment: We are continuing the adjustment of 7.1
percent to the OPPS payments to certain rural sole community hospitals
(SCHs), including essential access community hospitals (EACHs). This
adjustment will apply to all services paid under the OPPS, excluding
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to cost.
Cancer Hospital Payment Adjustment: For CY 2016, we are
continuing to provide additional payments to cancer hospitals so that
the cancer hospital's payment-to-cost ratio (PCR) after the additional
payments is equal to the weighted average PCR for the other OPPS
hospitals using the most recently submitted or settled cost report
data. Based on those data, a target PCR of 0.92 will be used to
determine the CY 2016 cancer hospital payment adjustment to be paid at
cost report settlement. That is, the payment adjustments will be the
additional payments needed to result in a PCR equal to 0.92 for each
cancer hospital.
Payment of Drugs, Biologicals, and Radiopharmaceuticals:
For CY 2016, payment for the acquisition and pharmacy overhead costs of
separately payable drugs and biologicals that do not have pass-through
status are set at the statutory default of average sales price (ASP)
plus 6 percent.
Payment of Skin Substitutes: Payment for skin substitutes
will utilize the high/low cost APC structure based on exceeding a
threshold based on mean unit cost (MUC) or per day cost (PDC). Further,
for CY 2016, skin substitutes with pass-through payment status will be
assigned to the high cost category. Skin substitutes with pricing
information but without claims data to calculate either an MUC or PDC
will be assigned to either the high cost or low cost category based on
the product's ASP+6 percent payment rate. Moreover, any new skin
substitutes without pricing information will be assigned to the low
cost category until pricing information is available to compare to the
CY 2016 thresholds.
Payment of Biosimilar Biological Products: For CY 2016, we
are paying for biosimilar biological products based on the payment
allowance of the product as determined under section 1847A of the Act.
We also are extending pass-through payment eligibility to biosimilar
biological products and to set payment at the difference between the
amount paid under section 1842(o) of the Act (that is, the payment
allowance of the product as determined under section 1847A of the Act)
and the otherwise applicable HOPD fee schedule amount.
Packaging Policies: In CY 2015, we conditionally packaged
certain ancillary services when they are integral, ancillary,
supportive, dependent, or adjunctive to a primary service. For CY 2016,
we are expanding the set of conditionally packaged ancillary services
to include three new APCs.
Conditionally Packaged Outpatient Laboratory Tests: For CY
2016, we are conditionally packaging laboratory tests (regardless of
the date of service) on a claim with a service that is assigned status
indicator ``S,'' ``T,'' or ``V'' unless an exception applies or the
laboratory test is ``unrelated'' to the other HOPD

[[Page 70305]]

service or services on the claim. We are establishing a new status
indicator ``Q4'' for this purpose. When laboratory tests are the only
services on the claim, a separate payment at CLFS payment rates will be
made. The ``L1'' modifier will still be used for ``unrelated''
laboratory tests.
Comprehensive APCs: We implemented the comprehensive APCs
(C-APCs) policy for CY 2015 with a total of 25 C-APCs. In CY 2016, we
are not making extensive changes to the already established methodology
used for C-APCs. However, we are creating nine new C-APCs that meet the
previously established criteria.
APC Restructuring: Section 1833(t)(9)(A) 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.
For CY 2016, we conducted a comprehensive review of the structure of
the APCs and codes and are restructuring the OPPS APC groupings for
nine APC clinical families based on the following principles: (1)
Improved clinical homogeneity; (2) improved resource homogeneity; (3)
reduced resource overlap in longstanding APCs; and (4) greater
simplicity and improved understandability of the OPPS APC structure.
New Process for Device Pass-Through Payment: Beginning in
CY 2016, we are adding a rulemaking component to the current quarterly
device pass-through payment application process. Specifically, we are
supplementing the quarterly process by including a description of
applications received as well as our rationale for approving the
application in the next applicable OPPS proposed rule. Applications
that we do not approve based on the evidence available during the
quarterly review process will be described in the next applicable OPPS
proposed rule, unless the applicant withdraws its application. The
addition of rulemaking to the device pass-through application process
will help achieve the goals of increased transparency and stakeholder
input. In addition, this change will align a portion of the OPPS device
pass-through payment application process with the already established
IPPS application process for new medical services and new technology
add-on payments. We also are establishing policy that a device that
requires FDA premarket approval or clearance is eligible to apply for
device pass-through payment only if it is ``new,'' meaning that the
pass-through payment application is submitted within 3 years from the
date of the initial FDA premarket approval or clearance, or, in the
case of a delay of market availability, within 3 years of market
availability.
Two-Midnight Rule: The 2-midnight rule was adopted
effective October 1, 2013. Under the 2-midnight rule, an inpatient
admission is generally appropriate for Medicare Part A payment if the
physician (or other qualified practitioner) admits the patient as an
inpatient based upon the expectation that the patient will need
hospital care that crosses at least 2 midnights. In assessing the
expected duration of necessary care, the physician (or other
practitioner) may take into account outpatient hospital care received
prior to inpatient admission. If the patient is expected to need less
than 2 midnights of care in the hospital, the services furnished should
generally be billed as outpatient services. In this final rule, we are
modifying our existing ``exceptions'' policy under which previously the
only exceptions to the 2-midnight benchmark were cases involving
services designated by CMS as inpatient only, and those published on
the CMS Web site or other subregulatory guidance. Specifically, we are
finalizing our proposal to also allow exceptions to the 2-midnight
benchmark to be determined on a case-by-case basis by the physician
responsible for the care of the beneficiary, subject to medical review.
However, we continue to expect that stays under 24 hours would rarely
qualify for an exception to the 2-midnight benchmark. In addition, we
revised our medical review strategy to have Quality Improvement
Organization (QIO) contractors conduct reviews of short inpatient stays
rather than the Medicare administrative contractors (MACs), and the
QIOs assumed medical responsibility for hospital stays affected by the
2-midnight rule on October 1, 2015.
Advanced Care Planning (ACP): For CY 2016, we are
conditionally packaging payment for the service described by CPT code
99497 (Advance care planning including the explanation and discussion
of advance directives such as standard forms (with completion of such
forms, when performed), by the physician or other qualified health care
professional; first 30 minutes, face-to-face with the patient, family
member(s), and/or surrogate). Consequently, this code is assigned to a
conditionally packaged payment status indicator of ``Q1.'' When this
service is furnished with another service paid under the OPPS, payment
will be package; when it is the only service furnished, payment will be
made separately. CPT code 99498 (Advance care planning including the
explanation and discussion of advance directives such as standard forms
(with completion of such forms, when performed), by the physician or
other qualified health care professional; each additional 30 minutes
(List separately in addition to code for primary procedure)) is an add-
on code and therefore payment for the service described by this code is
unconditionally packaged (assigned status indicator ``N'') in the OPPS
in accordance with 42 CFR 419.2(b)(18).
Chronic Care Management (CCM): For CY 2016, we are adding
additional requirements for hospitals to bill and receive OPPS payment
for CCM services described by CPT code 99490. These requirements
include scope of service elements analogous to the scope of service
elements finalized as requirements in the CY 2015 Medicare Physician
Fee Schedule (MPFS) final rule with comment period (79 FR 6715 through
67728).
National Electrical Manufacturers Association (NEMA)
Modifier: Effective for services furnished on or after January 1, 2016,
section 218(a) of the PAMA amended section 1834 of the Act by
establishing a new subsection 1834(p), which reduces payment for the
technical component (TC) (and the TC of the global fee) under the MPFS
and the OPPS (5 percent in 2016 and 15 percent in 2017 and subsequent
years) for applicable computed tomography (CT) services identified by
certain CPT HCPCS codes furnished using equipment that does not meet
each of the attributes of the National Electrical Manufacturers
Association (NEMA) Standard XR-29-2013, entitled ``Standard Attributes
on CT Equipment Related to Dose Optimization and Management.'' The
provision requires that information be provided and attested to by a
supplier and a hospital outpatient department that indicates whether an
applicable CT service was furnished that was not consistent with the
NEMA CT equipment standard. To implement this provision, we are
establishing a new modifier that will be reported with specific CPT
codes, effective January 1, 2016.
New Process for Requesting Comments on New and Revised
Category I and III CPT Codes: In the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66842 through 66844), we finalized a revised
process of

[[Page 70306]]

assigning APC and status indicators for new and revised Category I and
III CPT codes that will be effective January 1. Specifically, we stated
that we would include the proposed APC and status indicator assignments
for the vast majority of new and revised CPT codes before they are used
for payment purposes under the OPPS if the AMA provides CMS with the
codes in time for the OPPS/ASC proposed rule. For the CY 2016 OPPS
update, we received the CY 2016 CPT codes from AMA for inclusion in the
CY 2016 OPPS/ASC proposed rule. We received public comments on the
proposed OPPS status indicators for the new CY 2016 CPT codes, which we
address in this final rule with comment period.
Ambulatory Surgical Center Payment Update: For CY 2016, we
are increasing payment rates under the ASC payment system by 0.3
percent for ASCs that meet the quality reporting requirements under the
ASCQR Program. This increase is based on a projected CPI-U update of
0.8 percent minus a multifactor productivity adjustment required by the
Affordable Care Act of 0.5 percentage point. Based on this update, we
estimate that total payments to ASCs (including beneficiary cost-
sharing and estimated changes in enrollment, utilization, and case-
mix), for CY 2016 will be approximately $4.221 billion, an increase of
approximately $128 million compared to estimated CY 2015 Medicare
payments. In addition, we are establishing a revised process of
assigning ASC payment indicators for new and revised Category I and III
CPT codes that would be effective January 1, similar to the OPPS
process we finalized in the CY 2015 OPPS/ASC final rule with comment
period. Specifically, we are including the proposed ASC payment
indicator assignments in the OPPS/ASC proposed rule for the vast
majority of new and revised CPT codes before they are used for payment
purposes under the ASC payment system if the American Medical
Association (AMA) provides CMS with the codes in time for the OPPS/ASC
proposed rule. We received public comments on the proposed ASC payment
indicators for the new CY 2016 CPT codes, which we address in this
final rule with comment period.
Hospital Outpatient Quality Reporting (OQR) Program: For
the Hospital OQR Program, we are establishing requirements for the CY
2017 payment determination and subsequent years and the CY 2018 payment
determination and subsequent years. For CY 2017 and subsequent years,
we are: (1) Removing the OP-15: Use of Brain Computed Tomography (CT)
in the Emergency Department for Atraumatic Headache measure, effective
January 1, 2016 (no data for this measure will be used for any payment
determination); (2) changing the deadline for withdrawing from the
Hospital OQR Program from November 1 to August 31 and revising the
related regulations to reflect this change; (3) transitioning to a new
payment determination timeframe that will use only three quarters of
data for the CY 2017 payment determination; (4) making conforming
changes to our validation scoring process to reflect changes in the APU
determination timeframe; (5) changing the data submission timeframe for
measures submitted via the CMS Web-based tool (QualityNet Web site) to
January 1 through May 15; (6) fixing a typographical error to correct
the name of our extension and exception policy to extension and
exemption policy; (7) changing the deadline for submitting a
reconsideration request to the first business day on or after March 17
of the affected payment year; and (8) amending 42 CFR 419.46(f)(1) and
42 CFR 419.46(e)(2) to replace the term ``fiscal year'' with the term
``calendar year.''
For CY 2018 and subsequent years, we are (1) adding a new measure:
OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases (NQF
#1822) with a modification to the proposed manner of data submission,
and (2) shifting the quarters on which we base payment determinations
to again include four quarters of data.
In addition, we are exploring use of electronic clinical quality
measures (eCQMs) and whether, in future rulemaking, we will propose
that hospitals have the option to voluntarily submit data for the OP-
18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients measure electronically possibly beginning with the CY 2019
payment determination.
Ambulatory Surgical Center Quality Reporting (ASCQR)
Program: For the ASCQR Program, we are aligning our policies regarding
paid claims to be included in the calculation for all claims-based
measures, modifying the submission date for reconsideration requests,
modifying our policy for the facility identifier for public reporting
of ASCQR Program data, and finalizing our policy to not consider IHS
hospital outpatient departments that bill as ASCs to be ASCs for
purposes of the ASCQR Program. In addition, we are continuing to use
the existing submission deadlines for data submitted via an online data
submission tool. We also are codifying a number of existing and new
policies. We also address public comments that we solicited in the
proposed rule on the possible inclusion of two measures in the ASCQR
Program measure set in the future.
3. Summary of Costs and Benefits
In sections XXI. and XXII. of this final rule with comment period,
we set forth a detailed analysis of the regulatory and Federalism
impacts that the changes will have on affected entities and
beneficiaries. Key estimated impacts are described below.
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
Table 70 in section XXI. of this final rule with comment period
displays the distributional impact of all the OPPS changes on various
groups of hospitals and CMHCs for CY 2016 compared to all estimated
OPPS payments in CY 2015. We estimate that the policies finalized in
this final rule with comment period will result in a 0.4 percent
overall decrease in OPPS payments to providers. We estimate that total
OPPS payments for CY 2016, including beneficiary cost-sharing, to the
approximate 4,000 facilities paid under the OPPS (including general
acute care hospitals, children's hospitals, cancer hospitals, and
CMHCs) will decrease by approximately $133 million compared to CY 2015
payments, excluding our estimated changes in enrollment, utilization,
and case-mix.
We estimated the isolated impact of our OPPS policies on CMHCs
because CMHCs are only paid for partial hospitalization services under
the OPPS. Continuing the provider-specific structure that we adopted
beginning in CY 2011 and basing payment fully on the type of provider
furnishing the service, we estimate a 23.1 percent increase in CY 2016
payments to CMHCs relative to their CY 2015 payments.
(2) Impacts of the Updated Wage Indexes
We estimate that our update of the wage indexes based on the FY
2016 IPPS final wage indexes results in no change for urban hospitals
and a 0.4 percent decrease for rural hospitals under the OPPS. These
wage indexes include the continued implementation of the OMB labor
market area delineations based on 2010 Decennial Census data.

[[Page 70307]]

(3) Impacts of the Rural Adjustment and the Cancer Hospital Payment
Adjustment
There are no significant impacts of our CY 2016 payment policies
for hospitals that are eligible for the rural adjustment or for the
cancer hospital payment adjustment. We are not making any change in
policies for determining the rural and cancer hospital payment
adjustments, and the adjustment amounts do not significantly impact the
budget neutrality adjustments for these policies.
(4) Impacts of the OPD Fee Schedule Increase Factor
As a result of the OPD fee schedule increase factor, the 2.0
percent reduction to the conversion factor to redress the inflation in
OPPS payment rates resulting from excess packaged payment under the
OPPS for laboratory tests that are excepted from our final CY 2014
laboratory packaging policy, and other budget neutrality adjustments,
we estimate that urban and rural hospitals will experience decreases of
approximately 0.4 percent for urban hospitals and 0.6 percent for rural
hospitals. Classifying hospitals by teaching status or type of
ownership suggests that these hospitals will receive similar decreases.
b. Impacts of the ASC Payment Update
For impact purposes, the surgical procedures on the ASC list of
covered procedures are aggregated into surgical specialty groups using
CPT and HCPCS code range definitions. The percentage change in
estimated total payments by specialty groups under the CY 2016 payment
rates compared to estimated CY 2015 payment rates ranges between 5
percent for auditory system services and -5 percent for hematologic and
lymphatic system procedures.
c. Impacts of the Hospital OQR Program
We do not expect our CY 2016 policies to significantly affect the
number of hospitals that do not receive a full annual payment update.
d. Impacts of the ASCQR Program
We do not expect our CY 2016 policies to significantly affect the
number of ASCs that do not receive a full annual payment update.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act was enacted, Medicare
payment for hospital outpatient services was based on hospital-specific
costs. In an effort to ensure that Medicare and its beneficiaries pay
appropriately for services and to encourage more efficient delivery of
care, the Congress mandated replacement of the reasonable cost-based
payment methodology with a prospective payment system (PPS). The
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section
1833(t) to the Act authorizing implementation of a PPS for hospital
outpatient services. The OPPS was first implemented for services
furnished on or after August 1, 2000. Implementing regulations for the
OPPS are located at 42 CFR parts 410 and 419.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS.
The following Acts made additional changes to the OPPS: The Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8,
2006; the Medicare Improvements and Extension Act under Division B of
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA)
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare,
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173),
enacted on December 29, 2007; the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on
March 30, 2010 (these two public laws are collectively known as the
Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the
Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L.
112-96), enacted on February 22, 2012; the American Taxpayer Relief Act
of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR
Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the
Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93),
enacted on March 27, 2014; and the Medicare Access and CHIP
Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16,
2015.
Under the OPPS, we pay for hospital Part B services on a rate-per-
service basis that varies according to the APC group to which the
service is assigned. We use the Healthcare Common Procedure Coding
System (HCPCS) (which includes certain Current Procedural Terminology
(CPT) codes) to identify and group the services within each APC. The
OPPS includes payment for most hospital outpatient services, except
those identified in section I.C. of this final rule with comment
period. Section 1833(t)(1)(B) of the Act provides for payment under the
OPPS for hospital outpatient services designated by the Secretary
(which includes partial hospitalization services furnished by CMHCs),
and certain inpatient hospital services that are paid under Medicare
Part B.
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the hospital inpatient wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use (section 1833(t)(2)(B) of
the Act). In accordance with section 1833(t)(2) of the Act, subject to
certain exceptions, items and services within an APC group cannot be
considered comparable with respect to the use of resources if the
highest median cost (or mean cost, if elected by the Secretary) for an
item or service in the APC group is more than 2 times greater than the
lowest median cost (or mean cost, if elected by the Secretary) for an
item or service within the same APC group (referred to as the ``2 times
rule''). In implementing this provision, we generally use the cost of
the item or service assigned to an APC group.
For new technology items and services, special payments under the
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments, which we refer to as
``transitional pass-through payments,'' for at least 2 but not more
than 3 years for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of other
medical devices. For new technology services that are not eligible for
transitional pass-through payments, and for which we lack sufficient
clinical information and cost data to appropriately assign them to a
clinical APC group, we have established special APC groups based on
costs, which we refer to as New Technology APCs. These New Technology
APCs are designated by cost bands which allow

[[Page 70308]]

us to provide appropriate and consistent payment for designated new
procedures that are not yet reflected in our claims data. Similar to
pass-through payments, an assignment to a New Technology APC is
temporary; that is, we retain a service within a New Technology APC
until we acquire sufficient data to assign it to a clinically
appropriate APC group.

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to
designate the hospital outpatient services that are paid under the
OPPS. While most hospital outpatient services are payable under the
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for
ambulance, physical and occupational therapy, and speech-language
pathology services, for which payment is made under a fee schedule. It
also excludes screening mammography, diagnostic mammography, and
effective January 1, 2011, an annual wellness visit providing
personalized prevention plan services. The Secretary exercises the
authority granted under the statute to also exclude from the OPPS
certain services that are paid under fee schedules or other payment
systems. Such excluded services include, for example, the professional
services of physicians and nonphysician practitioners paid under the
Medicare Physician Fee Schedule (MPFS); certain laboratory services
paid under the Clinical Laboratory Fee Schedule (CLFS); services for
beneficiaries with end-stage renal disease (ESRD) that are paid under
the ESRD prospective payment system; and services and procedures that
require an inpatient stay that are paid under the hospital IPPS. We set
forth the services that are excluded from payment under the OPPS in
regulations at 42 CFR 419.22.
Under Sec. 419.20(b) of the regulations, we specify the types of
hospitals that are excluded from payment under the OPPS. These excluded
hospitals include: critical access hospitals (CAHs); hospitals located
in Maryland and paid under the Maryland All-Payer Model; hospitals
located outside of the 50 States, the District of Columbia, and Puerto
Rico; and Indian Health Service (IHS) hospitals.

D. Prior Rulemaking

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

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the
Panel)

1. Authority of the Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-
113, requires that we consult with an external advisory panel of
experts to annually review the clinical integrity of the payment groups
and their weights under the OPPS. In CY 2000, based on section
1833(t)(9)(A) of the Act and section 222 of the Public Health Service
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory
Payment Classification Groups (APC Panel) to fulfill this requirement.
In CY 2011, based on section 222 of the PHS Act which gives
discretionary authority to the Secretary to convene advisory councils
and committees, the Secretary expanded the panel's scope to include the
supervision of hospital outpatient therapeutic services in addition to
the APC groups and weights. To reflect this new role of the panel, the
Secretary changed the panel's name to the Advisory Panel on Hospital
Outpatient Payment (the HOP Panel, or the Panel). The Panel is not
restricted to using data compiled by CMS, and in conducting its review,
it may use data collected or developed by organizations outside the
Department.
2. Establishment of the Panel
On November 21, 2000, the Secretary signed the initial charter
establishing the HOP Panel, and at that time named the APC Panel. This
expert panel is composed of appropriate representatives of providers
(currently employed full-time, not as consultants, in their respective
areas of expertise), reviews clinical data, and advises CMS about the
clinical integrity of the APC groups and their payment weights. Since
CY 2012, the Panel also is charged with advising the Secretary on the
appropriate level of supervision for individual hospital outpatient
therapeutic services. The Panel is technical in nature, and it is
governed by the provisions of the Federal Advisory Committee Act
(FACA). The current charter specifies, among other requirements, that:
The Panel continues to be technical in nature; is governed by the
provisions of the FACA; may convene up to three meetings per year; has
a Designated Federal Official (DFO); and is chaired by a Federal
Official designated by the Secretary. The Panel's charter was amended
on November 15, 2011, renaming the Panel and expanding the Panel's
authority to include supervision of hospital outpatient therapeutic
services and to add Critical Access Hospital (CAH) representation to
its membership. The current charter was renewed on November 6, 2014 (80
FR 23009) and the number of panel members was revised from up to 19 to
up to 15 members.
The current Panel membership and other information pertaining to
the Panel, including its charter, Federal Register notices, membership,
meeting dates, agenda topics, and meeting reports, can be viewed on the
CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
The Panel has held multiple meetings, with the last meeting taking
place on August 24, 2015. Prior to each meeting, we publish a notice in
the Federal Register to announce the meeting and, when necessary, to
solicit nominations for Panel membership and to announce new members.
The Panel has established an operational structure that, in part,
currently includes the use of three subcommittees to facilitate its
required review process. The three current subcommittees are the Data
Subcommittee, the Visits and Observation Subcommittee, and the
Subcommittee for APC Groups and Status Indicator (SI) Assignments.
The Data Subcommittee is responsible for studying the data issues
confronting the Panel and for recommending options for resolving them.
The Visits and Observation Subcommittee reviews and makes
recommendations to the Panel on all technical issues pertaining to
observation services and hospital

[[Page 70309]]

outpatient visits paid under the OPPS (for example, APC configurations
and APC relative payment weights). The Subcommittee for APC Groups and
SI Assignments advises the Panel on the following issues: The
appropriate status indicators to be assigned to HCPCS codes, including
but not limited to whether a HCPCS code or a category of codes should
be packaged or separately paid; and the appropriate APC assignment of
HCPCS codes regarding services for which separate payment is made.
Each of these subcommittees was established by a majority vote from
the full Panel during a scheduled Panel meeting, and the Panel
recommended at the August 24, 2015 meeting that the subcommittees
continue. We accepted this recommendation.
Discussions of the other recommendations made by the Panel at the
August 24, 2015 Panel meeting are included in the sections of this
final rule with comment period that are specific to each
recommendation. For discussions of earlier Panel meetings and
recommendations, we refer readers to previously published OPPS/ASC
proposed and final rules, the CMS Web site mentioned earlier in this
section, and the FACA database at: http://facadatabase.gov/.

F. Public Comments Received on the CY 2015 OPPS/ASC Final Rule With
Comment Period

We received approximately 38 timely pieces of correspondence on the
CY 2015 OPPS/ASC final rule with comment period that appeared in the
Federal Register on November 10, 2014 (79 FR 66770), as well as in the
correction notice that was published on February 24, 2015 (80 FR 9629),
some of which contained comments on the interim APC assignments and/or
status indicators of new or replacement HCPCS codes (identified with
comment indicator ``NI'' in Addenda B, AA, and BB to that final rule).
Summaries of the public comments on new or replacement codes are set
forth in this CY 2016 OPPS/ASC final rule with comment period under the
appropriate subject-matter headings.

G. Public Comments Received on the CY 2016 OPPS/ASC Proposed Rule

We received approximately 670 timely pieces of correspondence on
the CY 2016 OPPS/ASC proposed rule that appeared in the Federal
Register on July 8, 2015 (80 FR 39200). We note that we received some
public comments that were outside the scope of the proposed rule. Out-
of-scope public comments are not addressed in this CY 2016 OPPS/ASC
final rule with comment period. Summaries of the public comments that
are within the scope of the proposed rule and our responses are set
forth in the various sections of this final rule with comment period
under the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
not less often than annually and revise the relative payment weights
for APCs. In the April 7, 2000 OPPS final rule with comment period (65
FR 18482), we explained in detail how we calculated the relative
payment weights that were implemented on August 1, 2000 for each APC
group.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39210), for the CY
2016 OPPS, we proposed to recalibrate the APC relative payment weights
for services furnished on or after January 1, 2016, and before January
1, 2017 (CY 2016), using the same basic methodology that we described
in the CY 2015 OPPS/ASC final rule with comment period. That is, we
proposed to recalibrate the relative payment weights for each APC based
on claims and cost report data for hospital outpatient department
(HOPD) services, using the most recent available data to construct a
database for calculating APC group weights. Therefore, for the purpose
of recalibrating the proposed APC relative payment weights for CY 2016,
we used approximately 151 million final action claims (claims for which
all disputes and adjustments have been resolved and payment has been
made) for HOPD services furnished on or after January 1, 2014, and
before January 1, 2015. For this final rule with comment period, for
the purpose of recalibrating the final APC relative payment weights for
CY 2016, we used approximately 163 million final action claims (claims
for which all disputes and adjustments have been resolved and payment
has been made) for HOPD services furnished on or after January 1, 2014,
and before January 1, 2015. For exact numbers of claims used, we refer
readers to the claims accounting narrative under supporting
documentation for the CY 2016 OPPS/ASC proposed rule and this final
rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
Of the approximately 163 million final action claims for services
provided in hospital outpatient settings used to calculate the CY 2016
OPPS payment rates for this final rule with comment period,
approximately 125 million claims were the type of bill potentially
appropriate for use in setting rates for OPPS services (but did not
necessarily contain services payable under the OPPS). Of the
approximately 125 million claims, approximately 3 million claims were
not for services paid under the OPPS or were excluded as not
appropriate for use (for example, erroneous cost-to-charge ratios
(CCRs) or no HCPCS codes reported on the claim). From the remaining
approximately 122 million claims, we created approximately 95 million
single records, of which approximately 43 million were ``pseudo''
single or ``single session'' claims (created from approximately 52
million multiple procedure claims using the process we discuss later in
this section). Approximately 3 million claims were trimmed out on cost
or units in excess of +/-3 standard deviations from the geometric mean
or other trims, yielding approximately 92 million single claims for
ratesetting. As described in section II.A.2. of this final rule with
comment period, our data development process is designed with the goal
of using appropriate cost information in setting the APC relative
payment weights. The bypass process is described in section II.A.1.b.
of this final rule with comment period. This section discusses how we
develop ``pseudo'' single procedure claims (as defined below), with the
intention of using more appropriate data from the available claims. In
some cases, the bypass process allows us to use some portion of the
submitted claim for cost estimation purposes, while the remaining
information on the claim continues to be unusable. Consistent with the
goal of using appropriate information in our data development process,
we only use claims (or portions of each claim) that are appropriate for
ratesetting purposes.
The final APC relative weights and payments for CY 2016 in Addenda
A and B to this final rule with comment period (which are available via
the Internet on the CMS Web site) were calculated using claims from CY
2014 that were processed through June 30, 2015. While prior to CY 2013
we historically based the payments on median hospital costs for
services in the APC groups, beginning with the CY 2013 OPPS, we
established the cost-based relative payment weights for the OPPS using
geometric mean costs, as

[[Page 70310]]

discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR
68259 through 68271). For the CY 2016 OPPS, as we proposed, we used
this same methodology, basing payments on geometric mean costs. Under
this methodology, we select claims for services paid under the OPPS and
match these claims to the most recent cost report filed by the
individual hospitals represented in our claims data. We continue to
believe that it is appropriate to use the most current full calendar
year claims data and the most recently submitted cost reports to
calculate the relative costs underpinning the APC relative payment
weights and the CY 2016 payment rates.
b. Use of Single and Multiple Procedure Claims
For CY 2016, in general, we proposed to continue to use single
procedure claims to set the costs on which the APC relative payment
weights are based. We generally use single procedure claims to set the
estimated costs for APCs because we believe that the OPPS relative
weights on which payment rates are based should be derived from the
costs of furnishing one unit of one procedure and because, in many
circumstances, we are unable to ensure that packaged costs can be
appropriately allocated across multiple procedures performed on the
same date of service.
It is generally desirable to use the data from as many claims as
possible to recalibrate the APC relative payment weights, including
those claims for multiple procedures. As we have for several years, we
proposed to use date of service stratification and a list of codes to
be bypassed to convert multiple procedure claims to ``pseudo'' single
procedure claims. Through bypassing specified codes that we believe do
not have significant packaged costs, we are able to use more data from
multiple procedure claims. In many cases, this enabled us to create
multiple ``pseudo'' single procedure claims from claims that were
submitted as multiple procedure claims spanning multiple dates of
service, or claims that contained numerous separately paid procedures
reported on the same date on one claim. We refer to these newly created
single procedure claims as ``pseudo'' single procedure claims. The
history of our use of a bypass list to generate ``pseudo'' single
procedure claims is well-documented, most recently in the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66780 through 66783). In
addition, for CY 2008 (72 FR 66614 through 66664), we increased
packaging and created the first composite APCs, and continued those
policies through CY 2015. Increased packaging and creation of composite
APCs also increased the number of bills that we were able to use for
ratesetting by enabling us to use claims that contained multiple major
procedures that previously would not have been usable. Further, for CY
2009, we expanded the composite APC model to one additional clinical
area, multiple imaging services (73 FR 68559 through 68569), which also
increased the number of bills we were able to use in developing the
OPPS relative weights on which payments are based. We have continued
the composite APCs for multiple imaging services through CY 2015, and
we proposed to continue this policy for CY 2016. We refer readers to
section II.A.2.f. of the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66810 through 66816) for a discussion of the use of
claims in modeling the costs for composite APCs and to section II.A.3.
of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66817
through 66823) for a discussion of our packaging policies for CY 2015.
In addition, we proposed to establish additional packaging policies for
the CY 2016 OPPS, as discussed in section II.A.3. of this final rule
with comment period.
In the proposed rule, we proposed to continue to apply these
processes to enable us to use as much claims data as possible for
ratesetting for the CY 2016 OPPS. This methodology enabled us to
create, for the proposed rule, approximately 38 million ``pseudo''
single procedure claims, including multiple imaging composite ``single
session'' bills (we refer readers to section II.A.2.f.(4) of the
proposed rule for further discussion), to add to the approximately 49
million ``natural'' single procedure claims.
In addition, we proposed to continue our broader initiative to
review, revise, and reorganize APCs across the OPPS to collectively
group services that are clinically similar and have similar resource
costs within the same APC. The restructuring of APCs are discussed in
the applicable sections of this final rule with comment period. In
conjunction with this initiative, we proposed to renumber the APCs
(except for the composite APCs) primarily to achieve consecutive
numbering of APCs within each clinical family of APCs, as discussed in
section III.D. of this final rule with comment period. For the proposed
rule, we provided a crosswalk from the existing APC numbers to the
proposed new APC renumber in Addendum Q to the proposed rule (which is
available via the Internet on the CMS Web site).
For CY 2016, in the proposed rule, we proposed to bypass 197 HCPCS
codes that were identified in Addendum N to the proposed rule (which is
available via the Internet on the CMS Web site). Since the inception of
the bypass list, which is the list of codes to be bypassed to convert
multiple procedure claims to ``pseudo'' single procedure claims, we
have calculated the percent of ``natural'' single claims that contained
packaging for each HCPCS code and the amount of packaging on each
``natural'' single claim for each code. Each year, we generally retain
the codes on the previous year's bypass list and use the updated year's
data (for CY 2016, data available for the proposed rule from CY 2014
claims processed through December 31, 2014) to determine whether it
would be appropriate to add additional codes to the previous year's
bypass list. For CY 2016, we proposed to continue to bypass all of the
HCPCS codes on the CY 2015 OPPS bypass list, with the exception of
HCPCS codes that we proposed to delete for CY 2016, which were listed
in Table 1 of the proposed rule. (We refer readers to Addendum N to the
CY 2015 OPPS/ASC final rule with comment period for the CY 2015 OPPS
bypass list. Addendum N is available via the Internet on the CMS Web
site.) We also proposed to remove HCPCS codes that are not separately
paid under the OPPS because the purpose of the bypass list is to obtain
more data for those codes relevant to ratesetting. Some of the codes we
proposed to remove from the CY 2016 bypass list were affected by the CY
2016 proposed packaging policy, discussed in section II.A.3. of this
final rule with comment period. Some of the codes we proposed to remove
have packaged cost patterns associated with their natural single major
claims that would no longer meet the bypass list criterion of 5 percent
or fewer of the single major claims having packaged costs on the claim.
In addition, we proposed to add to the bypass list for CY 2016 HCPCS
codes that are not on the CY 2015 bypass list that, using the proposed
rule data (CY 2014 claims), met the empirical criteria for the bypass
list that are summarized below. Finally, to remain consistent with the
CY 2016 proposal to continue to develop OPPS relative payment weights
based on geometric mean costs, we also proposed to establish that the
packaged cost criterion would continue to be based on the geometric
mean cost. The entire list proposed for CY 2016 (including the codes
that remain on the bypass list from prior years) was open to public
comment in the CY 2016 OPPS/ASC

[[Page 70311]]

proposed rule. Because we must make some assumptions about packaging in
the multiple procedure claims in order to assess a HCPCS code for
addition to the bypass list, we assumed that the representation of
packaging on ``natural'' single procedure claims for any given code is
comparable to packaging for that code in the multiple procedure claims.
The proposed criteria for the bypass list were:
There are 100 or more ``natural'' single procedure claims
for the code. This number of single procedure claims ensures that
observed outcomes are sufficiently representative of packaging that
might occur in the multiple claims.
Five percent or fewer of the ``natural'' single procedure
claims for the code have packaged costs on that single procedure claim
for the code. This criterion results in limiting the amount of
packaging being redistributed to the separately payable procedures
remaining on the claim after the bypass code is removed and ensures
that the costs associated with the bypass code represent the cost of
the bypassed service.
The geometric mean cost of packaging observed in the
``natural'' single procedure claims is equal to or less than $55. This
criterion also limits the amount of error in redistributed costs.
During the assessment of claims against the bypass criteria, we do not
know the dollar value of the packaged cost that should be appropriately
attributed to the other procedures on the claim. Therefore, ensuring
that redistributed costs associated with a bypass code are small in
amount and volume protects the validity of cost estimates for low cost
services billed with the bypassed service.
We note that, as we did for CY 2015, we proposed to continue to
establish the CY 2016 OPPS relative payment weights based on geometric
mean costs. To remain consistent in the metric used for identifying
cost patterns, we proposed to use the geometric mean cost of packaging
to identify potential codes to add to the bypass list.
In response to public comments on the CY 2010 OPPS/ASC proposed
rule requesting that the packaged cost threshold be updated, we
considered whether it would be appropriate to update the $50 packaged
cost threshold for inflation when examining potential bypass list
additions. As discussed in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60328), the real value of this packaged cost threshold
criterion has declined due to inflation, making the packaged cost
threshold more restrictive over time when considering additions to the
bypass list. Therefore, adjusting the threshold by the market basket
increase would prevent continuing decline in the threshold's real
value. Based on the same rationale described for the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66781), we proposed for CY 2016
to continue to update the packaged cost threshold by the market basket
increase. By applying the final CY 2015 market basket increase of 2.2
percent (79 FR 66825) to the prior nonrounded dollar threshold of
$55.66 (79 FR 66781), we determined that the proposed threshold would
remain for CY 2016 at $55 ($56.88 rounded to $55, the nearest $5
increment). Therefore, we proposed to set the geometric mean packaged
cost threshold based on the CY 2014 claims data at $55 for a code to be
considered for addition to the CY 2016 OPPS bypass list.
For inclusion on the bypass list, a code cannot be a code for an
unlisted service. Unlisted codes do not describe a specific service
and, therefore, their costs would not be appropriate for bypass list
purposes.
In addition, we proposed to continue to include on the bypass list
HCPCS codes that we believe have minimal associated packaging, based on
our clinical assessment of the complete CY 2016 OPPS proposal. Some of
these codes were identified by CMS, and some were identified in prior
years by commenters with specialized knowledge of the packaging
associated with specific services. We also proposed to continue to
include certain HCPCS codes on the bypass list in order to purposefully
direct the assignment of packaged costs to a companion code where
services always appear together and where there would otherwise be few
single procedure claims available for ratesetting. For example, we have
previously discussed our reasoning for adding HCPCS code G0390 (Trauma
response team associated with hospital critical care service) to the
bypass list (73 FR 68513).
As a result of the multiple imaging composite APCs that we
established in CY 2009, the program logic for creating ``pseudo''
single procedure claims from bypassed codes that are also members of
multiple imaging composite APCs changed. When creating the set of
``pseudo'' single procedure claims, claims that contain ``overlap
bypass codes'' (those HCPCS codes that are both on the bypass list and
are members of the multiple imaging composite APCs) were identified
first. These HCPCS codes were then processed to create multiple imaging
composite ``single session'' claims, that is, claims containing HCPCS
codes from only one imaging family, thus suppressing the initial use of
these codes as bypass codes. However, these ``overlap bypass codes''
were retained on the bypass list because, at the end of the ``pseudo''
single processing logic, we reassessed the claims without suppression
of the ``overlap bypass codes'' under our longstanding ``pseudo''
single process to determine whether we could convert additional claims
to ``pseudo'' single procedure claims. (We refer readers to section
II.A.2.b. of the proposed rule and this final rule with comment period
for further discussion of the treatment of ``overlap bypass codes.'')
This process also created multiple imaging composite ``single session''
claims that could be used for calculating composite APC costs.
``Overlap bypass codes'' that are members of the proposed multiple
imaging composite APCs were identified by asterisks (*) in Addendum N
to the proposed rule (which is available via the Internet on the CMS
Web site).
Addendum N to the proposed rule included the proposed list of
bypass codes for CY 2016. The proposed list of bypass codes contains
codes that were reported on claims for services in CY 2014 and,
therefore, includes codes that were in effect in CY 2014 and used for
billing but were deleted for CY 2015. We retained these deleted bypass
codes on the proposed CY 2016 bypass list because these codes existed
in CY 2014 and were covered OPD services in that period, and CY 2014
claims data are used to calculate CY 2016 payment rates. Keeping these
deleted bypass codes on the bypass list potentially allowed us to
create more ``pseudo'' single procedure claims for ratesetting
purposes. ``Overlap bypass codes'' that were members of the proposed
multiple imaging composite APCs were identified by asterisks (*) in the
third column of Addendum N to the proposed rule. HCPCS codes that we
proposed to add for CY 2016 were identified by asterisks (*) in the
fourth column of Addendum N.
We did not receive any public comments on our proposals for use of
single and multiple procedure code claims for ratesetting. Therefore,
we are adopting as final the proposed ``pseudo'' single claims process
and the final CY 2016 bypass list of 197 HCPCS codes, as displayed in
Addendum N to this final rule with comment period (which is available
via the Internet on the CMS Web site). Table 1 below contains the list
of codes that we are removing from the CY 2016 bypass list.

[[Page 70312]]

Table 1--HCPCS Codes Removed from the CY 2016 Bypass List
------------------------------------------------------------------------
HCPCS code HCPCS short descriptor
------------------------------------------------------------------------
11057................................. Trim skin lesions over 4.
57454................................. Bx/curett of cervix w/scope.
88348................................. Electron microscopy.
92240................................. Icg angiography.
92546................................. Sinusoidal rotational test.
------------------------------------------------------------------------

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
In the CY 2016 OPPS/ASC proposed rule (80 FR 39213), we proposed to
continue to use the hospital-specific overall ancillary and
departmental cost-to-charge ratios (CCRs) to convert charges to
estimated costs through application of a revenue code-to-cost center
crosswalk. To calculate the APC costs on which the proposed CY 2016 APC
payment rates were based, we calculated hospital-specific overall
ancillary CCRs and hospital-specific departmental CCRs for each
hospital for which we had CY 2014 claims data by comparing these claims
data to the most recently available hospital cost reports, which, in
most cases, were from CY 2013. For the CY 2016 OPPS proposed rates, we
used the set of claims processed during CY 2014. We applied the
hospital-specific CCR to the hospital's charges at the most detailed
level possible, based on a revenue code-to-cost center crosswalk that
contains a hierarchy of CCRs used to estimate costs from charges for
each revenue code. That crosswalk is available for review and
continuous comment on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
To ensure the completeness of the revenue code-to-cost center
crosswalk, we reviewed changes to the list of revenue codes for CY 2014
(the year of claims data we used to calculate the proposed CY 2016 OPPS
payment rates) and found that the National Uniform Billing Committee
(NUBC) did not add any new revenue codes to the NUBC 2014 Data
Specifications Manual.
In accordance with our longstanding policy, we calculated CCRs for
the standard and nonstandard cost centers accepted by the electronic
cost report database. In general, the most detailed level at which we
calculated CCRs was the hospital-specific departmental level. For a
discussion of the hospital-specific overall ancillary CCR calculation,
we refer readers to the CY 2007 OPPS/ASC final rule with comment period
(71 FR 67983 through 67985). The calculation of blood costs is a
longstanding exception (since the CY 2005 OPPS) to this general
methodology for calculation of CCRs used for converting charges to
costs on each claim. This exception is discussed in detail in the CY
2007 OPPS/ASC final rule with comment period and discussed further in
section II.A.2.d.(1) of the proposed rule and this final rule with
comment period.
For the CCR calculation process, we used the same general approach
that we used in developing the final APC rates for CY 2007 and
thereafter, using the revised CCR calculation that excluded the costs
of paramedical education programs and weighted the outpatient charges
by the volume of outpatient services furnished by the hospital. We
refer readers to the CY 2007 OPPS/ASC final rule with comment period
for more information (71 FR 67983 through 67985). We first limited the
population of cost reports to only those hospitals that filed
outpatient claims in CY 2014 before determining whether the CCRs for
such hospitals were valid.
We then calculated the CCRs for each cost center and the overall
ancillary CCR for each hospital for which we had claims data. We did
this using hospital-specific data from the Hospital Cost Report
Information System (HCRIS). We used the most recent available cost
report data, which, in most cases, were from cost reports with cost
reporting periods beginning in CY 2013. For the proposed rule, we used
the most recently submitted cost reports to calculate the CCRs to be
used to calculate costs for the proposed CY 2016 OPPS payment rates. If
the most recently available cost report was submitted but not settled,
we looked at the last settled cost report to determine the ratio of
submitted to settled cost using the overall ancillary CCR, and we then
adjusted the most recent available submitted, but not settled, cost
report using that ratio. We then calculated both an overall ancillary
CCR and cost center-specific CCRs for each hospital. We used the
overall ancillary CCR referenced above for all purposes that require
use of an overall ancillary CCR. We proposed to continue this
longstanding methodology for the calculation of costs for CY 2016.
Since the implementation of the OPPS, some commenters have raised
concerns about potential bias in the OPPS cost-based weights due to
``charge compression,'' which is the practice of applying a lower
charge markup to higher cost services and a higher charge markup to
lower cost services. As a result, the cost-based weights may reflect
some aggregation bias, undervaluing high-cost items and overvaluing
low-cost items when an estimate of average markup, embodied in a single
CCR, is applied to items of widely varying costs in the same cost
center. This issue was evaluated in a report by the Research Triangle
Institute, International (RTI). The RTI final report can be found on
RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_ratios_200807_Final.pdf. For a complete
discussion of the RTI recommendations, public comments, and our
responses, we refer readers to the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68519 through 68527).
We addressed the RTI finding that there was aggregation bias in
both the IPPS and the OPPS cost estimation of expensive and inexpensive
medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through
45467). Specifically, we created one cost center for ``Medical Supplies
Charged to Patients'' and one cost center for ``Implantable Devices
Charged to Patients,'' essentially splitting the then current cost
center for ``Medical Supplies Charged to Patients'' into one cost
center for low-cost medical supplies and another cost center for high-
cost implantable devices in order to mitigate some of the effects of
charge compression. In determining the items that should be reported in
these respective cost centers, we adopted commenters' recommendations
that hospitals should use revenue codes established by the AHA's NUBC
to determine the items that should be reported in the ``Medical
Supplies Charged to Patients'' and the ``Implantable Devices Charged to
Patients'' cost centers. For a complete discussion of the rationale for
the creation of the new cost center for ``Implantable Devices Charged
to Patients,'' a summary of public comments received, and our responses
to those public comments, we refer readers to the FY 2009 IPPS final
rule.
The cost center for ``Implantable Devices Charged to Patients'' has
been available for use for cost reporting periods beginning on or after
May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we
determined that a significant volume of hospitals were utilizing the
``Implantable Devices Charged to Patients'' cost center. Because a
sufficient amount of data from which to generate a meaningful analysis
was available, we established in the CY 2013 OPPS/ASC final rule with
comment period a policy to create a distinct CCR using the
``Implantable Devices Charged to Patients'' cost center (77 FR 68225).
We retained this policy through CY

[[Page 70313]]

2015, and we proposed to continue this practice for the CY 2016 OPPS.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through
50080), we finalized our proposal to create new standard cost centers
for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging (MRI),''
and ``Cardiac Catheterization,'' and to require that hospitals report
the costs and charges for these services under these new cost centers
on the revised Medicare cost report Form CMS 2552-10. As we discussed
in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI
also found that the costs and charges of CT scans, MRIs, and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
concluded that both the IPPS and the OPPS relative payment weights
would better estimate the costs of those services if CMS were to add
standard costs centers for CT scans, MRIs, and cardiac catheterization
in order for hospitals to report separately the costs and charges for
those services and in order for CMS to calculate unique CCRs to
estimate the cost from charges on claims data. We refer readers to the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more
detailed discussion on the reasons for the creation of standard cost
centers for CT scans, MRIs, and cardiac catheterization. The new
standard cost centers for CT scans, MRIs, and cardiac catheterization
were effective for cost report periods beginning on or after May 1,
2010, on the revised cost report Form CMS-2552-10.
Using the June 2015 HCRIS update to estimate costs in the final CY
2016 OPPS ratesetting process, of the 3,830 impact providers, we were
able to calculate a valid implantable device CCR for 2,969 hospitals
(78 percent), a valid MRI CCR for 2,080 hospitals (54 percent), a valid
CT scan CCR for 2,166 hospitals (57 percent), and a valid Cardiac
Catheterization CCR for 1,434 hospitals (37 percent).
In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we
noted that, for CY 2014, the estimated changes in geometric mean
estimated APC cost of using data from the new standard cost centers for
CT scans and MRIs appeared consistent with RTI's analysis of cost
report and claims data in the July 2008 final report (pages 5 and 6).
RTI concluded that ``in hospitals that aggregate data for CT scanning,
MRI, or nuclear medicine services with the standard line for Diagnostic
Radiology, costs for these services all appear substantially
overstated, while the costs for plain films, ultrasound and other
imaging procedures are correspondingly understated.'' We also noted
that there were limited additional impacts in the implantable device-
related APCs from adopting the new cost report Form CMS 2552-10 because
we had used data from the standard cost center for implantable medical
devices beginning in CY 2013 OPPS ratesetting, as discussed above.
As we indicated in prior rulemaking (77 FR 68223 through 68225),
once we determined that cost report data for the new standard cost
centers were sufficiently available, we would analyze that data and, if
appropriate, we would propose to use the distinct CCRs for new standard
cost centers described above in the calculation of the OPPS relative
payment weights. As stated in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 74847), we conducted our analysis and concluded
that we should develop distinct CCRs for each of the new cost centers
and use them in ratesetting. Therefore, we began in the CY 2014 OPPS,
continued in the CY 2015 OPPS, and we proposed to retain this practice
for the CY 2016 OPPS, to calculate the OPPS relative payment weights
using distinct CCRs for cardiac catheterization, CT scan, MRI, and
implantable medical devices. Section XIX. of the proposed rule and
section XXI. of this final rule with comment period include the impacts
of calculating the CY 2016 OPPS relative payment weights using these
standard cost centers that were adopted in CY 2014.
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
74847), we finalized a policy to remove claims from providers that use
a cost allocation method of ``square feet'' to calculate CCRs used to
estimate costs associated with the CT and MRI APCs. This change allows
hospitals additional time to use one of the more accurate cost
allocation methods, and thereby improve the accuracy of the CCRs on
which the OPPS relative payment weights are developed. In Table 2
below, we display CCR values for providers based on various cost
allocation methods.

Table 2--CCR Statiscal Values Based on Use of Different Cost Allocation Methods
----------------------------------------------------------------------------------------------------------------
CT MRI
Cost allocation method -------------------------------------------------------------------
Median CCR Mean CCR Median CCR Mean CCR
----------------------------------------------------------------------------------------------------------------
All Providers............................... 0.0436 0.0582 0.0874 0.1111
Square Feet Only............................ 0.0361 0.0507 0.0780 0.1026
Direct Assign............................... 0.0638 0.0716 0.1076 0.1273
Dollar Value................................ 0.0508 0.0667 0.0972 0.1204
Direct Assign and Dollar Value.............. 0.0508 0.0668 0.0976 0.1203
----------------------------------------------------------------------------------------------------------------

As part of this transitional policy to estimate the CT and MRI APC
relative payment weights using only cost data from providers that do
not use ``square feet'' as the cost allocation statistic, we adopted a
policy in the CY 2014 OPPS/ASC final rule with comment period that we
will sunset this policy in 4 years once the updated cost report data
become available for ratesetting purposes. We stated that we believe 4
years is sufficient time for hospitals that have not done so to
transition to a more accurate cost allocation method and for the
related data to be available for ratesetting purposes. Therefore, in CY
2018, we will estimate the CT and MRI APC relative payment weights
using cost data from all providers, regardless of the cost allocation
statistic employed. In Table 3 below, we display the impact of
excluding claims based on the ``square feet'' cost allocation method
from estimates of CT and MRI costs in CY 2016.

[[Page 70314]]

Table 3--Percent Change in Estimated Cost for CT and MRI APCs When
Excluding Claims From Providers Using ``Square Feet'' as the Cost
Allocation Method
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC descriptor Percent change
------------------------------------------------------------------------
5570 *..................... Computed Tomography without 15.4
Contrast.
5571 *..................... Level 1 Computed Tomography 10.2
with Contrast and Computed
Tomography Angiography.
5572 *..................... Level 2 Computed Tomography 10.5
with Contrast and Computed
Tomography Angiography.
5581 *..................... Magnetic Resonance Imaging 8.1
and Magnetic Resonance
Angiography without
Contrast.
5582 *..................... Magnetic Resonance Imaging 6.2
and Magnetic Resonance
Angiography with Contrast.
8005....................... CT & CTA without Contrast 13.7
Composite.
8006....................... CT & CTA with Contrast 9.8
Composite.
8007....................... MRI & MRA without Contrast 6.9
Composite.
8008....................... MRI & MRA with Contrast 6.8
Composite.
------------------------------------------------------------------------
* Renumbered APC for CY 2016.

In summary, we proposed to continue to use data from the
``Implantable Devices Charged to Patients'' and ``Cardiac
Catheterization'' cost centers to create distinct CCRs for use in
calculating the OPPS relative payment weights for the CY 2016 OPPS. For
the ``Magnetic Resonance Imaging (MRI)'' and ``Computed Tomography (CT)
Scan'' APCs identified in Table 3 of the proposed rule, we proposed to
continue our policy of removing claims from cost modeling for those
providers using ``square feet'' as the cost allocation statistic for CY
2016.
Comment: Several commenters supported CMS' proposal to continue
removing claims submitted by providers that use the ``square feet''
cost allocation methodology from cost modeling for the CT and MRI APCs.
A few commenters suggested that CMS continue its policy of removing
claims from providers that use this method for the CY 2018 OPPS update
and subsequent calendar years.
Response: We appreciate the commenters' support. As described in
the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), the
current policy of calculating CT and MRI APC relative payment weights
using only data from providers that do not use the ``square feet'' cost
allocation method was part of a transitional policy to allow providers
to adopt cost allocation methods that improve data and payment
accuracy. In the CY 2014 OPPS/ASC final rule with comment period, we
noted that we would sunset that policy in 4 years and estimate the CY
2018 CT and MRI APC relative payment weights using cost data from all
providers, regardless of which cost allocation method the provider
employed. While some commenters believe that we should continue this
transition policy of excluding ``square feet'' data from OPPS
ratesetting for the CY 2018 OPPS update and subsequent calendar years,
we believe that we have given providers sufficient time to adopt one of
the more precise cost allocation methodologies.
After consideration of the public comments we received, we are
finalizing our proposal to continue to use data from the ``Implantable
Devices Charged to Patients'' and ``Cardiac Catheterization'' cost
centers to create distinct CCRs for use in calculating the OPPS
relative payment weights for the CY 2016 OPPS. For the ``Magnetic
Resonance Imaging (MRI)'' and ``Computed Tomography (CT) Scan'' APCs
identified in Table 3 above, we are continuing our policy of removing
claims from providers that use the ``square feet'' cost allocation
methodology for CY 2016 CT and MRI APC cost modeling.
2. Data Development Process and Calculation of Costs Used for
Ratesetting
In this section of this final rule with comment period, we discuss
the use of claims to calculate the OPPS payment rates for CY 2016. The
Hospital OPPS page on the CMS Web site on which this final rule with
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an
accounting of claims used in the development of the payment rates. That
accounting provides additional detail regarding the number of claims
derived at each stage of the process. In addition, below in this
section we discuss the file of claims that comprises the data set that
is available for purchase under a CMS data use agreement. The CMS Web
site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing
the ``OPPS Limited Data Set,'' which now includes the additional
variables previously available only in the OPPS Identifiable Data Set,
including ICD-9-CM diagnosis codes and revenue code payment amounts.
This file is derived from the CY 2014 claims that were used to
calculate the proposed and final payment rates for the CY 2016 OPPS.
In the history of the OPPS, we have traditionally established the
scaled relative weights on which payments are based using APC median
costs, which is a process described in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74188). However, as discussed in more detail
in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68259 through 68271), we finalized the use of geometric
mean costs to calculate the relative weights on which the CY 2013 OPPS
payment rates were based. While this policy changed the cost metric on
which the relative payments are based, the data process in general
remained the same, under the methodologies that we used to obtain
appropriate claims data and accurate cost information in determining
estimated service cost. For CY 2016, we proposed to continue to use
geometric mean costs to calculate the relative weights on which the CY
2016 OPPS payment rates are based.
We used the methodology described in sections II.A.2.a. through
II.A.2.f. of this final rule with comment period to calculate the costs
we used to establish the relative payment weights used in calculating
the OPPS payment rates for CY 2016 shown in Addenda A and B to this
final rule with comment period (which are available via the Internet on
the CMS Web site). We refer readers to section II.A.4. of the proposed
rule and this final rule with comment period for a discussion of the
conversion of APC costs to scaled payment weights.
Comment: A few commenters suggested that CMS increase the
transparency of its cost estimation process and provide additional
detail on how various types of HCPCS code are treated within CMS'
claims processing.
Response: We thank the commenters for these suggestions. We have
updated the claims accounting narrative for this

[[Page 70315]]

final rule with comment period to include additional information on the
requested various types of HCPCS code where feasible. This updated
claims accounting narrative is available on the 2016 OPPS Final Rule
page of the CMS Web site (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html).
Comment: One commenter suggested that CMS present proposals for
significant payment changes, such as expanded packaging, APC
configurations, or new comprehensive APCs, at least 1 year before
issuance of a proposed rule. The commenter believed that this would
increase the transparency of policy changes and facilitate stakeholder
review and analysis of the proposed changes.
Response: We thank the commenter for this suggestion. We believe
that, for each proposed policy change, we assess the appropriate
timeframe for implementation and will continue to do so in the future.
We understand that modeling the OPPS is time-consuming and technically
complex, and we strive to aid these efforts by providing numerous data
files, public use files, and narrative descriptions of the claims
accounting process for each rule.
a. Claims Preparation
For the proposed rule, we used the CY 2014 hospital outpatient
claims processed through December 31, 2014, to calculate the geometric
mean costs of APCs that underpin the proposed relative payment weights
for CY 2016. For this final rule with comment period, we used the CY
2014 hospital outpatient claims processed through June 30, 2015, to
calculate the geometric mean costs of APCs that underpin the final
relative payment weights for CY 2016. To begin the calculation of the
relative payment weights for CY 2016, we selected all claims for
outpatient services furnished in CY 2014 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 tests
for persons who are neither inpatients nor outpatients of the
hospital).
We then excluded claims with condition codes 04, 20, 21, and 77
because these claims are submitted by providers to Medicare with the
knowledge that no payment would be made. For example, providers submit
claims with a condition code 21 to elicit an official denial notice
from Medicare to document that a service is not covered under the OPPS.
We then excluded claims for services furnished in Maryland, Guam, the
U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands
because hospitals in those geographic areas are not paid under the
OPPS, and, therefore, we do not use claims for services furnished in
these areas in ratesetting.
We divided the remaining claims into the three groups shown below.
Groups 2 and 3 comprise the 125 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X (Hospital Inpatient
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community
Mental Health Center). Other bill types are not paid under the OPPS;
therefore, these claims were not used to set OPPS payment rates.
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.
3. Claims that were bill type 76X (CMHC).
To convert charges on the claims to estimated cost, we multiplied
the charges on each claim by the appropriate hospital-specific CCR
associated with the revenue code for the charge as discussed in section
II.A.1.c. of this final rule with comment period. We then flagged and
excluded CAH claims (which are not paid under the OPPS) and claims from
hospitals with invalid CCRs. The latter included claims from hospitals
without a CCR; those from hospitals paid an all-inclusive rate; those
from hospitals with obviously erroneous CCRs (greater than 90 or less
than 0.0001); and those from hospitals with overall ancillary CCRs that
were identified as outliers (that exceeded 3 standard
deviations from the geometric mean after removing error CCRs). In
addition, we trimmed the CCRs at the cost center (that is,
departmental) level by removing the CCRs for each cost center as
outliers if they exceeded 3 standard deviations from the
geometric mean. We used a four-tiered hierarchy of cost center CCRs,
which is the revenue code-to-cost center crosswalk, to match a cost
center to every possible revenue code appearing in the outpatient
claims that is relevant to OPPS services, with the top tier being the
most common cost center and the last tier being the default CCR. If a
hospital's cost center CCR was deleted by trimming, we set the CCR for
that cost center to ``missing'' so that another cost center CCR in the
revenue center hierarchy could apply. If no other cost center CCR could
apply to the revenue code on the claim, we used the hospital's overall
ancillary CCR for the revenue code in question as the default CCR. For
example, if a visit was reported under the clinic revenue code but the
hospital did not have a clinic cost center, we mapped the hospital-
specific overall ancillary CCR to the clinic revenue code. The revenue
code-to-cost center crosswalk is available for inspection on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not
use in establishing relative costs or to model impacts are identified
with an ``N'' in the revenue code-to-cost center crosswalk.
We applied the CCRs as described above to claims with bill type
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the
Northern Mariana Islands and excluding all claims from hospitals for
which CCRs were flagged as invalid.
We identified claims with condition code 41 as partial
hospitalization services of hospitals and moved them to another file.
We note that the separate file containing partial hospitalization
claims is included in the files that are available for purchase as
discussed above.
We then excluded claims without a HCPCS code. We moved to another
file claims that contained only influenza and pneumococcal pneumonia
(PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost;
therefore, these claims are not used to set OPPS rates.
We next copied line-item costs for drugs, blood, and brachytherapy
sources to a separate file (the lines stay on the claim, but are copied
onto another file). No claims were deleted when we copied these lines
onto another file. These line-items are used to calculate a per unit
arithmetic and geometric mean and median cost and a per day arithmetic
and geometric mean and median cost for drugs and nonimplantable
biologicals, therapeutic radiopharmaceutical agents, and brachytherapy
sources, as well as other information used to set payment rates, such
as a unit-to-day ratio for drugs.
Prior to CY 2013, our payment policy for nonpass-through separately
paid drugs and biologicals was based on a redistribution methodology
that accounted for pharmacy overhead by allocating cost from packaged
drugs to separately paid drugs. This methodology typically would have
required us to reduce the cost associated

[[Page 70316]]

with packaged coded and uncoded drugs in order to allocate that cost.
However, for CY 2013, we paid for separately payable drugs and
biologicals under the OPPS at ASP+6 percent, based upon the statutory
default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under
that policy, we did not redistribute the pharmacy overhead costs from
packaged drugs to separately paid drugs. We retained the CY 2013
payment policy for separately payable drugs and biologicals through CY
2015, and as we proposed, we are continuing this payment policy for CY
2016. We refer readers to section V.B.3. of this final rule with
comment period for a complete discussion of our CY 2016 payment policy
for separately paid drugs and biologicals.
We then removed line-items that were not paid during claims
processing, presumably for a line-item rejection or denial. The number
of edits for valid OPPS payment in the Integrated Outpatient Code
Editor (I/OCE) and elsewhere has grown significantly in the past few
years, especially with the implementation of the full spectrum of
National Correct Coding Initiative (NCCI) edits. To ensure that we are
using valid claims that represent the cost of payable services to set
payment rates, we removed line-items with an OPPS status indicator that
were not paid during claims processing in the claim year, but have a
status indicator of ``S,'' ``T,'' and ``V'' in the prospective year's
payment system. This logic preserves charges for services that would
not have been paid in the claim year but for which some estimate of
cost is needed for the prospective year, such as services newly removed
from the inpatient list for CY 2015 that were assigned status indicator
``C'' in the claim year. It also preserves charges for packaged
services so that the costs can be included in the cost of the services
with which they are reported, even if the CPT codes for the packaged
services were not paid because the service is part of another service
that was reported on the same claim or the code otherwise violates
claims processing edits.
For CY 2016, we proposed to continue the policy we implemented for
CY 2013 and retained in subsequent years to exclude line-item data for
pass-through drugs and biologicals (status indicator ``G'' for CY 2013)
and nonpass-through drugs and biologicals (status indicator ``K'' for
CY 2013) where the charges reported on the claim for the line were
either denied or rejected during claims processing. Removing lines that
were eligible for payment but were not paid ensures that we are using
appropriate data. The trim avoids using cost data on lines that we
believe were defective or invalid because those rejected or denied
lines did not meet the Medicare requirements for payment. For example,
edits may reject a line for a separately paid drug because the number
of units billed exceeded the number of units that would be reasonable
and, therefore, is likely a billing error (for example, a line
reporting 55 units of a drug for which 5 units is known to be a fatal
dose). As with our trimming in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66788) of line-items with a status indicator of
``S,'' ``T,'' or ``V,'' we believe that unpaid line-items represent
services that are invalidly reported and, therefore, should not be used
for ratesetting (we note that the deletion of status indicator ``X''
was finalized in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66821)). We believe that removing lines with valid status
indicators that were edited and not paid during claims processing
increases the accuracy of the data used for ratesetting purposes.
For the CY 2016 OPPS, as part of our proposal and adoption of our
proposal to continue packaging payment for clinical diagnostic
laboratory tests, as we proposed, we also are applying the line item
trim to these services if they did not receive payment in the claims
year. Removing these lines ensures that, in establishing the CY 2016
OPPS relative payment weights, we appropriately allocate the costs
associated with packaging these services. Additional details and a
summary of public comments received and our responses regarding
packaging payment for clinical laboratory tests can be found in section
II.A.3.b.(3) of this final rule with comment period.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), for the CY
2016 OPPS, we proposed to then split the remaining claims into five
groups: Single majors; multiple majors; single minors; multiple minors;
and other claims. (Specific definitions of these groups are presented
below.) We note that, in the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66819 through 66821), we deleted status indicator ``X''
and revised the title and description of status indicator ``Q1'' to
reflect that deletion. We also finalized the creation of status
indicator ``J1'' in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66800 through 66809) to reflect the comprehensive APCs (C-APCs).
For CY 2016, we proposed to define major procedures as any procedure
described by a HCPCS code that is assigned a status indicator of
``J1,'' ``J2,'' ``S,'' ``T,'' or ``V,'' to define minor procedures as
any procedure described by a HCPCS code that is assigned a status
indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,''
and to classify ``other'' procedures as any procedure described by a
HCPCS code that is assigned a status indicator other than one that we
have classified as major or minor. For CY 2016, we proposed to continue
to assign status indicator ``R'' to HCPCS codes for blood and blood
products; status indicator ``U'' to HCPCS codes for brachytherapy
sources; status indicator ``Q1'' to all HCPCS ``STV-packaged codes'';
status indicator ``Q2'' to all HCPCS ``T-packaged codes''; status
indicator ``Q3'' to all HCPCS codes that may be paid through a
composite APC based on composite-specific criteria or paid separately
through single code APCs when the criteria are not met; and new status
indicator ``Q4'' to HCPCS codes for laboratory tests that will be
conditionally packaged on a claim with a service that is assigned
status indicator ``S,'' ``T,'' or ``V'' unless an exception applies or
the laboratory test is ``unrelated'' to the other HOPD service or
services on the claim. For more information on status indicator ``Q4,''
we refer readers to section II.A.3.b.(3) of this final rule with
comment period.
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 proposed to treat these codes in the same manner for data
purposes for CY 2016 as we have treated them since CY 2008.
Specifically, for CY 2016, we are continuing to evaluate whether the
criteria for separate payment of codes with a status indicator of
``Q1'' or ``Q2'' are met in determining whether they are treated as
major or minor codes. Claims containing codes with a status indicator
of ``Q1'' or ``Q2'' are processed through the data system either with
status indicator ``N'' to indicate that the services are packaged for
payment or, if they meet the criteria for separate payment, they are
assigned the status indicator of the APC to which they are assigned and
are considered as ``pseudo'' single procedure claims for major codes.
Claims containing codes that are assigned status indicator ``Q3'' are
paid under individual APCs unless they occur in the combinations that
qualify for payment as composite APCs

[[Page 70317]]

and, therefore, they are assigned the status indicator of the
individual APC to which they are assigned through the data process and
are treated as major codes during both the split and ``pseudo'' single
creation process. The calculation of the geometric mean costs for
composite APCs from multiple procedure major claims is discussed in
section II.A.2.f. of this final rule with comment period. HCPCS codes
with status indicator ``Q4'' only appear in the OPPS model if they are
packaged on a claim with a service that is assigned status indicator
``S,'' ``T,'' or ``V.''
Specifically, we proposed to divide the remaining claims into the
following five groups:
1. Single Procedure Major Claims: Claims with a single separately
payable procedure (that is, status indicator ``S,'' ``T,'' or ``V''
which includes codes with status indicator ``Q3''); claims with status
indicator ``J1'' or ``J2,'' which receive special processing for C-
APCs, as discussed in section II.A.2.e. of this final rule with comment
period; claims with one unit of a status indicator ``Q1'' code (``STV-
packaged'') where there was no code with status indicator ``S,'' ``T,''
or ``V'' on the same claim on the same date; or claims with one unit of
a status indicator ``Q2'' code (``T-packaged'') where there was no code
with a status indicator ``T'' on the same claim on the same date.
2. Multiple Procedure Major Claims: Claims with more than one
separately payable procedure (that is, status indicator ``S,'' ``T,''
or ``V'' 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'' or ``V''). We also include in
this set claims that contained one unit of one code when the bilateral
modifier was appended to the code and the code was conditionally or
independently bilateral. In these cases, the claims represented more
than one unit of the service described by the code, notwithstanding
that only one unit was billed.
3. Single Procedure Minor Claims: Claims with a single HCPCS code
that was assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,''
``R,'' ``U,'' or ``N'' and not status indicator ``Q1'' (``STV-
packaged'') or status indicator ``Q2'' (``T-packaged'') code.
4. Multiple Procedure Minor Claims: Claims with multiple HCPCS
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,''
``L,'' ``R,'' ``U,'' or ``N;'' claims that contain more than one code
with status indicator ``Q1'' (``STV-packaged'') or more than one unit
of a code with status indicator ``Q1'' but no codes with status
indicator ``S,'' ``T,'' or ``V'' on the same date of service; or claims
that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``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, 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''
(``STV-packaged'') and ``Q2'' (``T-packaged'') appear in the data for
the single major file, the multiple major file, and the multiple minor
file used for ratesetting. Claims that contain codes to which we have
assigned status indicator ``Q3'' (composite APC members) appear in both
the data of the single and multiple major files used in this final rule
with comment period, depending on the specific composite calculation.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39217), we proposed to
adjust the claims sorting process to determine whether a claim has a
bilateral procedure modifier (Modifier 50) before claims are assigned
to one of the five claims categories. This proposed adjustment shifts
some claims that might otherwise be considered a single major procedure
claim to the multiple major procedure claim category due to the
presence of the bilateral modifier. We stated that we believe that this
proposed adjustment more accurately sorts claims that have a bilateral
modifier.
We did not receive any public comments on the proposed process to
categorize claims used in CY 2016 OPPS cost modeling. Therefore, we are
finalizing our policy as proposed.
(2) Creation of ``Pseudo'' Single Procedure Claims
To develop ``pseudo'' single procedure claims for the proposed
rule, we examined both the multiple procedure major claims and the
multiple procedure minor claims. We first examined the multiple major
procedure claims for dates of service to determine if we could break
them into ``pseudo'' single procedure claims using the dates of service
for all lines on the claim. If we could create claims with single major
procedures by using dates of service, we created a single procedure
claim record for each separately payable procedure on a different date
of service (that is, a ``pseudo'' single procedure claim).
We also proposed to use the bypass codes listed in Addendum N to
the proposed rule (which is available via the Internet on the CMS Web
site) and discussed in section II.A.1.b. of the proposed rule and this
final rule with comment period to remove separately payable procedures
which we determined contained limited or no packaged costs or that were
otherwise suitable for inclusion on the bypass list from a multiple
procedure bill. As discussed above, we ignored the ``overlap bypass
codes,'' that is, those HCPCS codes that were both on the bypass list
and are members of the multiple imaging composite APCs, in this initial
assessment for ``pseudo'' single procedure claims. The proposed CY 2016
``overlap bypass codes'' were listed in Addendum N to the proposed rule
(which is available via the Internet on the CMS Web site). When one of
the two separately payable procedures on a multiple procedure claim was
on the bypass list, we split the claim into two ``pseudo'' single
procedure claim records. The single procedure claim record that
contained the bypass code did not retain packaged services. The single
procedure claim record that contained the other separately payable
procedure (but no bypass code) retained the packaged revenue code
charges and the packaged HCPCS code charges. We also removed lines that
contained multiple units of codes on the bypass list and treated them
as ``pseudo'' single procedure claims by dividing the cost for the
multiple units by the number of units on the line. If one unit of a
single, separately payable procedure code remained on the claim after
removal of the multiple units of the bypass code, we created a
``pseudo'' single procedure claim from that residual claim record,

[[Page 70318]]

which retained the costs of packaged revenue codes and packaged HCPCS
codes. This enabled us to use claims that would otherwise be multiple
procedure claims and could not be used.
We then assessed the claims to determine if the criteria for the
multiple imaging composite APCs, discussed in section II.A.2.f.(3) of
the proposed rule and this final rule with comment period, were met. If
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 will not be a separately payable procedure, we considered it to be
unavailable for use in setting the composite APC costs on which the CY
2016 OPPS relative payment weights are based. Having identified
``single session'' claims for the imaging composite APCs, we reassessed
the claim to determine if, after removal of all lines for bypass codes,
including the ``overlap bypass codes,'' a single unit of a single
separately payable code remained on the claim. If so, we attributed the
packaged costs on the claim to the single unit of the single remaining
separately payable code other than the bypass code to create a
``pseudo'' single procedure claim. We also identified line-items of
overlap bypass codes as a ``pseudo'' single procedure claim. This
allowed us to use more claims data for ratesetting purposes.
We also examined the multiple procedure minor claims to determine
whether we could create ``pseudo'' single procedure claims.
Specifically, where the claim contained multiple codes with status
indicator ``Q1'' (``STV-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 2015 relative payment weight, 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 ``Q1.'' We then packaged all costs for the
following into a single cost for the ``Q1'' HCPCS code that had the
highest CY 2015 relative payment weight to create a ``pseudo'' single
procedure claim for that code: additional units of the status indicator
``Q1'' HCPCS code with the highest CY 2015 relative payment weight;
other codes with status indicator ``Q1''; and all other packaged HCPCS
codes and packaged revenue code costs. We changed the status indicator
for the selected code from the data status indicator of ``N'' to the
status indicator of the APC to which the selected procedure was
assigned for further data processing and considered this claim as a
major procedure claim. We used this claim in the calculation of the APC
geometric mean cost for the status indicator ``Q1'' HCPCS code.
Similarly, we proposed that if a multiple procedure minor claim
contained multiple codes with status indicator ``Q2'' (``T-packaged'')
or multiple units of a single code with status indicator ``Q2,'' we
selected the status indicator ``Q2'' HCPCS code that had the highest CY
2015 relative payment weight 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 ``Q2'' HCPCS code that had the
highest CY 2015 relative payment weight to create a ``pseudo'' single
procedure claim for that code: Additional units of the status indicator
``Q2'' HCPCS code with the highest CY 2015 relative payment weight;
other codes with status indicator ``Q2''; and other packaged HCPCS
codes and packaged revenue code costs. We changed the status indicator
for the selected code from a data 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.
If a multiple procedure minor claim contained multiple codes with
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1''
(``STV-packaged''), we selected the T-packaged status indicator ``Q2''
HCPCS code that had the highest relative payment weight for CY 2015 and
set the units to one on that HCPCS code to reflect our policy of paying
only one unit of a code with a status indicator of ``Q2.'' We then
packaged all costs for the following into a single cost for the
selected (``T-packaged'') HCPCS code to create a ``pseudo'' single
procedure claim for that code: Additional units of the status indicator
``Q2'' HCPCS code with the highest CY 2015 relative payment weight;
other codes with status indicator ``Q2''; codes with status indicator
``Q1'' (``STV-packaged''); and other packaged HCPCS codes and packaged
revenue code costs. We selected status indicator ``Q2'' HCPCS codes
instead of ``Q1'' HCPCS codes because ``Q2'' HCPCS codes have higher CY
2015 relative payment weights. If a status indicator ``Q1'' HCPCS code
had a higher CY 2015 relative payment weight, it became the primary
code for the simulated single bill process. We changed the status
indicator for the selected status indicator ``Q2'' (``T-packaged'')
code from a data status indicator of ``N'' to the status indicator of
the APC to which the selected code was assigned and we considered this
claim as a major procedure claim.
We then applied our revised process for creating ``pseudo'' single
procedure claims to the conditionally packaged codes that do not meet
the criteria for packaging, which enabled us to create single procedure
claims from them, if they met the criteria for single procedure claims.
Conditionally packaged codes are identified using status indicators
``Q1'' and ``Q2,'' and are described in section XI.A. of this final
rule with comment period.
Lastly, we excluded those claims that we were not able to convert
to single procedure claims even after applying all of the techniques
for creation of ``pseudo'' single procedure claims to multiple
procedure major claims and to multiple procedure minor claims. As has
been our practice in recent years, we also excluded claims that
contained codes that were viewed as independently or conditionally
bilateral and that contained the bilateral procedure modifier (Modifier
50) because the line-item cost for the code represented the cost of two
units of the procedure, notwithstanding that hospitals billed the code
with a unit of one.
We did not receive any public comments on our proposed methodology
for creating ``pseudo'' single procedure claims. Therefore, we are
finalizing our proposal to continue to apply the methodology described
above for the purpose of creating ``pseudo'' single procedure claims
for the CY 2016 OPPS. The final CY 2016 bypass codes and ``overlap
bypass codes'' are listed in Addendum N to this final rule with comment
period (which is available via the Internet on the CMS Web site).
c. Completion of Claim Records and Geometric Mean Cost Calculations
(1) General Process
We proposed to then package the costs of packaged HCPCS codes
(codes with status indicator ``N'' listed in Addendum B to the proposed
rule (which is available via the Internet on the CMS Web site) and the
costs of those lines for codes with status indicator ``Q1'' or ``Q2''
when they are not separately paid), and the costs of the

[[Page 70319]]

services reported under packaged revenue codes in Table 4 of the
proposed rule (Table 4 below in this final rule with comment period)
that appeared on the claim without a HCPCS code into the cost of the
single major procedure remaining on the claim. For a more complete
discussion of our CY 2016 OPPS packaging policy, we refer readers to
section II.A.3. of this final rule with comment period.
As noted in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation
that CMS should review the final list of packaged revenue codes for
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we are continuing to
compare the final list of packaged revenue codes that we adopt for CY
2016 to the revenue codes that the I/OCE will package for CY 2016 to
ensure consistency.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68531), we replaced the NUBC standard abbreviations for the revenue
codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the
most current NUBC descriptions of the revenue code categories and
subcategories to better articulate the meanings of the revenue codes
without changing the list of revenue codes. In the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60362 through 60363), we
finalized changes to the packaged revenue code list based on our
examination of the updated NUBC codes and public comment on the CY 2010
proposed list of packaged revenue codes.
For CY 2016, as we did for CY 2015, we reviewed the changes to
revenue codes that were effective during CY 2014 for purposes of
determining the charges reported with revenue codes but without HCPCS
codes that we proposed to package for CY 2016. We stated in the
proposed rule that we believe that the charges reported under the
revenue codes listed in Table 4 of the proposed rule continue to
reflect ancillary and supportive services for which hospitals report
charges without HCPCS codes. Therefore, for CY 2016, we proposed to
continue to package the costs that we derive from the charges reported
without HCPCS codes under the revenue codes displayed in Table 4 of the
proposed rule for purposes of calculating the geometric mean costs on
which the CY 2016 OPPS/ASC payment rates are based.
Comment: One commenter suggested that CMS revisit its ratesetting
methodology to prevent items or services that are more costly than a
primary service from being packaged into the payment for the primary
service. The commenter also suggested that only items or services that
are clinically relevant to a primary service be packaged for payment
with a primary service.
Response: We thank the commenter for these suggestions. Since the
beginning of the OPPS and throughout its development, we have striven
to find ways to improve our methodologies for estimating the costs
associated with providing services, including our methodology for
packaging services. We will continue to look at ways to improve our
ratesetting process, including improving our packaging logic, in future
payment years. We only assign packaged status indicators to services
that we determine are ancillary, supportive, dependent, or adjunctive
to a primary service. We disagree with the commenter that only payment
for less costly services should be packaged into payment for a primary
service, as the cost of a packaged service relative to a primary
service is not necessarily determinative of packaged status.
For the reasons set forth in the proposed rule, we are finalizing
the proposed packaged revenue codes for CY 2016, without modification,
which are identified in Table 4 below.

Table 4--CY 2016 Packaged Revenue Codes
------------------------------------------------------------------------
Revenue code Description
------------------------------------------------------------------------
250.................................. Pharmacy; General Classification.
251.................................. Pharmacy; Generic Drugs.
252.................................. Pharmacy; Non-Generic Drugs.
254.................................. Pharmacy; Drugs Incident to Other
Diagnostic Services.
255.................................. Pharmacy; Drugs Incident to
Radiology.
257.................................. Pharmacy; Non-Prescription.
258.................................. Pharmacy; IV Solutions.
259.................................. Pharmacy; Other Pharmacy.
260.................................. IV Therapy; General
Classification.
261.................................. IV Therapy; Infusion Pump.
262.................................. IV Therapy; IV Therapy/Pharmacy
Svcs.
263.................................. IV Therapy; IV Therapy/Drug/
Supply Delivery.
264.................................. IV Therapy; IV Therapy/Supplies.
269.................................. IV Therapy; Other IV Therapy.
270.................................. Medical/Surgical Supplies and
Devices; General Classification.
271.................................. Medical/Surgical Supplies and
Devices; Non-sterile Supply.
272.................................. Medical/Surgical Supplies and
Devices; Sterile Supply.
275.................................. Medical/Surgical Supplies and
Devices; Pacemaker.
276.................................. Medical/Surgical Supplies and
Devices; Intraocular Lens.
278.................................. Medical/Surgical Supplies and
Devices; Other Implants.
279.................................. Medical/Surgical Supplies and
Devices; Other Supplies/Devices.
280.................................. Oncology; General Classification.
289.................................. Oncology; Other Oncology.
331.................................. Radiology--Therapeutic and/or
Chemotherapy Administration;
Chemotherapy Admin--Injected.
332.................................. Radiology--Therapeutic and/or
Chemotherapy Administration;
Chemotherapy Admin--Oral.
335.................................. Radiology--Therapeutic and/or
Chemotherapy Administration;
Chemotherapy Admin--IV.
343.................................. Nuclear Medicine; Diagnostic
Radiopharmaceuticals.
344.................................. Nuclear Medicine; Therapeutic
Radiopharmaceuticals.
360.................................. Operating Room Services; General
Classification.
361.................................. Operating Room Services; Minor
Surgery.
362.................................. Operating Room Services; Organ
Transplant--Other than Kidney.
369.................................. Operating Room Services; Other OR
Services.

[[Page 70320]]

370.................................. Anesthesia; General
Classification.
371.................................. Anesthesia; Anesthesia Incident
to Radiology.
372.................................. Anesthesia; Anesthesia Incident
to Other DX Services.
379.................................. Anesthesia; Other Anesthesia.
390.................................. Administration, Processing and
Storage for Blood and Blood
Components; General
Classification.
392.................................. Administration, Processing and
Storage for Blood and Blood
Components; Processing and
Storage.
399.................................. Administration, Processing and
Storage for Blood and Blood
Components; Other Blood
Handling.
410.................................. Respiratory Services; General
Classification.
412.................................. Respiratory Services; Inhalation
Services.
413.................................. Respiratory Services; Hyperbaric
Oxygen Therapy.
419.................................. Respiratory Services; Other
Respiratory Services.
621.................................. Medical Surgical Supplies--
Extension of 027X; Supplies
Incident to Radiology.
622.................................. Medical Surgical Supplies--
Extension of 027X; Supplies
Incident to Other DX Services.
623.................................. Medical Supplies--Extension of
027X, Surgical Dressings.
624.................................. Medical Surgical Supplies--
Extension of 027X; FDA
Investigational Devices.
630.................................. Pharmacy--Extension of 025X;
Reserved.
631.................................. Pharmacy--Extension of 025X;
Single Source Drug.
632.................................. Pharmacy--Extension of 025X;
Multiple Source Drug.
633.................................. Pharmacy--Extension of 025X;
Restrictive Prescription.
681.................................. Trauma Response; Level I Trauma.
682.................................. Trauma Response; Level II Trauma.
683.................................. Trauma Response; Level III
Trauma.
684.................................. Trauma Response; Level IV Trauma.
689.................................. Trauma Response; Other.
700.................................. Cast Room; General
Classification.
710.................................. Recovery Room; General
Classification.
720.................................. Labor Room/Delivery; General
Classification.
721.................................. Labor Room/Delivery; Labor.
722.................................. Labor Room/Delivery; Delivery
Room.
724.................................. Labor Room/Delivery; Birthing
Center.
729.................................. Labor Room/Delivery; Other Labor
Room/Delivery.
732.................................. EKG/ECG (Electrocardiogram);
Telemetry.
760.................................. Specialty Services; General
Classification.
761.................................. Specialty Services; Treatment
Room.
762.................................. Specialty services; Observation
Hours.
769.................................. Specialty Services; Other
Specialty Services.
770.................................. Preventive Care Services; General
Classification.
801.................................. Inpatient Renal Dialysis;
Inpatient Hemodialysis.
802.................................. Inpatient Renal Dialysis;
Inpatient Peritoneal Dialysis
(Non-CAPD).
803.................................. Inpatient Renal Dialysis;
Inpatient Continuous Ambulatory
Peritoneal Dialysis (CAPD).
804.................................. Inpatient Renal Dialysis;
Inpatient Continuous Cycling
Peritoneal Dialysis (CCPD).
809.................................. Inpatient Renal Dialysis; Other
Inpatient Dialysis.
810.................................. Acquisition of Body Components;
General Classification.
819.................................. Acquisition of Body Components;
Other Donor.
821.................................. Hemodialysis--Outpatient or Home;
Hemodialysis Composite or Other
Rate.
824.................................. Hemodialysis--Outpatient or Home;
Maintenance--100%.
825.................................. Hemodialysis--Outpatient or Home;
Support Services.
829.................................. Hemodialysis--Outpatient or Home;
Other OP Hemodialysis.
942.................................. Other Therapeutic Services (also
see 095X, an extension of 094x);
Education/Training.
943.................................. Other Therapeutic Services (also
see 095X, an extension of 094X),
Cardiac Rehabilitation.
948.................................. Other Therapeutic Services (also
see 095X, an extension of 094X),
Pulmonary Rehabilitation.
------------------------------------------------------------------------

In accordance with our longstanding policy, we proposed to continue
to exclude: (1) Claims that had zero costs after summing all costs on
the claim; and (2) claims containing packaging flag number 3. Effective
for services furnished after July 1, 2014, the I/OCE assigned packaging
flag number 3 to claims on which hospitals submitted token charges less
than $1.01 for a service with status indicator ``S'' or ``T'' (a major
separately payable service under the OPPS) for which the Medicare
Administrative Contractor (MAC) was required to allocate the sum of
charges for services with a status indicator equaling ``S'' or ``T''
based on the relative payment weight of the APC to which each code was
assigned. We do not believe that these charges, which were token
charges as submitted by the hospital, are valid reflections of hospital
resources. Therefore, we deleted these claims. We also deleted claims
for which the charges equaled the revenue center payment (that is, the
Medicare payment) on the assumption that, where the charge equaled the
payment, to apply a CCR to the charge would not yield a valid estimate
of relative provider cost. We are continuing these processes for the CY
2016 OPPS.
For the remaining claims, we then standardized 60 percent of the
costs of the claim (which we have previously determined to be the
labor-related portion) for geographic differences in labor input costs.
We made this adjustment by determining the wage index that applied to
the hospital that furnished the service and dividing the cost for the
separately paid HCPCS code furnished by the hospital by that wage
index. The claims accounting that we provide for the proposed rule and
final rule with comment period contains the formula we use to
standardize the total cost for the effects of the wage index. As

[[Page 70321]]

has been our policy since the inception of the OPPS, we used the pre-
reclassified wage indices for standardization because we believe that
they better reflect the true costs of items and services in the area in
which the hospital is located than the post-reclassification wage
indices and, therefore, would result in the most accurate unadjusted
geometric mean costs. We used these pre-reclassified wage indices for
standardization using the new OMB labor market area delineations
described in section II.C. of this final rule with comment period.
In accordance with our longstanding practice, we also excluded
single and ``pseudo'' single procedure claims for which the total cost
on the claim was outside 3 standard deviations from the geometric mean
of units for each HCPCS code on the bypass list (because, as discussed
above, we used claims that contain multiple units of the bypass codes).
After removing claims for hospitals with error CCRs, claims without
HCPCS codes, claims for immunizations not covered under the OPPS, and
claims for services not paid under the OPPS, approximately 122 million
claims remained. Using these approximately 122 million claims, we
created approximately 95 million single and ``pseudo'' single procedure
claims, of which we used approximately 92 million single claims (after
trimming out approximately 3 million claims as discussed in section
II.A.1.a. of this final rule with comment period) in the CY 2016
geometric mean cost development and ratesetting.
As discussed above, the OPPS has historically developed the
relative weights on which APC payments are based using APC median
costs. For the CYs 2013, 2014, and 2015 OPPS, we calculated the APC
relative payment weights using geometric mean costs, and we are
continuing this practice for CY 2016. Therefore, the following
discussion of the 2 times rule violation and the development of the
relative payment weight refers to geometric means. For more detail
about the CY 2016 OPPS/ASC policy to calculate relative payment weights
based on geometric means, we refer readers to section II.A.2.c. of this
final rule with comment period.
We used these claims to calculate the CY 2016 geometric mean costs
for each separately payable procedure described by the HCPCS code and
each APC. The comparison of HCPCS code-specific and APC geometric mean
costs determines the applicability of the 2 times rule. Section
1833(t)(2) of the Act provides that, subject to certain exceptions, the
items and services within an APC group shall not be treated as
comparable with respect to the use of resources if the highest median
cost (or mean cost, if elected by the Secretary) for an item or service
within the group is more than 2 times greater than the lowest median
cost (or mean cost, if so elected) for an item or service within the
same group (the 2 times rule). While we have historically applied the 2
times rule based on median costs, in the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68270), as part of the CY 2013 policy to
develop the OPPS relative payment weights based on geometric mean
costs, we also applied the 2 times rule based on geometric mean costs.
For the CY 2016 OPPS, as we proposed, we are continuing to develop the
APC relative payment weights based on geometric mean costs.
We note that, for purposes of identifying significant HCPCS codes
for examination in the 2 times rule, we consider codes that have more
than 1,000 single major claims or codes that have both greater than 99
single major claims and contribute at least 2 percent of the single
major claims used to establish the APC geometric mean cost to be
significant. This longstanding definition of when a HCPCS code is
significant for purposes of the 2 times rule was selected because we
believe that a subset of 1,000 claims is negligible within the set of
approximately 92 million single procedure or single session claims we
use for establishing geometric mean costs. Similarly, a HCPCS code for
which there are fewer than 99 single claims and which comprises less
than 2 percent of the single major claims within an APC will have a
negligible impact on the APC geometric mean. We note that this method
of identifying significant HCPCS codes within an APC for purposes of
the 2 times rule was used in prior years under the median-based cost
methodology. Under our CY 2016 policy to continue to base the relative
payment weights on geometric mean costs, we believe that this same
consideration for identifying significant HCPCS codes should apply
because the principles are consistent with their use in the median-
based cost methodology. Unlisted codes are not used in establishing the
percent of claims contributing to the APC, nor are their costs used in
the calculation of the APC geometric mean. Finally, we reviewed the
geometric mean costs for the services for which we will pay separately
under this final rule with comment period, and we reassigned HCPCS
codes to different APCs where it was necessary to ensure clinical and
resource homogeneity within the APCs. The APC geometric means were
recalculated after we reassigned the affected HCPCS codes. Both the
HCPCS code-specific geometric means and the APC geometric means were
weighted to account for the inclusion of multiple units of the bypass
codes in the creation of ``pseudo'' single procedure claims.
As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this
final rule with comment period, in some cases, APC geometric mean costs
were calculated using variations of the process outlined above.
Specifically, section II.A.2.d. of this final rule with comment period
addresses the calculation of single APC criteria-based geometric mean
costs. Section II.A.2.f. of this final rule with comment period
discusses the calculation of composite APC criteria-based geometric
mean costs. Section VIII.B. of this final rule with comment period
addresses the methodology for calculating the geometric mean costs for
partial hospitalization services.
We did not receive any public comments on our proposal for
completion of claims records and calculation of geometric means cost.
Therefore, we are adopting the geometric means calculation process that
we proposed as final. We are finalizing our proposed methodology for
calculating geometric means costs for purposes of creating relative
payment weights and subsequent APC payment rates for the CY 2016 OPPS.
(2) Recommendations of the Advisory Panel on Hospital Outpatient
Payment (the Panel) Regarding Data Development
At the August 24, 2015 meeting of the Panel, we discussed our
standard analysis of APCs, specifically those APCs for which geometric
mean costs in the proposed rule run of CY 2014 claims data varied
significantly from the CY 2013 claims data used for the CY 2015 OPPS/
ASC final rule with comment period. We also discussed the ``pseudo''
single development process for the CY 2015 OPPS/ASC final rule with
comment period.
At the August 24, 2015 Panel meeting, the Panel made two
recommendations related to the data process. The Panel's data-related
recommendations and our responses follow.
Recommendation: The Panel recommends that the work of the Data
Subcommittee continue.
CMS Response: We are accepting this recommendation.
Recommendation: The Panel recommends that CMS provide the Panel
with a list of APCs fluctuating

[[Page 70322]]

significantly in costs at the next Panel meeting.
CMS Response: We are accepting this recommendation.
Recommendation: The Panel recommends that Michael Schroyer serve as
Chair of the Data Subcommittee.
CMS Response: We are accepting this recommendation.
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
(a) Methodology
Since the implementation of the OPPS in August 2000, we have made
separate payments for blood and blood products through APCs rather than
packaging payment for them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as well as for the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39222), for CY 2016,
we proposed to continue to establish payment rates for blood and blood
products using our blood-specific CCR methodology, which utilizes
actual or simulated CCRs from the most recently available hospital cost
reports to convert hospital charges for blood and blood products to
costs. This methodology has been our standard ratesetting methodology
for blood and blood products since CY 2005. It was developed in
response to data analysis indicating that there was a significant
difference in CCRs for those hospitals with and without blood-specific
cost centers, and past public comments indicating that the former OPPS
policy of defaulting to the overall hospital CCR for hospitals not
reporting a blood-specific cost center often resulted in an
underestimation of the true hospital costs for blood and blood
products. Specifically, in order to address the differences in CCRs and
to better reflect hospitals' costs, we proposed 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 also proposed to 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 proposed to calculate the costs upon which
the CY 2016 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 stated in the proposed rule that we continue to believe that the
hospital-specific simulated 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 hospital, we believe that it yields more
accurate estimated costs for these products. We continue to believe
that this methodology in CY 2016 will result in costs for blood and
blood products that appropriately reflect the relative estimated costs
of these products for hospitals without blood cost centers and,
therefore, for these blood products in general.
We invited public comments on this proposal to continue this
longstanding methodology.
Comment: Commenters supported the proposal to continue to
separately pay for blood and blood products using a blood-specific CCR
methodology.
Response: We appreciate the commenters' support.
Comment: Numerous commenters (various hospitals, blood centers,
associations, and other stakeholders) expressed concern regarding the
proposed CY 2016 payment rates for blood and blood products. The
commenters believed that the proposed payment rates do not accurately
reflect the cost of collecting, processing, and distributing blood
products to patients. The commenters noted that the payment rates did
not align with the costs statistics data provided with the proposed
rule, and therefore the commenters believed that the CY 2016 proposed
payment rates for blood and blood products were produced in error.
Response: We acknowledge that an error occurred in the calculation
of the proposed CY 2016 payment rates for blood and blood products
included in the proposed rule. The payment rates included in the
proposed rule erroneously were not calculated using the hospital-
specific simulated blood-specific CCR methodology described in the
proposed rule (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). As a result of correcting this
error, payment rates for blood and blood products increased
approximately 10 percent to 60 percent from the proposed CY 2016
payment rates. We have corrected this error in this final rule with
comment period and the final CY 2016 payment rates reflect this
correction.
After consideration of the public comments we received, we are
finalizing, without modification, our CY 2016 proposal to continue to
establish payment rates for blood and blood products using our blood-
specific CCR methodology. The final CY 2016 payment rates for blood and
blood products (which are identified with status indicator ``R'') are
reflective of the use of the hospital-specific simulated blood-specific
CCR methodology and can be found in Addendum B to this final rule with
comment period (which is available via the Internet on the CMS Web
site).
(b) New HCPCS Codes for Pathogen-Reduced Blood Products
For CY 2016, the HCPCS Workgroup established three new HCPCS P-
codes for new pathogen-reduced blood products, effective January 1,
2016, as follows:
P9070 (Plasma, pooled multiple donor, pathogen reduced,
frozen, each unit);
P9071 (Plasma (single donor), pathogen reduced, frozen,
each unit); and
P9072 (Platelets, pheresis, pathogen reduced, each unit).
The term ``pathogen reduction'' describes various techniques
(including treatment with Amotosalen and UVA light) used on blood
products to eliminate certain pathogens and reduce the risk of
transfusion-associated infections. As discussed above, we calculate
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. Because these three HCPCS P-
codes are new for CY 2016, there are currently no claims data on the
charges and costs for these blood products upon which to apply our
blood-specific CCR methodology. Therefore, we are establishing interim
payment rates for these three HCPCS P-codes based on a crosswalk to
existing blood product HCPCS codes that we believe provide the best
proxy for the costs of the three new blood products described by the
above listed new HCPCS P-codes. Table 5 below list the new pathogen-
reduced blood products

[[Page 70323]]

HCPCS P-codes and their payment crosswalks.

Table 5--New Pathogen-Reduced Blood Products HCPCS P-Codes and Interim Payment Rates and Crosswalks for CY 2016
----------------------------------------------------------------------------------------------------------------
Final CY 2016
New CY 2016 HCPCS P-code New HCPCS P-code Crosswalked HCPCS Crosswalked HCPCS P- OPPS payment
long descriptor P[dash]code code long descriptor amount
----------------------------------------------------------------------------------------------------------------
P9070.................... Plasma, pooled P9059.................... Fresh frozen plasma $73.08
multiple donor, between 8-24 hours
pathogen reduced, of collection, each
frozen, each unit. unit.
P9071.................... Plasma (single P9017.................... Fresh frozen plasma 72.56
donor), pathogen (single donor),
reduced, frozen, frozen within 8
each unit. hours of
collection, each
unit.
P9072.................... Platelets, pheresis, P9037.................... Platelets, pheresis, 641.85
pathogen reduced, leukocytes reduced,
each unit. irradiated, each
unit.
----------------------------------------------------------------------------------------------------------------

These interim payment rates are open for public comment in this CY
2016 final rule with comment period. Specifically, the new HCPCS P-
codes are flagged with comment indicator ``NI'' in Addendum B to this
final rule with comment period to indicate that we have assigned the
codes an interim OPPS payment status for CY 2016 and are seeking public
comments on the APC and status indicator assignments. Once we have
claims data for these new HCPCS P-codes, we will calculate payment
rates using the claims data that should be available for these new
codes beginning in CY 2018, which is our practice for other blood
products for which claims data have been available for 2 years.
During the process of creating these new HCPCS P-codes for the
three pathogen-reduced blood products, we examined the current set of
HCPCS P-codes, which became effective many years ago. We believe that
the HCPCS P-codes for these products could benefit from a careful
examination and review with possible revision and updating to make the
HCPCS P-codes describing blood products reflect current product
descriptions and utilization while minimizing redundancy and
potentially outdated descriptors. Therefore, we intend in future
rulemaking to evaluate the set of HCPCS P-codes and propose revisions
that may be necessary to create a current and robust code set for blood
products.
(2) Brachytherapy Sources
Section 1833(t)(2)(H) of the Act mandates 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 statute provides certain criteria for the additional
groups. For the history of OPPS payment for brachytherapy sources, we
refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC
final rule with comment period (77 FR 68240 through 68241). As we have
stated in prior OPPS updates, we believe that adopting the general OPPS
prospective payment methodology for brachytherapy sources is
appropriate for a number of reasons (77 FR 68240). The general OPPS
methodology uses costs based on claims data to set the relative payment
weights for hospital outpatient services. This payment methodology
results in more consistent, predictable, and equitable payment amounts
per source across hospitals by averaging the extremely high and low
values, in contrast to payment based on hospitals' charges adjusted to
costs. We believe that the OPPS methodology, as opposed to payment
based on hospitals' charges adjusted to cost, also would 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 refer readers to
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66796
through 66798) for further discussion of the history of OPPS payment
for brachytherapy sources.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39222), for CY 2016,
we proposed to use the costs derived from CY 2014 claims data to set
the proposed CY 2016 payment rates for brachytherapy sources, as we
proposed to use to set the proposed payment rates for most other items
and services that would be paid under the CY 2016 OPPS. We based the
proposed payment rates for brachytherapy sources on the geometric mean
unit costs for each source, consistent with the methodology proposed
for other items and services paid under the OPPS, as discussed in
section II.A.2. of the proposed rule and this final rule with comment
period. We also proposed to continue the other payment policies for
brachytherapy sources that we finalized and first implemented in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60537). We proposed
to pay for the stranded and nonstranded not otherwise specified (NOS)
codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest
stranded or nonstranded prospective payment rate for such sources,
respectively, on a per source basis (as opposed to, for example, 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). For CY 2016 and
subsequent years, we also proposed to continue the policy we first
implemented in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60537) regarding payment for new brachytherapy sources for which we
have no claims data, based on the same reasons we discussed in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66786; which was
delayed until January 1, 2010 by section 142 of Pub. L. 110-275). That
policy is intended to enable us to assign new HCPCS codes for new
brachytherapy sources to their own APCs, with prospective payment rates
set based on our consideration of external data and other relevant
information regarding the expected costs of the sources to hospitals.
The proposed CY 2016 payment rates for brachytherapy sources were
included in Addendum B to the proposed rule (which is available via the
Internet on the CMS Web site) and were identified with status indicator
``U.''
We invited public comments on this proposed policy. We also
requested recommendations for new HCPCS codes to describe new
brachytherapy sources consisting of a radioactive isotope, including a
detailed rationale to support recommended new sources.
Comment: One commenter expressed concern regarding the outpatient

[[Page 70324]]

hospital claims data that CMS used to set the prospective payment rates
for brachytherapy sources. The commenter stated that high dose rate
(HDR) brachytherapy devices are renewable because the devices have a
90-day use span and are used in the treatment of multiple patients
during this 90-day span. According to the commenter, the true cost of
treatment involving brachytherapy sources depends on the number of
patients treated by a hospital within a 90-day period, as well as the
number of treatments required and the intensity of the treatments. For
this reason, the commenter believed that it is difficult to establish
fair and adequate prospective payment rates for brachytherapy sources.
The commenter also noted that the brachytherapy source payment data
continue to show huge variation in per unit cost across hospitals.
In addition, the commenter believed that CMS' claims data contain
rank order anomalies, causing the usual cost relationship between the
high activity palladium-103 source (HCPCS code C2635, Brachytherapy
source, non-stranded, high activity, palladium-103, greater than 2.2
mci (NIST) per source) and the low activity palladium-103 sources
(HCPCS code C2640, Brachytherapy source, stranded, palladium-103, per
source and HCPCS code C2641, Brachytherapy source, non-stranded,
palladium-103, per source) to be reversed. The commenter noted that the
proposed geometric mean costs of the brachytherapy source HCPCS codes
are approximately $35, $72, and $72, respectively. The commenters
stated that, based on its experience, stranded palladium-103 sources
(HCPCS code C2640) always cost more than non-stranded palladium-103
sources (HCPCS code C2641), which is not reflected in the proposed rule
claims data that CMS used. The commenter expressed concern that payment
for brachytherapy sources are unstable and fluctuate significantly
since CMS implemented the prospective payment methodology based on
source-specific median cost in CY 2010 and geometric mean unit cost in
CY 2013.
Response: As stated above, we believe that geometric mean costs
based on hospital claims data for brachytherapy sources have produced
reasonably consistent per-source cost estimates over the past several
years, comparable to the patterns we have observed for many other OPPS
services whose payments are set based upon relative payment weights
from claims data. We believe that our per-source payment methodology
specific to each source's radioisotope, radioactive intensity, and
stranded or non-stranded configuration, supplemented by payment based
on the number of sources used in a specific clinical case, adequately
accounts for the major expected sources of variability across
treatments. (We refer readers to 72 FR 66782; 74 FR 60534; 75 FR 71979;
76 FR 74161; 77 FR 68241; 78 FR 74861; and 79 FR 66796.) We believe
that the CY 2014 brachytherapy source claims data used for CY 2016
ratesetting produce adequate payment rates for brachytherapy sources.
In addition, as we have explained previously, a prospective payment
system relies upon the concept of averaging, where the payment may be
more or less than the estimated cost of providing a service for a
particular patient. With the exception of outlier cases, the payment
for services is adequate to ensure access to appropriate care. In the
case of brachytherapy sources for which the law requires separate
payment groups, without packaging, the costs of these individual items
could be expected to show greater variation than some other APCs under
the OPPS because higher variability in costs for some component items
and services is not balanced with lower variability in costs for
others, and because relative payment weights are typically estimated
using a smaller set of claims. Nevertheless, we believe that
prospective payment rates for brachytherapy sources based on geometric
mean costs of the services reported on claims calculated according to
the standard OPPS methodology are appropriate and provide hospitals
with the greatest incentives for efficiency in furnishing brachytherapy
treatment.
Under the OPPS, it is the relativity of costs, not the absolute
costs, that is important, and we believe that brachytherapy sources are
appropriately paid according to the standard OPPS approach.
Furthermore, some sources may have geometric mean costs and payment
rates based on 50 or fewer providers because it is not uncommon for
OPPS rates to be based on claims from a relatively small number of
hospitals that furnished the service in the year of claims data
available for the OPPS update year. Fifty hospitals may report hundreds
of brachytherapy sources on claims for many cases and comprise the
universe of providers using particular low volume sources, for which we
are required to pay separately by statute. Further, our methodology for
estimating geometric mean costs for brachytherapy sources utilizes all
line-item charges for those sources, which allows us to use all
hospital reported charge and estimated cost information to set payment
rates for these items. Therefore, no brachytherapy source claims are
excluded from the calculation of geometric means costs. We have no
reason to believe that prospective payment rates based on claims data
from those providers furnishing a particular source do not
appropriately reflect the cost of that source to hospitals. As with
most other OPPS services, we note that the geometric mean costs for
brachytherapy sources are based upon the costs of those providers'
sources in CY 2014. Hospitals individually determine their charge for
an item or service, and one of Medicare's primary requirements for
setting a charge is that it be reasonably and consistently related to
the cost of the item or service for that facility. (We refer readers to
the Medicare Provider Reimbursement Manual, Part I, Section 2203, which
is available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.html?DLPage=1&DLSort=0&DLSortDir=ascending.) We then estimate
a cost from that charge using the hospital's most recent Medicare
hospital cost report data in our standard OPPS ratesetting process.
We acknowledge that HDR brachytherapy sources such as HDR iridium-
192 have a fixed active life and must be replaced every 90 days. As a
result, a hospital's per treatment cost for the source would be
dependent on the number of treatments furnished per source. The cost of
the brachytherapy source must be amortized over the life of the source.
Therefore, when establishing charges for HDR iridium-192, we expect
hospitals to project the number of treatments that would be provided
over the life of the source and establish charges for the source
accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 74162; 77 FR
68242; and 78 FR 74861). For most payable services under the OPPS, our
practice is to establish prospective payment rates based on the
geometric mean costs determined from hospitals' claims data to provide
incentives for efficient and cost effective delivery of these services.
With regard to the commenter's stated concerns relating to the
differences in costs for high-activity and low-activity palladium-103
sources, our claims data consistently have shown higher average costs
for low-activity palladium-103 sources. For the high-activity
palladium-103 sources described by HCPCS code C2635, our claims data
showed that 9 hospitals submitted claims for this source in CY 2014,
compared to 91 and 145 hospitals that submitted claims for the low-
activity palladium-103 sources described by

[[Page 70325]]

HCPCS codes C2640 and C2641, respectively. It is clear from these
claims data that fewer hospitals furnished the high-activity palladium-
103 source than the low-activity palladium-103 sources, and we expect
that the hospital cost distribution for those hospitals could be
different than the cost distribution of the large numbers of hospitals
reporting the low-activity palladium-103 sources, as previously stated
(74 FR 60535; 75 FR 71979; 76 FR 74162; 77 FR 68242; and 78 FR 74861).
These varied cost distributions clearly contribute to the observed
relationship in geometric mean cost between the different types of
sources. However, we see no reason why our standard ratesetting
methodology for brachytherapy sources that relies on all claims data
from all hospitals furnishing brachytherapy sources would not yield
valid geometric mean costs for those hospitals furnishing the different
brachytherapy sources upon which CY 2016 prospective payments are
based.
Comment: A number of commenters noted that the proposed CY 2016
payment rate for brachytherapy sources described by HCPCS code C2616
(Brachytx, non-str, yttrium-90) would not adequately cover a hospital's
true cost for purchasing the device. The commenters expressed concern
that the claims data used to calculate the CY 2016 proposed payment
rate does not accurately represent charges for the Y-90 brachytherapy
devices and the CY 2015 purchase price incurred by hospitals. In
addition, the commenters believed that inconsistent or incorrect
reporting (or both) of revenue codes for the use of Y-90 brachytherapy
devices adversely affected the proposed CY 2016 payment rate for HCPCS
code C2616.
Response: As illustrated in Table 6 below, the CY 2016 geometric
mean cost of brachytherapy sources described by HCPCS code C2616 for
this final rule with comment period is approximately $16,760, compared
with approximately $16,160 for CY 2015, and $16,890 for CY 2014.
Furthermore, we note that the CY 2016 geometric mean cost is based on a
greater number of providers, days, and units in comparison to CY 2014
and CY 2015.

Table 6--Cost Statistics for Brachytheraopy Sources Described by HCPCS Code C2616 for CY 2014 Through CY 2016
----------------------------------------------------------------------------------------------------------------
Number of Geometric mean
Calendar year HCPCS code providers Days Units unit cost
----------------------------------------------------------------------------------------------------------------
2014.......................... C2616........... 246 2,237 2,237 $16,888.06
2015.......................... C2616........... 299 2,464 2,464 16,164.79
2016.......................... C2616........... 352 3,153 3,153 16,764.72
----------------------------------------------------------------------------------------------------------------

We believe that some variation in relative cost from year to year
is to be expected in a prospective payment system, particularly for
low-volume items.
For all APCs whose payment rates are based upon relative payment
weights, we note that the quality and accuracy of reported units and
charges significantly influence the final geometric mean costs that are
the basis for our payments. Beyond our standard OPPS trimming
methodology (described in section II.A.2. for this final rule with
comment period) that we apply to those claims that have passed various
types of claims processing edits, it is not our policy to critique the
accuracy of hospital coding and charging for the purpose of
ratesetting. Moreover, we do not believe it is necessary to incorporate
external cost data from manufacturers of Y-90 brachytherapy sources (or
any other brachytherapy sources) because, in a relative weight system
like the OPPS, it is the relativity of the costs of services to one
another, rather than absolute cost, that is important in setting
payment rates. External data lack relativity to the estimated costs
derived from the claims and cost report data and generally are not
appropriate for determining relative weights that result in payment
rates when costs derives from hospital claims and cost report data for
services are available.
After consideration of the public comments we received, we are
finalizing our proposal to continue to set the payment rates for
brachytherapy sources using our established prospective payment
methodology, which is based on geometric mean costs. The CY 2016 final
payment rates for brachytherapy sources are found in Addendum B to this
final rule with comment period (which is available via the Internet on
the CMS Web site).
As stated in the proposed rule, we continue to invite hospitals and
other parties to submit recommendations to us for new codes to describe
new brachytherapy sources. Such recommendations should be directed to
the Division of Outpatient Care, Mail Stop C4-03-27, Centers for
Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD
21244. We will continue to add new brachytherapy source codes and
descriptors to our systems for payment on a quarterly basis.
e. Comprehensive APCs (C-APCs) for CY 2016
(1) Background
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861
through 74910), we finalized a comprehensive payment policy that
packages payment for adjunctive and secondary items, services, and
procedures into the most costly primary procedure under the OPPS at the
claim level. The policy was finalized in CY 2014, but the effective
date was delayed until January 1, 2015, to allow additional time for
further analysis, opportunity for public comment, and systems
preparation. The comprehensive APC (C-APC) policy was implemented
effective January 1, 2015, with modifications and clarifications in
response to public comments received regarding specific provisions of
the C-APC policy (79 FR 66798 through 66810).
A C-APC is defined as a classification for the provision of a
primary service and all adjunctive services provided to support the
delivery of the primary service. We established C-APCs as a category
broadly for OPPS payment and implemented 25 C-APCs beginning in CY 2015
(79 FR 66809 through 66810).
Under this policy, we designated a HCPCS code assigned to a C-APC
as the primary service (identified by a new OPPS status indicator
``J1''). When such a primary service is reported on a hospital
outpatient claim, taking into consideration the few exceptions that are
discussed below, we make payment for all other items and services
reported on the hospital outpatient claim as being integral, ancillary,
supportive, dependent, and adjunctive to the primary service
(hereinafter collectively referred to as ``adjunctive services'') and
representing components of a complete

[[Page 70326]]

comprehensive service (78 FR 74865 and 79 FR 66799). Payments for
adjunctive services are packaged into the payments for the primary
services. This results in a single prospective payment for each of the
primary, comprehensive services based on the costs of all reported
services at the claim level.
Services excluded from the C-APC policy include services that are
not covered OPD services, services that cannot by statute be paid for
under the OPPS, and services that are required by statute that must be
separately paid. This includes certain mammography and ambulance
services that are not ever covered OPD services in accordance with
section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also
are required by statute to receive separate payment under section
1833(t)(2)(H) of the Act; pass-through drugs and devices, which also
require separate payment under section 1833(t)(6) of the Act; self-
administered drugs (SADs) that are not otherwise packaged as supplies
because they are not covered under Medicare Part B under section
1861(s)(2)(B) of the Act, and certain preventive services (78 FR 74865
and 79 FR 66800 through 66801).
The C-APC policy payment methodology set forth in the CY 2014 OPPS/
ASC final rule with comment period for the C-APCs and modified and
implemented in CY 2015 is summarized as follows (78 FR 74887 and 79 FR
66800):
Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule
with comment period, we define the C-APC payment policy as including
all covered OPD services on a hospital outpatient claim reporting a
primary service that is assigned to status indicator ``J1,'' excluding
services that are not covered OPD services or that cannot by statute be
paid for under the OPPS. Services and procedures described by HCPCS
codes assigned to status indicator ``J1'' are assigned to C-APCs based
on our usual APC assignment methodology by evaluating the geometric
mean costs of the primary service claims to establish resource
similarity and the clinical characteristics of each procedure to
establish clinical similarity within each APC.
Services included under the C-APC payment packaging policy, that
is, services that are typically adjunctive to the primary service,
provided during the delivery of the comprehensive service, include
diagnostic procedures, laboratory tests, and other diagnostic tests and
treatments that assist in the delivery of the primary procedure; visits
and evaluations performed in association with the procedure; uncoded
services and supplies used during the service; durable medical
equipment as well as prosthetic and orthotic items and supplies when
provided as part of the outpatient service; and any other components
reported by HCPCS codes that represent services that are provided
during the complete comprehensive service, except the excluded services
that are described below (78 FR 74865 and 79 FR 66800).
In addition, payment for outpatient department services that are
similar to therapy services and delivered either by therapists or
nontherapists is included as part of the payment for the packaged
complete comprehensive service. These services that are provided during
the perioperative period are adjunctive services and not therapy
services as described in section 1834(k) of the Act, regardless of
whether the services are delivered by therapists or other nontherapist
health care workers. We have previously noted that therapy services are
those provided by therapists under a plan of care in accordance with
section 1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid
for under section 1834(k) of the Act, subject to annual therapy caps as
applicable (78 FR 74867 and 79 FR 66800). However, certain other
services similar to therapy services are considered and paid for as
outpatient department services. Payment for these nontherapy outpatient
department services that are reported with therapy codes and provided
with a comprehensive service is included in the payment for the
packaged complete comprehensive service. We note that these services,
even though they are reported with therapy codes, are outpatient
department services and not therapy services. Therefore, the
requirement for functional reporting under the regulations at 42 CFR
410.59(a)(4) and 42 CFR 410.60(a)(4) does not apply.
Items included in the packaged payment provided in conjunction with
the primary service also include all drugs, biologicals, and
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and those drugs that are usually self-
administered (SADs), unless they function as packaged supplies (78 FR
74868 through 74869 and 74909 and 79 FR 66800). We refer readers to
Section 50.2M, Chapter 15, of the Medicare Benefit Policy Manual for a
description of our policy on SADs treated as hospital outpatient
supplies, including lists of SADs that function as supplies and those
that do not function as supplies.
Items and services excluded from the C-APC payment policy include:
SADs that are not considered supplies because they are not covered
under Medicare Part B under section 1861(s)(2)(B) of the Act; services
excluded from the OPPS according to section 1833(t)(1)(B) of the Act,
including recurring therapy services, which we considered unrelated to
the comprehensive service (defined as therapy services reported on a
separate facility claim for recurring services), ambulance services,
diagnostic and screening mammography, the annual wellness visit
providing personalized prevention plan services, and pass-through drugs
and devices that are paid according to section 1833(t)(6) of the Act.
We also excluded preventive services. For a description of the
preventive services that are excluded from the C-APC payment policy, we
refer readers to the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66800 through 66801) and the list below in Table 7, which also
includes any new preventive services added for CY 2016.
Other exclusions include brachytherapy services and pass-through
drugs, biologicals, and devices that are required by statute to be
separately payable (78 FR 74868 and 74909 and 79 FR 66801). In
addition, we also excluded services assigned to OPPS status indicator
``F,'' which are services not paid under the OPPS and are instead paid
on a reasonable cost basis (that is, certain certified registered nurse
assistant (CRNA) services, Hepatitis B vaccines, and corneal tissue
acquisition, which is not part of a comprehensive service for CY 2015).
In Table 7 below, we list the services that are excluded from the C-APC
payment policy.

Table 7--Comprehensive APC Payment Policy Exclusions for CY 2016
------------------------------------------------------------------------

-------------------------------------------------------------------------
Ambulance services;
------------------------------------------------------------------------
Brachytherapy;
------------------------------------------------------------------------

[[Page 70327]]

Diagnostic and mammography screenings;
------------------------------------------------------------------------
Physical therapy, speech-language pathology and occupational therapy
services--Therapy services reported on a separate facility claim for
recurring services;
------------------------------------------------------------------------
Pass-through drugs, biologicals, and devices;
------------------------------------------------------------------------
Preventive services defined in 42 CFR 410.2:
Annual wellness visits providing personalized prevention
plan services
Initial preventive physical examinations
Pneumococcal, influenza, and hepatitis B vaccines and
administrations
Mammography Screenings
Pap smear screenings and pelvic examination screenings
Low Dose Computed Tomography
Prostate cancer screening tests
Colorectal cancer screening tests
Diabetes outpatient self-management training services
Bone mass measurements
Glaucoma screenings
Medical nutrition therapy services
Cardiovascular screening blood tests
Diabetes screening tests
Ultrasound screenings for abdominal aortic aneurysm
Additional preventive services (as defined in section
1861(ddd)(1) of the Act);
------------------------------------------------------------------------
Self-administered drugs (SADs)--Drugs that are usually self-administered
and do not function as supplies in the provision of the comprehensive
service;
------------------------------------------------------------------------
Services assigned to OPPS status indicator ``F'' (certain CRNA services,
Hepatitis B vaccines and corneal tissue acquisition);
------------------------------------------------------------------------
Services assigned to OPPS status indicator ``L'' (influenza and
pneumococcal pneumonia vaccines); and
------------------------------------------------------------------------
Certain Part B inpatient services--Ancillary Part B inpatient services
payable under Part B when the primary ``J1'' service for the claim is
not a payable Medicare Part B inpatient service (for example, exhausted
Medicare Part A benefits, beneficiaries with Part B only).
------------------------------------------------------------------------

We define each hospital outpatient claim reporting a single unit of
a single primary service assigned to status indicator ``J1'' as a
single ``J1'' unit procedure claim (78 FR 74871 and 79 FR 66801). We
sum all line item charges for services included on the C-APC claim,
convert the charges to costs, and calculate the ``comprehensive''
geometric mean cost of one unit of each service assigned to status
indicator ``J1.'' (We note that we use the term ``comprehensive'' to
describe the geometric mean cost of a claim reporting ``J1'' service(s)
or the geometric mean cost of a C-APC, inclusive of all of the items
and services included in the C-APC service payment bundle.) Charges for
services that would otherwise be separately payable are added to the
charges for the primary service. This process differs from our
traditional cost accounting methodology only in that all such services
on the claim are packaged (except certain services as described above).
We apply our standard data trims, excluding claims with extremely high
primary units or extreme costs.
The comprehensive geometric mean costs are used to establish
resource similarity and, along with clinical similarity, dictate the
assignment of the primary services to the C-APCs. We establish a
ranking of each primary service (single unit only) to be assigned to
status indicator ``J1'' according to their comprehensive geometric mean
costs. For the minority of claims reporting more than one primary
service assigned to status indicator ``J1'' or units thereof
(approximately 20 percent of CY 2014 claims), we identify one ``J1''
service as the primary service for the claim based on our cost-based
ranking of primary services. We then assign these multiple ``J1''
procedure claims to the C-APC to which the service designated as the
primary service is assigned. If the reported ``J1'' services reported
on a claim map to different C-APCs, we designate the ``J1'' service
assigned to the C-APC with the highest comprehensive geometric mean
cost as the primary service for that claim. If the reported multiple
``J1'' services on a claim map to the same C-APC, we designate the most
costly service (at the HCPCS code level) as the primary service for
that claim. This process results in initial assignments of claims for
the primary services assigned to status indicator ``J1'' to the most
appropriate C-APCs based on both single and multiple procedure claims
reporting these services and clinical and resource homogeneity.
Complexity Adjustments. We use complexity adjustments to provide
increased payment for certain comprehensive services. We apply a
complexity adjustment by promoting qualifying ``J1'' service code
combinations or code combinations of ``J1'' services and certain add-on
codes (as described further below) from the originating C-APC (the C-
APC to which the designated primary service is first assigned) to a
higher paying C-APC in the same clinical family of C-APCs, if
reassignment is clinically appropriate and the reassignment would not
create a violation of the 2 times rule in the receiving APC (the higher
paying C-APC in the same clinical family of C-APCs). We implement this
type of complexity adjustment when the code combination represents a
complex, costly form or version of the primary service according to the
following criteria:
Frequency of 25 or more claims reporting the code
combination (frequency threshold); and
Violation of the 2 times rule (cost threshold).
After designating a single primary service for a claim, we evaluate
that service in combination with each of the other procedure codes
reported on the claim assigned to status indicator ``J1'' (or certain
add-on codes) to determine if they meet the complexity adjustment

[[Page 70328]]

criteria. For new HCPCS codes, we determine initial C-APC assignments
and complexity adjustments using the best data available, crosswalking
the new HCPCS codes to predecessor codes wherever possible.
Once we have determined that a particular code combination of
``J1'' services (or combinations of ``J1'' services reported in
conjunction with certain add-on codes) represents a complex version of
the primary service because it is sufficiently costly, frequent, and a
subset of the primary comprehensive service overall according to the
criteria described above, we promote the complex version of the primary
service as described by the code combination to the next higher cost C-
APC within the clinical family, unless the APC reassignment is not
clinically appropriate, the reassignment would create a violation of
the 2 times rule in the receiving APC, or the primary service is
already assigned to the highest cost APC within the C-APC clinical
family or assigned to the only C-APC in a clinical family. We do not
create new APCs with a comprehensive geometric mean cost that is higher
than the highest geometric mean cost (or only) C-APC in a clinical
family just to accommodate potential complexity adjustments. Therefore,
the highest payment for any code combination for services assigned to a
C-APC would be the highest paying C-APC in the clinical family (79 FR
66802).
We package payment for all add-on codes into the payment for the C-
APC. However, certain primary service-add-on combinations may qualify
for a complexity adjustment. First, the add-on code must be an eligible
add-on code. The list of add-on codes that are eligible for complexity
adjustment evaluation was included in Table 8 of the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66810), and also was identified
as Addendum J to the proposed rule (which is available via the Internet
on the CMS Web site). In the CY 2016 OPPS/ASC proposed rule (80 FR
39225), for CY 2016, we did not propose to add any add-on codes to the
list of add-on codes that are evaluated for a complexity adjustment
when performed in conjunction with a primary C-APC procedure.
To determine which combinations of primary service codes reported
in conjunction with an eligible add-on code may qualify for a
complexity adjustment for CY 2016, we apply the frequency and cost
criteria thresholds discussed above, testing claims reporting one unit
of a single primary service assigned to status indicator ``J1'' and any
number of units of a single add-on code. If the frequency and cost
criteria thresholds for a complexity adjustment are met, and
reassignment to the next higher cost APC in the clinical family is
appropriate, we make a complexity adjustment for the code combination;
that is, we reassign the primary service code reported in conjunction
with the eligible add-on code combination to a higher cost C-APC within
the same clinical family of C-APCs. If any add-on code combination
reported in conjunction with the primary service code does not qualify
for a complexity adjustment, payment for these services is packaged
within the payment for the complete comprehensive service. We list the
complexity adjustments proposed for add-on code combinations for CY
2016, along with all of the other complexity adjustments, in Addendum J
to this final rule with comment period (which is available via the
Internet on the CMS Web site).
We are providing in Addendum J to this final rule with comment
period a breakdown of cost statistics for each code combination that
will qualify for a complexity adjustment (including primary code and
add-on code combinations). Addendum J to this final rule with comment
period also contains summary cost statistics for each of the code
combinations that describe a complex code combination that will qualify
for a complexity adjustment and will be reassigned to the next higher
cost C-APC within the clinical family. The combined statistics for all
reassigned complex code combinations are represented by an alphanumeric
code with the last 4 digits of the designated primary service followed
by ``A'' (indicating ``adjustment''). For example, the geometric mean
cost listed in Addendum J for the code combination described by
complexity adjustment assignment 3208A, which is assigned to renumbered
C-APC 5223 (Level 3 Pacemaker and Similar Procedures) (previously APC
0089), includes all code combinations that are reassigned to renumbered
C-APC 5223 when CPT code 33208 is the primary code. Providing the
information contained in Addendum J in this final rule with comment
period allows stakeholders the opportunity to better assess the impact
associated with the reassignment of each of the code combinations
eligible for a complexity adjustment.
(2) C-APCs To Be Paid Under the C-APC Payment Policy for CY 2016
(a) CY 2016 C-APCs
In the CY 2016 OPPS/ASC proposed rule (80 FR 39225), for CY 2016,
we proposed to continue to apply the C-APC payment policy methodology
made effective in CY 2015, as described in detail below. We proposed to
continue to define the services assigned to C-APCs as primary services,
and to define a C-APC as a classification for the provision of a
primary service and all adjunctive services and supplies provided to
support the delivery of the primary service. We also proposed to follow
the C-APC payment policy methodology of including all covered OPD
services on a hospital outpatient claim reporting a primary service
that is assigned to status indicator ``J1,'' excluding services that
are not covered OPD services or that cannot by statute be paid under
the OPPS.
As indicated in the CY 2016 OPPS/ASC proposed rule (80 FR 39225),
after our annual review of the OPPS, we proposed to establish nine
additional C-APCs to be paid under the existing C-APC payment policy
beginning in CY 2016. All C-APCs, including those effective in CY 2016
and those being proposed for CY 2016, were displayed in Table 6 of the
proposed rule with the proposed new C-APCs denoted with an asterisk.
Addendum J to the proposed rule (which is available via the Internet on
the CMS Web site) contained all of the data related to the C-APC
payment policy methodology, including the list of proposed complexity
adjustments.
Comment: Several commenters generally supported the concept of
creating larger payment bundles under the OPPS. The commenters endorsed
the C-APC payment policy and the proposal to establish nine additional
C-APCs for CY 2016 to be paid under the existing policy.
Response: We appreciate the commenters' support.
Comment: Some commenters expressed concerns that the C-APC payment
rates do not accurately reflect all of the costs associated with the
primary service and all adjunctive services. Many of these commenters
opposed the expansion of the C-APC policy and requested a delay in the
implementation of the proposed CY 2016 C-APCs until the effect of the
existing C-APCs can be assessed. Other commenters stated that the C-APC
payment rates may not appropriately account for the cost of recurring
services such as radiation oncology and dialysis that are unrelated to
the primary service, but may be included in a C-

[[Page 70329]]

APC claim. Some commenters also requested CMS to provide for
transparency in the development of C-APC payment rates and data inputs.
Response: We do not believe that we should delay implementation of
the proposed CY 2016 C-APCs to allow time for assessment of the effect
of the existing C-APCs. It is unclear what specific analyses the
commenters are requesting we perform before establishing additional C-
APCs. In addition, we believe we have provided adequate information to
enable stakeholders sufficient time to perform independent analysis of
the proposed C-APC payment rates and their effects.
We believe that the additional nine C-APCs that we proposed for CY
2016 and the existing 25 C-APCs meet the established C-APC criteria. In
addition, the commenters did not present any data or evidence that
would suggest that the C-APC payment methodology used to calculate the
CY 2016 payment rates is inappropriate. We calculate payment rates for
C-APCs with the same basic methodology used to calculate payment rates
for other APCs. We calculated the final relative payment weights for C-
APCs by using relative costs derived from our standard process as
described earlier in section II.A. of this final rule with comment
period. Specifically, after converting charges to costs on the claims,
we identified all claims reporting a single procedure described by a
HCPCS code assigned to status indicator ``J1'' as constituting a
comprehensive service. These claims were, by definition, classified as
single major procedure claims. Any claims that contained more than one
of these procedures were identified but were included in calculating
the cost of the procedure that had the greatest cost when traditional
HCPCS level accounting was applied. All other costs were summed to
calculate the total cost of the comprehensive service, and statistics
for those services were calculated in the usual manner. Claims with
extreme costs were excluded in accordance with our usual process. We
used the final relative payment weights of these comprehensive services
to calculate final payments following our standard methodology. We
believe that the C-APC payment methodology is consistent with our goal
of making the OPPS more like a prospective payment system and less like
a fee schedule. As is our current practice, we intend to continue to
review and monitor all of our payment rates to ensure that they are
accurate and reflect the average resource costs of furnishing a service
or set of services. In the event that we discover inaccuracies in the
development of payment rates, CMS will take appropriate action and make
adjustments as necessary.
With respect to the public comments regarding the inclusion of
unrelated services on a C-APC claim, we note that we have responded to
similar comments in a prior rulemaking. We refer readers to the CY 2014
OPPS/ASC final rule with comment period (78 FR 74865) and CY 2015 OPPS/
ASC final rule with comment period (79 FR 66804 and 66806) for a
complete discussion of this issue. We believe that the central
attribute of the C-APC payment policy is the packaging of all the
services related to the primary service, with the exception of those
services described above that, according to the statute, cannot be
packaged or the list of preventive services that generally would not be
provided at the time of a major procedure assigned to a C-APC. We
believe that other services performed at the time of major procedures
included in C-APCs can reasonably be considered to be related to the
primary service or procedure. Therefore, we consider all services
reported on the claim to be related to the primary service and include
these services in establishing the payment rate for the C-APC. We do
not believe that a significant amount of unrelated services would be
billed on the claim for the primary service.
Further, we note that the comments received regarding this issue
were primarily concerned with unrelated services reported on claims
spanning 30 days. We have previously issued manual guidance in the
Internet Only Manual, Pub. 100-4, Chapter 1, Section 50.2.2, that
states that only recurring services should be billed monthly. We also
have specified that, in the event that a recurring service occurs on
the same day as an acute service that falls within the span of the
recurring service claim, hospitals should bill separately for recurring
services on a monthly claim (repetitive billing) and submit a separate
claim for the acute service (79 FR 66804). In addition, we have
instructed hospitals that laboratory tests ordered by unrelated
providers for unrelated medical conditions may be billed on a 14X bill-
type (78 FR 74926).
Lastly, we do not believe that it would be an undue hardship for
some hospitals to alter their processes in order to submit separate
claims for services that are unrelated both clinically and in regard to
time to the comprehensive service.
In response to comments requesting additional transparency of the
development of C-APCs and their proposed cost, we believe that the data
made available to the public as part of the proposed rule was
appropriate, clear, and sufficient. For further information on our data
process, we refer readers to section II.A.1.b. of this final rule with
comment period.
Comment: A few commenters requested that CMS provide more clarity
regarding the definition of adjunctive services.
Response: A description of services that are considered to be
adjunctive to the primary comprehensive service is provided in the CY
2014 OPPS/ASC final rule with comment period (78 FR 74865) as well as
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66800). As
previously stated, adjunctive services include services that are
integral, ancillary, supportive, or dependent that are provided during
the delivery of the comprehensive service. This includes the diagnostic
procedures, laboratory tests and other diagnostic tests, and treatments
that assist in the delivery of the primary procedure; visits and
evaluations performed in association with the procedure; uncoded
services and supplies used during the service; outpatient department
services delivered by therapists as part of the comprehensive service;
durable medical equipment as well as prosthetic and orthotic items and
supplies when provided as part of the outpatient service; and any other
components reported by HCPCS codes that are provided during the
comprehensive service, except for mammography services and ambulance
services, which are never payable as OPD services in accordance with
section 1833(t)(1)(B)(iv) of the Act.
Comment: One commenter expressed concerns regarding payment for
durable medical equipment that is included on the claim with a primary
service and packaged into the C-APC payment for the service. The
commenter stated that, with the implementation of the C-APC payment
policy, these items and services are no longer paid under separate fee
schedules and their costs are included in determining the relative
weights for the C-APCs. Further, the commenter stated that CMS did not
provide any evidence that funds were added to the OPPS for these
packaged groups and that not adding these funds could potentially add
costs to the payment system without increasing payment rates. In
addition, the commenter expressed concerns that the relative weights of
the new C-APCs will increase, in turn causing the relative weights of
other APCs to decrease, which would unfairly decrease payment rates for
those other separately paid procedures.

[[Page 70330]]

Response: The costs of durable medical equipment, prosthetics, and
orthotics have been accounted for in the OPPS. Funds were transferred
from the DMEPOS Fee Schedule to the OPPS to account for costs of
durable medical equipment. We refer readers to the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66823) for a discussion of the
redistribution from the DMEPOS Fee Schedule to the OPPS of
approximately $1 million.
Also, with regard to the effect of the increase in the relative
weights for the C-APCs, we disagree with the commenters that payment
rates for other separately paid procedures are unfairly reduced.
Because funds were transferred from the DMEPOS Fee Schedule to account
for the costs of durable medical equipment, the relativity of the OPPS
payment weights has not been distorted. This accounting for additional
DME costs would make the relative payment weights of OPPS services
(both comprehensive and noncomprehensive) reflective of their estimated
costs. Further, in a budget neutral system, changes to any OPPS
relative payment weights have redistributional effects throughout the
system and any policy changes or data updates have the potential to
cause these effects.
Comment: One commenter opposed CMS' proposal to assign the
procedure described by new CPT code 0392T (Laparoscopy, surgical,
esophageal sphincter augmentation procedure, placement of sphincter
augmentation device (i.e., magnetic band)) to C-APC 5362 (Level 2
Laparoscopy). Although the commenter did not suggest a specific APC or
C-APC to which the procedure should be assigned, the commenter stated
that the proposed C-APC assignment for the procedure described by CPT
code 0392T results in a significant payment reduction for the procedure
and creates a situation where the cost of the device represents
approximately 51 percent of the payment rate for C-APC 5362. Therefore,
the commenter requested that CMS consider an alternative APC assignment
for this procedure. Another commenter suggested that CMS create a third
level to the C-APC structure for the Laparoscopic Procedures clinical
family that includes laparoscopic procedures with a mean geometric cost
that is greater than $8,000.
Response: We disagree with the commenter's request. As a part of
our broader efforts to thoroughly review, revise, and consolidate APCs
to improve both resource and clinical homogeneity, we proposed a two-
level APC structure for laparoscopy procedures for CY 2016. This
proposal reduced the levels in the Laparoscopic Procedures clinical
family from four levels in CY 2015 to two levels proposed for CY 2016.
The procedure described by CPT code 0392T is similar in terms of
clinical characteristics to the other procedures assigned to C-APC 5362
(Level 2 Laparoscopy), which has the highest payment rate in this
clinical family. In addition, CPT code 0392T replaced HCPCS code C9737
(Laparoscopy, surgical, esophageal sphincter augmentation with device
(e.g., magnetic band)), beginning July 1, 2015. In CY 2015, the
procedure described by HCPCS code C9737 was assigned to APC 0174 (Level
4 Laparoscopy). Because CPT code 0392T describes the same procedure as
HCPCS code C9737, we proposed to assign the new CPT code to the same
APC and status indicator as its predecessor HCPCS C-code. In addition,
because CPT code 0392T is new for CY 2015 and we do not have claims
data for ratesetting purposes for this code, we used the geometric mean
cost of the predecessor HCPCS code (C9737) as a proxy for the APC
assignment. The geometric mean cost of the procedure described by HCPCS
code C9737 is approximately $9,779 and the geometric mean cost of C-APC
5362 is approximately $7,179, which comprises significant services
ranging in cost from approximately $6,139 to approximately $9,551.
Therefore, the assignment of CPT code 0392T to C-APC 5362 is based on
similar resource use and does not result in a violation of the 2 times
rule. In addition, CPT code 0392T is a laparoscopic procedure that is
similar in clinical characteristics to other procedures assigned to C-
APC 5362. Once we have available claims data for the procedure
described by CPT code 0392T, we intend to reevaluate this APC
assignment under the yearly review of APC assignments.
We believe that the procedures assigned to C-APC 5362 have similar
resource utilization and do not create a violation of the 2 times rule
within the C-APC. Therefore, we do not believe that creating another
level in the structure of this clinical family is warranted.
Comment: One commenter recommended that the Neurostimulators C-APC
clinical family be restructured to: (1) Assign all of the single and
multiple lead combination procedures to C-APC 5462 (Level 2
Neurostimulators); (2) assign all of the single generators (without
placement of a lead) and low cost combination full system implants (one
generator and one or more leads) to C-APC 5463 (Level 3
Neurostimulator); and (3) assign all of the multiple generators for
bilateral procedures and high cost full system implants (one generator
and one or more leads) to C-APC 5464 (Level 4 Neurostimulators). The
commenter noted that it appears that the procedures assigned to the
Neurostimulators C-APC clinical family were based on the comparable
cost of the procedures alone rather than also factoring in clinical
similarity. The commenter believed that the recommended restructuring
would improve the clinical coherence of the procedures assigned to the
neurostimulators C-APC family and increase the stability of the C-APC.
Response: We do not believe that we should restructure the
Neurostimulators C-APC clinical family as recommended by the commenter.
We note that APC groupings are based on two factors, clinical
similarity and resource similarity. The highest level in this APC
series includes various combinations of neurostimulator generator
implantation procedures with or without leads (and no other types of
procedures) within the specified cost range. The commenter suggested
that we define clinical similarity very narrowly with strict adherence
to the CPT code descriptors. If the OPPS were a fee schedule that did
not assign procedures to groups, this could be an acceptable approach.
However, the OPPS is a prospective payment system that uses APC
groupings of clinically similar services. We believe that the proposed
structure of this C-APC clinical family best meets the objective of
both clinical and resource homogeneity within the context of a
prospective payment system.
Comment: A few commenters requested that CMS make modifications to
the C-APC complexity adjustment policy. Some commenters requested that
CMS revise the criteria for a claim to qualify for a complexity
adjustment beyond the current frequency and cost thresholds to account
for the patient acuity experienced at institutions such as academic
medical centers, cancer hospitals, and trauma centers. Other commenters
requested that CMS consider the inclusion of three or more primary
``J1'' codes in the evaluation of complexity adjustments instead of the
current code pair comparison policy. The commenter believed that the
reliance on code combinations based on cost ranking of codes would lead
to instability in the complexity adjustments from year to year, and
would not take into consideration a large number of comprehensive
claims with multiple ``J1'' services.
Response: While we acknowledge the challenges involved with
treating

[[Page 70331]]

complex patients, as discussed in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66805), OPPS payments are not currently based on
patient severity or diagnosis like payments under the IPPS. Therefore,
we are unable to make adjustments based on these factors.
With regard to considering the inclusion of three or more primary
``J1'' services in evaluation of complexity adjustments, we reiterate
our statement in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66806) in which we disagreed that assigning complexity
adjustments based on cost ranking of primary and secondary codes is
either insufficient or would result in instability of the complexity
adjustments in future years. Ranking ``J1'' services based on
comprehensive geometric mean costs to determine the primary ``J1''
service on a claim does not result in instability in the evaluation of
complexity adjustments because, by definition, the complexity
adjustment is for costly cases relative to the primary (most costly)
``J1'' service. We proposed complexity adjustments for certain code
pairs to provide a higher payment by promoting the claim for high cost
procedure pairs consisting of a primary comprehensive procedure and a
secondary comprehensive procedure that represent sufficiently frequent
and sufficiently costly comprehensive procedure pairs to the next
higher paying APC within a clinical family, such that these claims are
separated from and provided a higher payment than all of the services
that are accounted for in the APC assignment of the primary service. We
do not believe that providing a complexity adjustment to any claim that
has three or more ``J1'' services or to all claims reporting code pairs
of ``J1'' services that meet the cost and frequency criteria would
adequately serve the stated purpose of the policy. The intent of the
complexity adjustment policy is to identify a limited number of costly
procedure pairs that would qualify for a higher payment at the next
higher paying C-APC within the clinical family, not to unpackage and
separately pay for all of the high cost services that are associated
with the primary ``J1'' procedure.
Comment: One commenter requested that CMS allow any add-on codes
describing status indicator ``J1'' procedures to be eligible for
complexity adjustments when the codes appear on the claim in
combination with a primary ``J1''service. The commenter noted that the
current list of add-on codes eligible for complexity adjustments
includes only add-on codes formerly assigned to device-dependent APCs.
The commenter further reasoned that, because CMS has extended the
concept of C-APCs beyond the original policy of applying the
comprehensive APC methodology to device-dependent APCs, the list of
eligible add-on procedures should be expanded as well.
Response: We agree with the commenters. The current policy allows
add-on codes that were (prior to CY 2015) assigned to device-dependent
APCs to be evaluated for a complexity adjustment when provided in
combination with a primary ``J1'' service. This policy was adopted
because the original group of C-APCs was primarily the former device-
dependent APCs; therefore, the add-on codes that were evaluated for a
complexity adjustment were consistent with the codes assigned as
primary ``J1''services under the original C-APCs. As we expand the
number of C-APCs, we believe that we must also expand the number of
add-on codes that can be evaluated for a complexity adjustment beyond
only those add-on codes that were once assigned to device-dependent
APCs. Therefore, we are revising the list of add-on codes that are
evaluated for a complexity adjustment to include all add-on codes that
can be appropriately reported in combination with a base code that
describes a primary ``J1''service.
In order to qualify for a complexity adjustment, the primary
service add-on combination must meet the frequency (25 or more claims
reporting the code combination) and cost (no violation of the 2 times
rule) thresholds discussed above. Table 8 of the CY 2015 OPPS/ASC final
rule with comment period (79 FR 66810) (now also Table 8 in this final
rule with comment period) has been updated to include the additional
add-on codes that can be evaluated for a complexity adjustment.

Table 8--Final CY 2016 Packaged CPT Add-On Codes That Are Evaluated for
a Complexity Adjustment
------------------------------------------------------------------------
CY 2016 CPT/HCPCS add-on code CY 2016 short descriptor
------------------------------------------------------------------------
C9601................................. Perc drug-el cor stent bran.
C9603................................. Perc d-e cor stent ather br.
C9605................................. Perc d-e cor revasc t cabg b.
C9608................................. Perc d-e cor revasc chro add.
G0289................................. Arthro, loose body + chondro.
0172T................................. Lumbar spine process addl.
0205T................................. Inirs each vessel add-on.
0289T................................. Laser inc for pkp/lkp donor.
0290T................................. Laser inc for pkp/lkp recip.
0291T................................. Iv oct for proc init vessel.
0294T................................. Ins lt atrl mont pres lead.
0376T................................. Insert ant segment drain int.
0396T................................. Intraop kinetic balnce sensr.
0397T................................. Ercp w/optical endomicroscpy.
20930................................. Sp bone algrft morsel add-on.
20931................................. Sp bone algrft struct add-o.
20936................................. Sp bone agrft local add-on.
20937................................. Sp bone agrft morsel add-on.
20938................................. Sp bone agrft struct add-on.
22515................................. Perq vertebral augmentation.
22552................................. Addl neck spine fusion.
22585................................. Additional spinal fusion.
22614................................. Spine fusion extra segment.
22632................................. Spine fusion extra segment.
22840................................. Insert spine fixation device.
22841................................. Insert spine fixation device.
22842................................. Insert spine fixation device.
22843................................. Insert spine fixation device.
22844................................. Insert spine fixation device.
22845................................. Insert spine fixation device.
22846................................. Insert spine fixation device.
22847................................. Insert spine fixation device.
22848................................. Insert spine fixation device.
22851................................. Apply spine prosth device.
22858................................. Second level cer diskectomy.
27358................................. Remove femur lesion/fixation.
29826................................. Shoulder arthroscopy/surgery.
33225................................. L ventric pacing lead add-on.
37222................................. Iliac revasc add-on.
37223................................. Iliac revasc w/stent add-on.
37232................................. Tib/per revasc add-on.
37233................................. Tibper revasc w/ather add-on.
37234................................. Revsc opn/prq tib/pero stent.
37235................................. Tib/per revasc stnt & ather.
37237................................. Open/perq place stent ea add.
37239................................. Open/perq place stent ea add.
38900................................. Io map of sent lymph node.
43273................................. Endoscopic pancreatoscopy.
43283................................. Lap esoph lengthening.
43338................................. Esoph lengthening.
49326................................. Lap w/omentopexy add-on.
49327................................. Lap ins device for rt.
49435................................. Insert subq exten to ip cath.

[[Page 70332]]

57267................................. Insert mesh/pelvic flr addon.
60512................................. Autotransplant parathyroid.
63035................................. Spinal disk surgery add-on.
63043................................. Laminotomy addl cervical.
63044................................. Laminotomy addl lumbar.
63048................................. Remove spinal lamina add-on.
63057................................. Decompress spine cord add-on.
63066................................. Decompress spine cord add-on.
63076................................. Neck spine disk surgery.
65757................................. Prep corneal endo allograft.
66990................................. Ophthalmic endoscope add-on.
92921................................. Prq cardiac angio addl art.
92925................................. Prq card angio/athrect addl.
92929................................. Prq card stent w/angio addl.
92934................................. Prq card stent/ath/angio.
92938................................. Prq revasc byp graft addl.
92944................................. Prq card revasc chronic addl.
92973................................. Prq coronary mech thrombect.
92974................................. Cath place cardio brachytx.
92978................................. Intravasc us heart add-on.
92998................................. Pul art balloon repr precut.
93462................................. L hrt cath trnsptl puncture.
93463................................. Drug admin & hemodynmic meas.
93571................................. Heart flow reserve measure.
93609................................. Map tachycardia add-on.
93613................................. Electrophys map 3d add-on.
93621................................. Electrophysiology evaluation.
93622................................. Electrophysiology evaluation.
93623................................. Stimulation pacing heart.
93655................................. Ablate arrhythmia add on.
93657................................. Tx l/r atrial fib addl.
93662................................. Intracardiac ecg (ice).
------------------------------------------------------------------------

After consideration of the public comments we received, we are
finalizing our proposal with a slight modification to establish 10
additional C-APCs to be paid under the existing C-APC payment policy
beginning in CY 2016. Because an additional level 5 was added to the
musculoskeletal procedures APC series (we refer readers to section
III.D.9. of this final rule with comment period), the final number of
additional C-APCs for CY 2016 is 10. In addition, we are adopting a
final policy to include all add-on codes that are paired with a primary
service assigned status indicator ``J1'' to be evaluated to qualify for
a complexity adjustment as shown in Table 8 above. All C-APCs,
including those newly added for CY 2016, are displayed in Table 9 of
this final rule with comment period with the new C-APCs denoted with an
asterisk. Addendum J to this final rule with comment period (which is
available via the Internet on the CMS Web site) contains all of the
data related to the C-APC payment policy methodology, including the
list of complexity adjustments.

Table 9--Final CY 2016 C-APCs
----------------------------------------------------------------------------------------------------------------
CY 2016 C-APC \+\ CY 2016 APC Group title Clinical family New C-APC
----------------------------------------------------------------------------------------------------------------
5222.............................. Level 2 Pacemaker and AICDP............................ ...............
Similar Procedures.
5223.............................. Level 3 Pacemaker and AICDP............................ ...............
Similar Procedures.
5224.............................. Level 4 Pacemaker and AICDP............................ ...............
Similar Procedures.
5231.............................. Level 1 ICD and Similar AICDP............................ ...............
Procedures.
5232.............................. Level 2 ICD and Similar AICDP............................ ...............
Procedures.
5093.............................. Level 3 Breast/Lymphatic BREAS............................ ...............
Surgery and Related
Procedures.
5165.............................. Level 5 ENT Procedures.. ENTXX............................ *
5166.............................. Level 6 ENT Procedures.. ENTXX............................ ...............
5211.............................. Level 1 EPHYS............................ ...............
Electrophysiologic
Procedures.
5212.............................. Level 2 EPHYS............................ ...............
Electrophysiologic
Procedures.
5213.............................. Level 3 EPHYS............................ ...............
Electrophysiologic
Procedures.
5492.............................. Level 2 Intraocular EYEXX............................ *
Procedures.
5493.............................. Level 3 Intraocular EYEXX............................ ...............
Procedures.
5494.............................. Level 4 Intraocular EYEXX............................ ...............
Procedures.
5331.............................. Complex GI Procedures... GIXXX............................ ...............
5415.............................. Level 5 Gynecologic GYNXX............................ ...............
Procedures.
5416.............................. Level 6 Gynecologic GYNXX............................ *
Procedures.
5361.............................. Level 1 Laparoscopy..... LAPXX............................ *
5362.............................. Level 2 Laparoscopy..... LAPXX............................ *
5462.............................. Level 2 Neurostimulator NSTIM............................ ...............
and Related Procedures.
5463.............................. Level 3 Neurostimulator NSTIM............................ ...............
and Related Procedures.
5464.............................. Level 4 Neurostimulator NSTIM............................ ...............
and Related Procedures.
5123.............................. Level 3 Musculoskeletal ORTHO............................ *
Procedures.
5124.............................. Level 4 Musculoskeletal ORTHO............................ ...............
Procedures.
5125.............................. Level 5 Musculoskeletal ORTHO............................ *
Procedures.
5471.............................. Implantation of Drug PUMPS............................ ...............
Infusion Device.
5627.............................. Level 7 Radiation RADTX............................ ...............
Therapy.
5375.............................. Level 5 Urology and UROXX............................ *
Related Services.
5376.............................. Level 6 Urology and UROXX............................ ...............
Related Services.
5377.............................. Level 7 Urology and UROXX............................ ...............
Related Services.
5191.............................. Level 1 Endovascular VASCX............................ ...............
Procedures.
5192.............................. Level 2 Endovascular VASCX............................ ...............
Procedures.
5193.............................. Level 3 Endovascular VASCX............................ ...............
Procedures.
5881.............................. Ancillary Outpatient N/A.............................. *
Services When Patient
Expires.
8011.............................. Comprehensive N/A.............................. *
Observation Services.
----------------------------------------------------------------------------------------------------------------
\+\ We refer readers to section III.D. of this final rule with comment period for a discussion of the overall
restructuring and renumbering of APCs.

[[Page 70333]]

* New C-APC for CY 2016.
Clinical Family Descriptor Key:
AICDP = Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices.
BREAS = Breast Surgery.
ENTXX = ENT Procedures.
EPHYS = Cardiac Electrophysiology.
EYEXX = Ophthalmic Surgery.
GIXXX = Gastrointestinal Procedures.
GYNXX = Gynecologic Procedures.
LAPXX = Laparoscopic Procedures.
NSTIM = Neurostimulators.
ORTHO = Orthopedic Surgery.
PUMPS = Implantable Drug Delivery Systems.
RADTX = Radiation Oncology.
UROXX = Urologic Procedures.
VASCX = Vascular Procedures.

(b) Observation Comprehensive APC (C-APC 8011)
As part of our expansion of the C-APC payment policy methodology,
we have identified an instance where we believe that comprehensive
payments are appropriate, that is, when a claim contains a specific
combination of services performed in combination with each other, as
opposed to the presence of a single primary service identified by
status indicator ``J1.'' To recognize such instances, in the CY 2016
OPPS/ASC proposed rule (80 FR 39226), for CY 2016, we proposed to
create a new status indicator ``J2'' to designate specific combinations
of services that, when performed in combination with each other and
reported on a hospital Medicare Part B outpatient claim, would allow
for all other OPPS payable services and items reported on the claim
(excluding all preventive services and certain Medicare Part B
inpatient services) to be deemed adjunctive services representing
components of a comprehensive service and resulting in a single
prospective payment for the comprehensive service based on the costs of
all reported services on the claim. Additional information about the
proposed new status indicator ``J2'' and its proposed C-APC assignment
is provided below.
It has been our longstanding policy to provide payment to hospitals
in certain circumstances when extended assessment and management of a
patient occur (79 FR 66811 through 66812). Currently, payment for all
qualifying extended assessment and management encounters is provided
through APC 8009 (Extended Assessment and Management (EAM) Composite)
(79 FR 66811 through 66812). Under this policy, we allow services
identified by the following to qualify for payment through EAM
composite APC 8009: A clinic visit (described by HCPCS code G0463); a
Level 4 or 5 Type A ED visit (described by CPT codes 99284 or 99285); a
Level 5 Type B ED visit (described by HCPCS code G0384); and a direct
referral for observation (described by HCPCS code G0379), or critical
care services (described by CPT code 99291) provided by a hospital in
conjunction with observation services of substantial duration (8 or
more hours) (provided the observation was not furnished on the same day
as surgery or postoperatively) (79 FR 66811 through 66812).
For CY 2016, we proposed to pay for all qualifying extended
assessment and management encounters through a newly created
``Comprehensive Observation Services'' C-APC (C-APC 8011) and to assign
the services within this APC to proposed new status indicator ``J2,''
as described earlier in this section. Specifically, we proposed to make
a C-APC payment through the proposed new C-APC 8011 for claims that
meet the following criteria:
The claims do not contain a procedure described by a HCPCS
code to which we have assigned status indicator ``T'' that is reported
with a date of service on the same day or 1 day earlier than the date
of service associated with services described by HCPCS code G0378;
The claims contain 8 or more units of services described
by HCPCS code G0378 (Observation services, per hour);
The claims contain services described by one of the
following codes: HCPCS code G0379 (Direct referral of patient for
hospital observation care) on the same date of service as services
described by HCPCS code G0378; 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)) or HCPCS code G0384 (Type B
emergency department visit (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 G0463 (Hospital outpatient
clinic visit for assessment and management of a patient) provided on
the same date of service or 1 day before the date of service for
services described by HCPCS code G0378; and
The claims do not contain services described by a HCPCS
code to which we have assigned status indicator ``J1.''
We proposed to utilize all of the claims that meet the above
criteria in ratesetting for the proposed new C-APC 8011, and to develop
the geometric mean costs of the comprehensive service based on the
costs of all reported OPPS payable services reported on the claim
(excluding all preventive services and certain Medicare Part B
inpatient services). The proposed CY 2016 geometric mean cost resulting
from this methodology was approximately $2,111, based on 1,191,120
claims used for ratesetting.
With the proposal to establish a new C-APC 8011 to capture
qualifying extended assessment and management encounters that currently
are paid using composite APC 8009, in the CY 2016 OPPS/ASC proposed
rule, we correspondingly proposed to delete APC 8009, as it would be
replaced with proposed new C-APC 8011.
As stated earlier, we proposed to assign certain combinations of
procedures within proposed new C-APC 8011 to the proposed new status
indicator ``J2,'' to distinguish the new C-APC 8011 from the other C-
APCs. Comprehensive payment would be made through the new C-APC 8011
when a claim contains a specific combination of services performed in
combination with each other, as opposed to the presence of a single
primary service identified by status indicator ``J1.'' We believe that
a distinction in the status indicator is necessary to distinguish
between the logic required to identify when a claim qualifies for
payment through a C-APC because of the presence of a status indicator
``J1'' procedure on the claim versus when a claim qualifies for payment
through a C-APC because of the presence of a specific combination of
services on the claim. Specifically, for proposed new C-APC 8011, we
believe the assignment of certain combinations

[[Page 70334]]

of services that qualify under proposed new C-APC 8011 to the new
proposed status indicator ``J2'' is necessary because claims containing
procedures assigned status indicator ``T'' that are performed on the
same day or day before observation care is provided would not be
payable through the proposed new C-APC 8011, and the initial ``J1''
logic would not exclude claims containing procedures assigned status
indicator ``T'' from qualifying for payment through another
appropriately assigned C-APC based on the primary ``J1'' procedure.
For claims reporting services assigned to status indicator ``J1''
that qualify for payment through a C-APC and services assigned to
status indicator ``J2'' that qualify for payment through a C-APC, we
proposed that payment for services would be made through the C-APC to
which the primary ``J1'' procedure is assigned or through the C-APC to
which the primary ``J2'' procedures is assigned, and all of the OPPS
payable services performed would be deemed adjunctive services to the
primary status indicator ``J1'' service, including the specific
combination of services performed in combination with each other that
would otherwise qualify for payment through a C-APC based on the
primary procedure being assigned to status indicator ``J2.'' We
proposed that the presence of the specific combination of services
performed in combination with each other that would otherwise qualify
the service for payment through a C-APC because it is assigned to
status indicator ``J2'' on a hospital outpatient claim would not result
in a complexity adjustment for the service qualifying for payment
through a C-APC because the primary procedure is assigned to status
indicator ``J1.''
Under the C-APC payment policy, we note that, instead of paying
copayments for a number of separate services that are generally,
individually subject to the copayment liability cap at section
1833(t)(8)(C)(i) of the Act, beneficiaries can expect to pay a single
copayment for the comprehensive service that would be subject to the
copayment liability cap. As a result, we expect that this policy likely
reduces the possibility that the overall beneficiary liability exceeds
the cap for most of these types of claims.
Comment: Many commenters, including MedPAC, supported the proposal
to create new C-APC 8011. The majority of those commenters who
supported the proposal requested that CMS not allow any claims
reporting a surgical procedure (assigned status indicator ``T'') to
qualify for payment through C-APC 8011, regardless of whether the
procedure assigned status indicator ``T'' was furnished before or after
observation services (described by HCPCS code G0378) were provided. A
few other commenters who supported the proposal requested that CMS make
separate payment for services assigned to the proposed new C-APC 8011
and the procedure assigned status indicator ``T,'' when a procedure
assigned status indicator ``T'' was furnished after observation
services were provided as part of an encounter that would otherwise
qualify for payment through the proposed new C-APC 8011. One commenter
requested that CMS package payment for all procedures assigned status
indicator ``T'' into the payment for the services through the proposed
new C-APC 8011, regardless of whether the procedure assigned status
indicator ``T'' was provided prior to or after the furnishing the
services described by HCPCS code G0378 when both services are present
on a claim that would otherwise qualify for payment through the
proposed new C-APC 8011. Other commenters recommended that CMS make
modifications to the proposal, including creating a cost threshold to
exclude relative high-cost but low frequency services from being
packaged into the payment for services assigned to C-APC 8011;
excluding the payment for specified covered outpatient drugs (SCODs)
from being packaged into the payment for proposed new C-APC 8011;
establishing multiple observation C-APCs; and creating a complexity
adjustment factor for services assigned to proposed new C-APC 8011
similar to the complexity adjustment used for services assigned status
indicator ``J1'' and paid through other C-APCs.
Response: We appreciate the commenters' support of our proposal to
create new C-APC 8011. In response to comments pertaining to packaging
the payment for procedures assigned status indicator ``T'' into the
payment for proposed new C-APC 8011, we are sensitive to commenters'
concerns regarding packaging payment for potentially high-cost surgical
procedures into the payment for an observation C-APC and agree that
claims reporting procedures assigned status indicator ``T'' should not
qualify for payment through C-APC 8011, regardless of whether the
procedure assigned status indicator ``T'' was furnished before or after
observation services (described by HCPCS code G0378) were provided. We
believe that excluding all claims reporting procedures assigned status
indicator ``T'' from qualifying for payment through the new C-APC 8011
will eliminate any need to create a cost threshold to exclude payment
for relative high-cost but low frequency services from being packaged
into the payment for C-APC 8011, as well as eliminate any need to
create a complexity adjustment factor for services assigned to C-APC
8011 or to create multiple observation C-APCs.
While we believe that payment for surgical procedures should not be
packaged into the payment for services assigned to C-APC 8011, we do
not believe that separate payment should be made for both C-APC 8011
and the procedure assigned status indicator ``T'' when the procedure
assigned status indicator ``T'' was provided as part of an encounter
that would otherwise qualify for payment through the proposed new C-APC
8011.
Accordingly, we are adopting a policy that payment for observation
services will always be packaged when furnished with a procedure
assigned status indicator ``T.'' For CY 2016, consistent with our
modified final policy discussed in this final rule with comment period,
payment for observation services will be packaged into the surgical
procedure when comprehensive observation services are furnished with a
procedure assigned status indicator ``T,'' while eligible separately
payable services will receive separate payment.
In addition, we do not believe that payment for SCODs should be
excluded from packaging into the payment made through C-APC 8011
because the services are considered supportive and ancillary when
furnished during an outpatient observation encounter and, therefore,
are appropriate for inclusion in the comprehensive payment through C-
APC 8011.
Comment: A number of commenters who supported the proposal
suggested that CMS include all emergency department (ED) visits as
eligible services paid through C-APC 8011, as opposed to limiting the
eligible services to only high-level ED visits.
Response: We agree with the commenters' suggestion that CMS assign
all ED visits to C-APC 8011, rather than only the high-level ED visits,
because we believe that all ED visits should be eligible to trigger C-
APC payment in the same fashion that all clinic visits are eligible to
trigger C-APC payment to C-APC 8011. We believe that including all ED
visits in C-APC 8011 is more consistent with our comprehensive payment
policy. Allowing all ED visits to be eligible to trigger C-APC payment
through C-APC 8011 means that we will make C-APC payment for the full
spectrum of ED and clinic visits when furnished in conjunction with 8
or more

[[Page 70335]]

hours of observation and without a surgical procedure.
Comment: One commenter requested that CMS withdraw its requirement
to ``carve out,'' or not include under the reported observation hours,
the number of hours associated with active monitoring.
Response: We disagree with the commenter. Consistent with Section
290.2.2 of Chapter 4 of the Medicare Claims Processing Manual,
observation services should not be billed concurrently with diagnostic
or therapeutic services for which active monitoring is a part of the
procedure.
Comment: Some commenters expressed concern that the proposed
payment rate for C-APC 8011 does not adequately cover the costs of the
services involved, and may result in a disincentive for hospitals to
establish policies that result in premature discharge of these
patients.
Response: The proposed geometric mean cost of C-APC 8011 upon which
the CY 2016 proposed payment rate is based, represents the geometric
mean cost of all services reported on claims that qualified for payment
through the former EAM composite APC. Based on the approximately 1.2
million claims used for ratesetting for C-APC 8011, we believe that the
CY 2016 geometric mean cost and associated CY 2016 payment rate
appropriately reflect the appropriate comprehensive payment for
encounters qualifying for payment through C-APC 8011. Accordingly, we
do not believe the proposed payment rate for C-APC 8011 would
incentivize hospitals to prematurely discharge patients.
Comment: A few commenters expressed concern that, because the
breadth of services that may be included in these observation stays
varies widely based on the specific diagnoses associated with the stay,
critical care hospitals and those hospitals in areas with low socio-
demographic status may be disproportionately penalized by receiving
payment for services through C-APC 8011. Another commenter expressed
concern that the proposed creation of C-APC 8011 would incentivize use
of the least expensive test for complex Medicare patients with serious
life-threatening symptoms, regardless of what may be the best test for
a patient at a given time based on the physician's clinical judgment.
Response: We do not agree with the commenters' assertion that the
creation of new C-APC 8011 would incentivize hospitals to furnish the
cheapest test to complex Medicare patients at the expense of what may
be the most appropriate course of treatment because we believe that
hospitals provide appropriate reasonable and necessary care that is in
the best interest of the patient, and if furnishing a more costly test
represents the most appropriate course of treatment, hospitals would
provide such a service. As noted earlier in this section, the payment
rate for C-APC 8011 was based on all services reported on claims that
previously qualified for the EAM composite APC. Therefore, we believe
the payment rate appropriately reflects the average resources expended
in furnishing comprehensive observation services. In addition, we have
no reason or evidence to support the commenters' assertion that
critical care hospitals and those in areas with low socio-demographic
status may be disproportionately penalized by receiving payment for
services through C-APC 8011, as the commenter did not explain the basis
for this assertion. We believe that hospitals will continue to provide
appropriate care that is reasonable and necessary. We note that, as
part of our annual rulemaking cycle, we will continue to examine the
claims data and monitor any changes in the provision of care associated
with furnishing observation services and payment through C-APC 8011.
Comment: A number of commenters requested that CMS provide
additional transparency on the development of C-APC 8011 and its
proposed cost, as well as assess the risk of care fragmentation and
analyze the impact of the C-APC payment methodology on a variety of
factors such as length of stay, patient diagnosis, and patient age. One
commenter asked CMS to remind providers of the critical importance of
reporting all services provided to patients, regardless of whether they
are separately paid or not.
Response: In response to comments requesting additional
transparency on the development of C-APC 8011 and its proposed cost, we
believe that the data made available to the public as part of the
addenda to the proposed rule was appropriate, clear, and sufficient.
For further information on our data process, we refer readers to
section II.A.1.b. of this final rule with comment period. Furthermore,
as indicated earlier in this section, as part of our annual rulemaking
cycle, we will continue to examine the claims data and monitor any
changes in the provision of care, including care fragmentation and
other factors such as length of stay associated with furnishing
observation services and payment through C-APC 8011. We also remind
providers to report all services provided to patients, regardless of
whether they are separately paid or not.
A number of comments presented specific issues pertaining to self-
administered drugs, long observation stays, outpatient observation
notice, and the 3-day inpatient stay requirement for Medicare paid
skilled nursing facility (SNF) coverage. We did not propose or discuss
policies in the proposed rule that implicated any of the specific
issues raised by the commenters. Therefore, we believe these comments
are outside the scope of the proposed rule, and we are not responding
to them in this final with comment period.
After consideration of the public comments we received, effective
beginning CY 2016, we are finalizing our proposals to delete APC 8009,
to establish new C-APC 8011, and to develop the geometric mean costs of
the C-APCs based on the costs of all reported OPPS payable services
reported on the claim (excluding all preventive services and certain
Medicare Part B inpatient services). We also are finalizing our
proposal to pay for all qualifying extended assessment and management
encounters through C-APC 8011 and to assign the services within this
APC to proposed new status indicator ``J2.'' In addition, we are
modifying our proposed criteria for services to qualify for
comprehensive payment through C-APC 8011 and how we identify all claims
used in ratesetting for the new C-APC 8011. Specifically, we are
adopting the following two modifications to our proposal: (1) The
criteria for services to qualify for payment through C-APC 8011 and the
claims identified for purposes of ratesetting for C-APC 8011 will
exclude all claims containing a status indicator ``T'' procedure from
qualification; and (2) any level ED visit is an eligible service that
could trigger qualification and payment through C-APC 8011, as opposed
to only high-level emergency department visits. The finalized criteria
for services to qualify for payment through C-APC 8011 are listed
below. All claims meeting these criteria will be utilized in
ratesetting purposes for C-APC 8011 for CY 2016.
The claims do not contain a procedure described by a HCPCS
code to which we have assigned status indicator ``T'';
The claims contain 8 or more units of services described
by HCPCS code G0378 (Observation services, per hour);
The claims contain services provided on the same date of
service or 1 day before the date of service for HCPCS code G0378 that
are described by one of the following codes: HCPCS code G0379 (Direct
referral of patient for hospital observation care) on the same date of
service as HCPCS code G0378;

[[Page 70336]]

CPT code 99281 (Emergency department visit for the evaluation and
management of a patient (Level 1)); CPT code 99282 (Emergency
department visit for the evaluation and management of a patient (Level
2)); CPT code 99283 (Emergency department visit for the evaluation and
management of a patient (Level 3)); CPT code 99284 (Emergency
department visit for the evaluation and management of a patient (Level
4)); CPT code 99285 (Emergency department visit for the evaluation and
management of a patient (Level 5)) or HCPCS code G0380 (Type B
emergency department visit (Level 1)); HCPCS code G0381 (Type B
emergency department visit (Level 2)); HCPCS code G0382 (Type B
emergency department visit (Level 3)); HCPCS code G0383 (Type B
emergency department visit (Level 4)); HCPCS code G0384 (Type B
emergency department visit (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 G0463 (Hospital outpatient
clinic visit for assessment and management of a patient); and
The claims do not contain a service that is described by a
HCPCS code to which we have assigned status indicator ``J1.''
The final CY 2016 geometric mean cost for C-APC 8011 resulting from
this methodology is approximately $2,275, based on 1,338,889 claims
used for ratesetting.
(3) CY 2016 Policies for Specific C-APCs
(a) Stereotactic Radiosurgery (SRS)
With the advent of C-APCs, the OPPS consists of a wide array of
payment methodologies, ranging from separate payment for a single
service to a C-APC payment for an entire outpatient encounter with
multiple services. As described above, our C-APC payment policy
generally provides payment for a primary service and all adjunctive
services provided to support the delivery of the primary service, with
certain exceptions, reported on the same claim, regardless of the date
of service. Since implementation of the C-APC policy and subsequent
claims data analyses, we have observed circumstances in which necessary
services that are appropriately included in an entire outpatient
encounter payment are furnished prior to a primary ``J1'' service and
billed separately. That is, our analysis of billing patterns associated
with certain procedures assigned status indicator ``J1'' indicates that
providers are reporting planning services, imaging tests, and other
``planning and preparation'' services that are integrally associated
with the direct provision of the primary ``J1'' service on a separate
claim. The physician practice patterns associated with reporting the
provision of various stereotactic radiosurgery (SRS) treatments
presents an example of this issue.
Section 634 of the American Taxpayer Relief Act (ATRA) of 2012
(Pub. L. 112-240) amended section 1833(t)(16) of the Act by adding a
new subparagraph (D) to require that OPPS payments for Cobalt-60 based
SRS (also referred to as gamma knife) be reduced to equal that of
payments for robotic linear accelerator-based (LINAC) SRS, for covered
OPD services furnished on or after April 1, 2013. This payment
reduction does not apply to hospitals in rural areas, rural referral
centers, or SCHs. In the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66809), we created C-APC 0067 (which was proposed to be
renumbered to C-APC 5631 for CY 2016) for procedures involving single-
session cranial SRS services. Because section 1833(t)(16)(D) of the Act
requires equal payment for SRS delivered by Cobalt-60 based or LINAC
based technology, proposed renumbered C-APC 5631 includes two types of
services involving SRS delivery instruments, which are described by
HCPCS code 77371 (Radiation treatment delivery, stereotactic
radiosurgery [SRS], complete course of treatment cranial lesion(s)
consisting of 1 session; multi-source Cobalt 60-based) and HCPCS code
77372 (Linear accelerator based) (79 FR 66862).
As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39228),
based on our analysis of CY 2014 claims data (the data used to develop
the proposed CY 2016 payment rates), we identified differences in the
billing patterns for SRS procedures delivered using Cobalt-60 based and
LINAC based technologies. In particular, our claims data analysis
results revealed that services involving SRS delivered by Cobalt-60
based technologies (as described by HCPCS code 77371) typically
included SRS treatment planning services (for example, imaging studies,
radiation treatment aids, and treatment planning) and the actual
deliveries of SRS treatment on the same date of service and reported on
the same claim. In contrast, claims data analysis results revealed that
services involving SRS delivered by LINAC-based technologies (as
described by HCPCS code 77372) frequently included services related to
SRS treatment (for example, imaging studies, radiation treatment aids,
and treatment planning) that were provided on different dates of
services and reported on claims separate from the actual delivery of
SRS treatment. Because services involving Cobalt-60 based and LINAC-
based technologies are proposed to be assigned to proposed renumbered
C-APC 5631, the costs of both technologies are reflected in the C-APC
payment rate.
The policy intent of C-APCs is to bundle payment for all services
related and adjunctive to the primary ``J1'' procedure. In light of
this, we believe that all essential planning and preparation services
also should be paid through the C-APC. For accuracy of payment, we make
a single payment through the C-APC that includes payment for these
essential planning and preparation services, and we do not pay
separately for C-APC services when they are furnished prior to delivery
of the primary ``J1'' procedure and reported on separate claims.
Procedures involving SRS services are just one example of where this
may be occurring under our C-APC payment policy.
As a result of our SRS claims data findings, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39228), for CY 2016, we proposed to change
payment for SRS treatment under proposed renumbered C-APC 5631 by
identifying any services that are differentially reported using HCPCS
codes 77371 and 77372 on the same claim and on claims one month prior
to the delivery of SRS services in proposed renumbered C-APC 5631,
including planning and preparation services, and removing these claims
from our C-APC geometric mean cost calculations for CY 2016 and CY
2017, while we collect data using a modifier, which is discussed in
greater detail below. For any of the services that we remove from the
C-APC payment bundle, we proposed that those services would receive
separate payment even when appearing in combination with a primary
``J1'' procedure (described either by HCPCS code 77371 or 77372) on the
same claim for both CY 2016 and CY 2017. Specifically, we proposed to
apply this treatment for the following codes for planning and
preparation services:
CT localization (HCPCS codes 77011 and 77014);
MRI imaging (HCPCS codes 70551, 70552, and 70553);
Clinical treatment planning (HCPCS codes 77280, 77285,
77290, and 77295); and
Physics consultation (HCPCS code 77336).
We invited public comments on our proposal to remove claims
reporting planning and preparation service for SRS treatment from our
geometric mean

[[Page 70337]]

cost calculation for the CY 2016 and CY 2017 payment rate for proposed
renumbered C-APC 5631 and to allow for separate payment of these same
services during CY 2016 and CY 2017 using either modality. As discussed
in detail below, our long-term goal is to create a single prospective
payment for the entire outpatient encounter by packaging payment for
all C-APC services, including all planning and preparation services
that occur prior to the primary ``J1'' procedure.
Comment: Several commenters supported our policy proposal to remove
claims reporting planning and preparation services from the geometric
mean cost calculations for proposed renumbered C-APC 5631. The
commenters believed that because of the coding changes implemented over
the past few years to describe SRS delivery by LINAC-based and Cobalt-
60 based technologies, hospitals have incorrectly coded claims
reporting SRS services. To remedy perceived payment inaccuracies for C-
APC 5631, the commenters urged CMS to adopt the policy as proposed.
Response: We appreciate the commenters' support of our proposal.
Comment: In contrast, many commenters opposed the policy proposal
regarding payment for SRS services and recommended that CMS leave the
four identified categories of services within the C-APC payment
methodology for CY 2016 and work with stakeholders to improve the
coding guidance for SRS services.
Response: As we stated in the proposed rule, the policy intent of
the C-APCs is to bundle payment for all services related and adjunctive
to the primary ``J1'' procedure. In light of this, we believe that all
services that are adjunctive to the primary service should be paid
through the C-APC. However, our claims analysis has shown that the
services described by HCPCS codes that we proposed to exclude from the
C-APC payment were frequently reported on a separate claim than the
primary ``J1'' SRS service and, therefore, received separate payment in
addition to the full C-APC payment. Therefore, to collect claims data
on the adjunctive services for the SRS ``J1'' procedures and to ensure
appropriate ratesetting for the SRS C-APC in the future, we believe it
is necessary to unbundle payment for the adjunctive services for CY
2016 and CY 2017. Because the intent of a C-APC is to bundle payment
for all services related and adjunctive to the primary ``J1''
procedure, we agree that coding and billing guidance and instructions
for SRS services should reflect the inclusion of the comprehensive
services that were furnished in conjunction with the primary ``J1''
service and we proposed the use of a modifier to better identify when
related comprehensive services were being billed separately.
Comment: One commenter requested clarification on how CMS will pay
for planning and preparation services performed prior to the actual
delivery of the SRS service, such as basic dosimetry (CPT code 77300),
since CMS did not specifically propose to remove these costs from the
calculation of C-APC 5631.
Response: Only the above-identified 10 planning and preparation CPT
codes that we proposed to remove from the C-APC bundle payment for SRS
delivery services will be paid for separately in CY 2016 when furnished
to a beneficiary within one month of the SRS treatment. For CY 2016 and
CY 2017, these codes will not be included in the C-APC payment for SRS
even if they are furnished on the same date of service. The services
that we did not propose to remove from the geometric mean cost
calculations will continue to be paid through C-APC 5631 (for CY 2016,
this will be C-APC 5627). However, we remind hospitals that procedure
codes related to the primary SRS service should either be reported on
the same claim, or, if furnished on a different date than the primary
service, must include modifier ``CP'' that we are adopting in this
final rule with comment period (as discussed in detail below).
Comment: Commenters requested that CMS provide additional guidance
on the specific items and services, apart from the four identified
categories, that are to be reported with the proposed modifier as
integral, ancillary, supportive, dependent, and adjunctive to either
HCPCS code 77371 or 77372. Commenters also asked for clarification on
the time period in which CMS will consider the delivery of a service to
be adjunctive to the primary ``J1'' SRS treatment.
Response: As we stated in the proposed rule, any service that is
integral, ancillary, supportive, dependent and adjunctive to the
primary ``J1'' service identified by either HCPCS code 77371 or 77372
that is reported on a different claim than the primary ``J1'' service
must be billed with the HCPCS modifier. We believe that hospitals,
physicians, and other clinical staff that furnish comprehensive
services are in a position to identify these types of related services.
We do not believe that it is feasible or practicable for us to identify
all of the services that could potentially be related to a primary
``J1'' service given differences in medical practice. We expect
providers to identify any adjunctive services provided within 30 days
prior to SRS treatment.
After consideration of the public comments we received, for CY 2016
and CY 2017, we are finalizing our proposal to remove planning and
preparation services (identified by the following 10 specific HCPCS
codes: 70551, 70552, 70553, 77011, 77014, 77280, 77285, 77290, 77295,
and 77336) from the geometric mean cost calculations for proposed C-APC
5631 which, beginning in CY 2016, will be C-APC 5627 (Level 7 Radiation
Therapy). In addition, for CY 2016 and CY 2017, we will separately pay
for planning and preparation services adjunctive to the delivery of the
SRS treatment through either modality, regardless of whether they are
furnished on the same date of service as the primary ``J1'' SRS
service.
(b) Data Collection for Nonprimary Services in C-APCs
As mentioned above, provider practice patterns can create a need
for hospitals to perform services that are integral, ancillary,
supportive, dependent, and adjunctive, hereinafter collectively
referred to as ``adjunctive services'', to a comprehensive service
prior to the delivery of that service--for example, testing leads for a
pacemaker insertion or planning for radiation treatment. As the C-APC
policy continues to expand, we need a mechanism to identify these
adjunctive services that are furnished prior to the delivery of the
associated primary ``J1'' service so that payments under the encounter-
based C-APC will be more accurate.
To meet this objective, in the CY 2016 OPPS/ASC proposed rule (80
FR 39228), for CY 2016, we proposed to establish a HCPCS modifier to be
reported with every service code that describes an adjunctive service
to a comprehensive service, but is reported on a different claim. We
proposed that the modifier would be reported on UB-04 form (CMS Form
1450) for hospital outpatient services. Specifically, hospitals would
report this modifier for services that are adjunctive to a primary
procedure code assigned a status indicator ``J1'' and that are reported
on a different claim than the primary ``J1'' service. The collection of
this information would allow us to begin to assess the accuracy of the
claims data used to set payment rates for C-APC services. This
information would be useful in refining our C-APC ratesetting process.
Based on the collection of these data, we envision creating a single
encounter payment for primary ``J1'' services that reflects the costs
of all of the resources used during

[[Page 70338]]

the delivery of the primary services. We also would discontinue
separate payment for any of these packaged adjunctive services, even
when furnished prior to delivery of the primary ``J1''service. As noted
above, we proposed to use the modifier to identify planning and
preparation services for primary ``J1'' procedures involving SRS
services with this goal in mind.
We invited additional public comments on whether to adopt a
condition code as early as CY 2017, which would replace this modifier
to be used for CY 2016 data collection, for collecting this service-
level information.
Comment: Overall, few commenters supported CMS' proposed policy to
collect claims data on the costs of adjunctive services furnished prior
to a primary ``J1'' procedure and reported on a different claim. Those
commenters who supported the policy proposal encouraged CMS to
implement this proposal to begin an effort to include the costs of all
planning and preparation services in the payment bundles for C-APCs.
Response: We appreciate the commenters' support.
Comment: A significant number of commenters opposed the proposed
policy to require hospitals to report a modifier with every HCPCS code
that describes services that are adjunctive to a comprehensive service
(as described by a ``J1'' status indicator), but reported on a
different claim. The commonly cited concerns among the commenters who
opposed the proposed policy were as follows:
Definition of related and adjunctive services. Commenters
requested that CMS provide greater clarity on the definition of
adjunctive services. Specifically, the commenters recommended that CMS
identify and propose adjunctive services by HCPCS code for each primary
``J1'' service, similar to the SRS C-APC proposal, so that hospitals
will know which HCPCS codes describing adjunctive services to report
with the modifier. Without specific guidance from CMS on the scope of
these adjunctive services, some commenters expressed uncertainty about
their ability to accurately report services using the modifier.
Operational challenges and administrative burden.
Commenters asserted that operationalizing new reporting requirements
for modifiers is challenging because it requires a manual claims review
to determine appropriateness of a modifier. In addition, commenters
recommended that CMS delay implementation or withdraw the proposed
modifier for C-APC adjunctive services data collection so that
facilities can successfully implement ICD-10 and accurately use the PO
modifier and the new modifier 59 subset X (E,S,P, and U).
Response: We appreciate the thoughtful comments that were submitted
and, based on the above-mentioned issues, particularly the desire for
CMs to provide additional information pertaining to adjunctive services
for each C-APC raised by the commenters, are modifying our proposal to
only require that the modifier be used with respect to reporting
adjunctive services related to primary ``J1'' SRS services that are
reported separately on different claims. We believe that it is
appropriate to finalize our proposal to require the use of the modifier
for adjunctive SRS services based on our analysis of claims data and
information submitted by stakeholders who are familiar with the
distinct processes of care for each type of SRS technology. We are not
finalizing our proposal to require the use of the modifier for
reporting any other C-APC services at this time. We will take these
comments into consideration if we propose a modifier for the other C-
APCs in future rulemaking.
Comment: Several commenters raised technical questions about the
application of the proposed adjunctive services modifier. Specifically,
commenters posed the following questions:
Should facilities report adjunctive planning and
preparation services when furnished in a setting outside of the HOPD?
Are adjunctive services limited to preoperative testing
and planning services only?
Does the modifier apply to services performed by different
physicians within a health system?
Response: As noted above, we are finalizing our proposal to require
the use of the modifier for reporting adjunctive and related services
to a primary ``J1'' SRS procedure at this time. We intend to issue
further subregulatory guidance on use of the modifier with respect to
SRS services prior to January 1, 2016. The commenters' technical
questions will be addressed in that guidance.
Comment: One commenter supported the use of a modifier over a
condition code to report adjunctive services. The commenter stated that
because CMS proposed to require the use of the modifier for CY 2016, it
is less burdensome to continue its use in subsequent years than switch
to a condition code. In addition, several commenters asked CMS to delay
implementation of the requirement to use the adjunctive services
modifier until additional clarifying instruction is provided on how to
identify adjunctive services furnished prior to a primary ``J1''
service. Alternatively, commenters recommended that CMS follow a step-
wise roll out approach and propose select C-APCs through annual
rulemaking for which the use of the adjunctive services modifier will
be required.
Response: We appreciate the feedback from the commenter regarding
the preference for use of a modifier rather than a condition code. For
CY 2016, we are finalizing a policy to only require the use of the
HCPCS code modifier for adjunctive services related to primary ``J1''
SRS services (described by HCPCS codes 77371 and 77372) that are
reported on a separate claim than the primary ``J1'' service. In
response to comments on additional clarification on how to identify
adjunctive services, we have identified these services for SRS
treatments in this final rule with comment period. Because we are not
adopting a policy to require the use of this HCPCS modifier for other
C-APCs at this time, we are not providing additional information
relating to adjunctive services for other C-APCs in this final rule
with comment period.
After consideration of the public comments we received we are
finalizing our proposal, with modification. Specifically, for CY 2016
and CY 2017, we are adopting a policy to require the use of a HCPCS
code modifier for adjunctive SRS C-APC services that are reported
separate from the primary ``J1'' SRS service. Effective January 1,
2016, hospitals must use the HCPCS code modifier ``CP'' (Adjunctive
service related to a procedure assigned to a comprehensive ambulatory
payment classification (C-APC) procedure, but reported on a different
claim) to report adjunctive service(s) related to a primary ``J1'' SRS
services that is reported on a separate claim than the primary ``J1''
service. With respect to other C-APCs, we are not adopting a policy to
require the use of the HCPCS code modifier to identify adjunctive
services that are reported separately at this time, but may consider
doing so in the future.
(c) Payment for Claims Reporting Inpatient Only Services Performed on a
Patient Who Dies Before Admission
Currently, composite APC 0375 (Ancillary Outpatient Services When
Patient Dies) packages payment for all services provided on the same
date as an inpatient only procedure that is performed on an emergence
basis on an outpatient who dies before admission

[[Page 70339]]

when the modifier ``-CA'' appears on the claim. For CY 2016, we
proposed to provide payment through proposed renumbered C-APC 5881 for
all services reported on the same claim as an inpatient only procedure
with the modifier ``-CA.'' We stated in the proposed rule that this
proposal provides for all services reported on the same claim as an
inpatient only procedure with modifier ``-CA'' would be paid through a
single prospective payment for the comprehensive service. In the CY
2016 OPPS/ASC proposed rule (80 FR 39228), we proposed to renumber APC
0375 as APC 5881 (Ancillary Outpatient Services When Patient Dies) for
CY 2016.
We did not receive any public comments on this proposal. Therefore,
we are finalizing, without modification, our proposal to provide
payment through renumbered C-APC 5881 for all services provided on the
same date and reported on the same claim as an inpatient only procedure
with the modifier ``-CA.''
f. Calculation of Composite APC Criteria-Based Costs
As discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66613), we believe it is important that the OPPS enhance
incentives for hospitals to provide necessary, high quality 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 policies for extended assessment and management services, low
dose rate (LDR) prostate brachytherapy, 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) and the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74163) for more recent background.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39228 through 39232),
for CY 2016, we proposed to continue our composite APC payment policies
for LDR prostate brachytherapy services, mental health services, and
multiple imaging services, as discussed below. For CY 2016, we proposed
to discontinue our composite APC payment policies for qualifying
extended assessment and management services (APC 8009) and to pay for
these services through proposed new C-APC 8011 (Comprehensive
Observation Services), as presented in a proposal included under
section II.A.2.e. of the proposed rule. As a result, we proposed to
delete APC 8009 for CY 2016.
We noted that we finalized a policy to discontinue our composite
APC payment policies for cardiac electrophysiologic evaluation and
ablation services (APC 8000), and to pay for these services through C-
APC 0086 (Level III Electrophysiologic Procedures), as presented in a
proposal included under section II.A.2.e. of the CY 2015 OPPS/ASC
proposed rule (79 FR 66800 through 66810). As a result, in the CY 2015
OPPS/ASC final rule with comment period, we deleted APC 8000 for CY
2015 (79 FR 66810). For CY 2016, we proposed to continue to pay for
cardiac electrophysiologic evaluation and ablation services through
existing C-APC 0086 (that was proposed to be renumbered C-APC 5213).
(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
LDR prostate brachytherapy is a treatment for prostate cancer in
which hollow needles or catheters are inserted into the prostate,
followed by permanent implantation of radioactive sources into the
prostate through the needles/catheters. At least two CPT codes are used
to report the composite treatment service because there are separate
codes that describe placement of the needles/catheters and the
application of the brachytherapy sources: CPT code 55875 (Transperineal
placement of needles or catheters into prostate for interstitial
radioelement application, with or without cystoscopy) and CPT code
77778 (Interstitial radiation source application; complex), which are
generally present together on claims for the same date of service in
the same operative session. In order to base payment on claims for the
most common clinical scenario, and to further our goal of providing
payment under the OPPS for a larger bundle of component services
provided in a single hospital encounter, beginning in CY 2008, we began
providing a single payment for LDR prostate brachytherapy when the
composite service, reported as CPT codes 55875 and 77778, is furnished
in a single hospital encounter. We base the payment for composite APC
8001 (LDR Prostate Brachytherapy Composite) on the geometric mean cost
derived from claims for the same date of service that contain both CPT
codes 55875 and 77778 and that do not contain other separately paid
codes that are not on the bypass list. We refer readers to the CY 2008
OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for
a full history of OPPS payment for LDR prostate brachytherapy services
and a detailed description of how we developed the LDR prostate
brachytherapy composite APC. (We note that, for CY 2016, we did not
propose to renumber composite APC 8001 as part of our overall APC
restructuring and renumbering discussed in section III.D. of the
proposed rule.)
In the CY 2016 OPPS/ASC proposed rule (80 FR 39229), for CY 2016,
we proposed to continue to pay for LDR prostate brachytherapy services
using the composite APC payment methodology proposed and implemented
for CY 2008 through CY 2015. That is, we proposed to use CY 2014 claims
reporting charges for both CPT codes 55875 and 77778 on the same date
of service with no other separately paid procedure codes (other than
those on the bypass list) to calculate the proposed payment rate for
composite APC 8001. Consistent with our CY 2008 through CY 2015
practice, in the proposed rule, we proposed to not use the claims that
meet these criteria in the calculation of the geometric mean costs of
procedures or services assigned to APC 0163 (Level IV Cystourethroscopy
and Other Genitourinary Procedures) (which was proposed to be
renumbered APC 5375 in the proposed rule) and APC 0651 (Complex
Interstitial Radiation Source Application) (which was proposed to be
renumbered APC 5641 in the proposed rule), the APCs to which CPT codes
55875 and 77778 are assigned, respectively. We proposed to continue to
calculate the proposed geometric mean costs of procedures or services
assigned to proposed renumbered APCs 5375 and 5641 using single and
``pseudo'' single procedure claims. We stated that we continue to
believe that composite APC 8001 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

[[Page 70340]]

also stated that we continue to believe that data from claims reporting
both services required for LDR prostate brachytherapy provide the most
accurate geometric mean cost upon which to base the proposed composite
APC payment rate.
Using a partial year of CY 2014 claims data available for the CY
2016 proposed rule, we were able to use 226 claims that contained both
CPT codes 55875 and 77778 to calculate the proposed geometric mean cost
of approximately $3,807 for these procedures upon which the proposed CY
2016 payment rate for composite APC 8001 was based.
Comment: One commenter expressed concern that the proposed CY 2016
payment rate for APC 8001 is based only on 226 claims that reported
both CPT codes 55875 and 77778 on the same date of service, a
significant decrease in the number of claims used from the CY 2015
final rule ratesetting, which was based on 406 available claims.
Response: We were able to identify 240 claims in the CY 2014 claims
data available for this CY 2016 final rule, which we used to set the
final CY 2016 payment rate for APC 8001 (which has a geometric mean
cost of approximately $3,542), compared to the 226 claims that were
available and used for ratesetting for the CY 2016 proposed rule (which
had a geometric mean cost of approximately $3,807). With regard to the
commenters' concern regarding the decrease in the number of claims
available for CY 2016 ratesetting relative to the number of claims
available for CY 2015 ratesetting, we note that there is typically some
fluctuation in costs from year to year. We acknowledge that the number
of claims available and used for ratesetting for APC 8001 has
continuously decreased over recent years. However, the percentage of
single frequency claims compared to total claims that were available
and that we were able to use for ratesetting in this final rule with
comment period is comparable to prior years.
After consideration of the public comment we received, we are
finalizing our proposal, without modification, to continue to use the
payment rate for composite APC 8001 to pay for LDR prostate
brachytherapy services for CY 2016 and to set the payment rate for this
APC using our established methodology.
(2) Mental Health Services Composite APC
In the CY 2016 OPPS/ASC proposed rule (80 FR 39229 through 39230),
for CY 2016, we proposed 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 services provided by a hospital, which
we consider to be the most resource-intensive of all outpatient mental
health services. We refer readers to the April 7, 2000 OPPS final rule
with comment period (65 FR 18452 through 18455) for the initial
discussion of this longstanding policy and the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74168) for more recent background.
Specifically, we proposed that when the aggregate payment for
specified mental health services provided by one hospital to a single
beneficiary on one date of service based on the payment rates
associated with the APCs for the individual services exceeds the
maximum per diem payment rate for partial hospitalization services
provided by a hospital, those specified mental health services would be
assigned to proposed renumbered composite APC 8010 (Mental Health
Services Composite) (existing APC 0034). We also proposed to continue
to set the payment rate for proposed renumbered composite APC 8010 at
the same payment rate that we proposed to establish for proposed
renumbered APC 5862 (Level 2 Partial Hospitalization (4 or more
services) for hospital-based PHPs) (existing APC 0176), which is the
maximum partial hospitalization per diem payment rate for a hospital,
and that the hospital continue to be paid the payment rate for proposed
renumbered composite APC 8010. Under this policy, the I/OCE would
continue to determine whether to pay for these specified mental health
services individually, or to make a single payment at the same payment
rate established for proposed renumbered APC 5862 (existing APC 0176)
for all of the specified mental health services furnished by the
hospital on that single date of service. We stated that we continue to
believe that the costs associated with administering a partial
hospitalization program at a hospital represent the most resource-
intensive of all outpatient mental health services. Therefore, we do
not believe that we should pay more for mental health services under
the OPPS than the highest partial hospitalization per diem payment rate
for hospitals.
We did not receive any public comments on this proposal. Therefore,
we are finalizing our CY 2016 proposal, without modification, that when
the aggregate payment for specified mental health services provided by
one hospital to a single beneficiary on one date of service, based on
the payment rates associated with the APCs for the individual services,
exceeds the maximum per diem payment rate for partial hospitalization
services provided by a hospital, those specified mental health services
will be assigned to renumbered composite APC 8010 (Mental Health
Services Composite) (existing APC 0034) for CY 2016. For CY 2016, we
also will continue to set the payment rate for renumbered composite APC
8010 (existing APC 0034) at the same payment rate that we established
for renumbered APC 5862 (Level 2 Partial Hospitalization (4 or more
services) for hospital-based PHPs) (existing APC 0176), which is the
maximum partial hospitalization per diem payment rate for a hospital,
and that the hospital will continue to be paid the payment rate for
renumbered composite APC 8010.
(3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and
8008)
Effective January 1, 2009, we provide a single payment each time a
hospital submits a claim for more than one imaging procedure within an
imaging family on the same date of service, in order to reflect and
promote the efficiencies hospitals can achieve when performing multiple
imaging procedures during a single session (73 FR 41448 through 41450).
We utilize three imaging families based on imaging modality for
purposes of this methodology: (1) Ultrasound; (2) computed tomography
(CT) and computed tomographic angiography (CTA); and (3) magnetic
resonance imaging (MRI) and magnetic resonance angiography (MRA). The
HCPCS codes subject to the multiple imaging composite policy and their
respective families are listed in Table 12 of the CY 2014 OPPS/ASC
final rule with comment period (78 FR 74920 through 74924).
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement under 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 under 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

[[Page 70341]]

APC 8008 (MRI and MRA with Contrast Composite).
(We note that we did not propose to renumber these composite APCs
as part of our overall restructuring and renumbering of APCs as
discussed in section III.D. of the proposed rule.)
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 based on the payment rate for APC 8008, the ``with
contrast'' composite APC.
We make a single payment for those imaging procedures that qualify
for payment based on the composite APC payment rate, which includes 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).
In the CY 2016 OPPS/ASC proposed rule (80 FR 39230), for CY 2016,
we proposed to continue to pay for all multiple imaging procedures
within an imaging family performed on the same date of service using
the multiple imaging composite APC payment methodology. We stated that
we continue to believe that this policy will reflect and promote the
efficiencies hospitals can achieve when performing multiple imaging
procedures during a single session.
The proposed CY 2016 payment rates for the five multiple imaging
composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on
proposed geometric mean costs calculated from a partial year of CY 2014
claims available for the proposed rule that qualified for composite
payment under the current policy (that is, those claims reporting more
than one procedure within the same family on a single date of service).
To calculate the proposed geometric mean costs, we used the same
methodology that we used to calculate the final CY 2014 and CY 2015
geometric mean costs for these composite APCs, as described in the CY
2014 OPPS/ASC final rule with comment period (78 FR 74918). The imaging
HCPCS codes referred to as ``overlap bypass codes'' that we removed
from the bypass list for purposes of calculating the proposed multiple
imaging composite APC geometric mean costs, in accordance with our
established methodology as stated in the CY 2014 OPPS/ASC final rule
with comment period (78 FR 74918), were identified by asterisks in
Addendum N to the proposed rule (which is available via the Internet on
the CMS Web site) and are discussed in more detail in section II.A.1.b.
of the proposed rule and this final rule with comment period.
For the CY 2016 OPPS/ASC proposed rule, we were able to identify
approximately 584,194 ``single session'' claims out of an estimated 1.5
million potential claims for payment through composite APCs from our
ratesetting claims data, which represents approximately 39 percent of
all eligible claims, to calculate the proposed CY 2016 geometric mean
costs for the multiple imaging composite APCs. Table 7 of the proposed
rule listed the proposed HCPCS codes that would be subject to the
multiple imaging composite APC policy and their respective families and
approximate composite APC proposed geometric mean costs for CY 2016.
Comment: One commenter supported CMS' decision to not propose any
new multiple imaging composite APCs and requested that CMS provide
stakeholders with the opportunity to meaningfully comment on any new
composite APCs that the agency may propose in the future.
Response: We appreciate the commenter's support.
After consideration of the public comment we received, we are
finalizing our proposal to continue the use of multiple imaging
composite APCs to pay for services providing more than one imaging
procedure from the same family on the same date, without modification.
For this CY 2016 final rule with comment period, we were able to
identify approximately 616,602 ``single session'' claims out of an
estimated 1.6 million potential claims for payment through composite
APCs from our ratesetting claims data, which represents approximately
38 percent of all eligible claims, to calculate the final CY 2016
geometric mean costs for the multiple imaging composite APCs. Table 10
below lists the HCPCS codes that are subject to the multiple imaging
composite APC policy and their respective families and approximate
composite APC geometric mean costs for CY 2016.

Table 10--OPPS Imaging Families and Multiple Imaging Procedure Composite
APCs
------------------------------------------------------------------------

------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
CY 2016 APC 8004 (Ultrasound Composite) CY 2016 Approximate APC
Geometric Mean Cost = $296
------------------------------------------------------------------------
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
------------------------------------------------------------------------
CY 2016 APC 8005 (CT and CTA without CY 2016 Approximate APC
Contrast Composite) * Geometric Mean Cost = $325
------------------------------------------------------------------------
70450.................................. Ct head/brain w/o dye.
70480.................................. Ct orbit/ear/fossa w/o dye.
70486.................................. Ct maxillofacial w/o dye.

[[Page 70342]]

70490.................................. Ct soft tissue neck w/o dye.
71250.................................. Ct thorax w/o dye.
72125.................................. Ct neck spine w/o dye.
72128.................................. Ct chest spine w/o dye.
72131.................................. Ct lumbar spine w/o dye.
72192.................................. Ct pelvis w/o dye.
73200.................................. Ct upper extremity w/o dye.
73700.................................. Ct lower extremity w/o dye.
74150.................................. Ct abdomen w/o dye.
74261.................................. Ct colonography, w/o dye.
74176.................................. Ct angio abd & pelvis.
------------------------------------------------------------------------
CY 2016 APC 8006 (CT and CTA with CY 2016 Approximate APC
Contrast Composite) Geometric Mean Cost = $548
------------------------------------------------------------------------
70487.................................. Ct maxillofacial w/dye.
70460.................................. Ct head/brain w/dye.
70470.................................. Ct head/brain w/o & w/dye.
70481.................................. Ct orbit/ear/fossa w/dye.
70482.................................. Ct orbit/ear/fossa w/o & w/dye.
70488.................................. Ct maxillofacial w/o & w/dye.
70491.................................. Ct soft tissue neck w/dye.
70492.................................. Ct sft tsue nck w/o & w/dye.
70496.................................. Ct angiography, head.
70498.................................. Ct angiography, neck.
71260.................................. Ct thorax w/dye.
71270.................................. Ct thorax w/o & w/dye.
71275.................................. Ct angiography, chest.
72126.................................. Ct neck spine w/dye.
72127.................................. Ct neck spine w/o & w/dye.
72129.................................. Ct chest spine w/dye.
72130.................................. Ct chest spine w/o & w/dye.
72132.................................. Ct lumbar spine w/dye.
72133.................................. Ct lumbar spine w/o & w/dye.
72191.................................. Ct angiograph pelv w/o & w/dye.
72193.................................. Ct pelvis w/dye.
72194.................................. Ct pelvis w/o & w/dye.
73201.................................. Ct upper extremity w/dye.
73202.................................. Ct uppr extremity w/o & w/dye.
73206.................................. Ct angio upr extrm w/o & w/dye.
73701.................................. Ct lower extremity w/dye.
73702.................................. Ct lwr extremity w/o & w/dye.
73706.................................. Ct angio lwr extr w/o & w/dye.
74160.................................. Ct abdomen w/dye.
74170.................................. Ct abdomen w/o & w/dye.
74175.................................. Ct angio abdom w/o & w/dye.
74262.................................. Ct colonography, w/dye.
75635.................................. Ct angio abdominal arteries.
74177.................................. Ct angio abd & pelv w/contrast.
74178.................................. Ct angio abd & pelv 1+ regns.
------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during the
same session as a ``with contrast'' CT or CTA procedure, the I/OCE
assigns the procedure to APC 8006 rather than APC 8005..
------------------------------------------------------------------------
Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
CY 2016 APC 8007 (MRI and MRA without CY 2016 Approximate APC
Contrast Composite) * Geometric Mean Cost = $631
------------------------------------------------------------------------
70336.................................. Magnetic image, jaw joint.
70540.................................. Mri orbit/face/neck w/o dye.
70544.................................. Mr angiography head w/o dye.
70547.................................. Mr angiography neck w/o dye.
70551.................................. Mri brain w/o dye.
70554.................................. Fmri brain by tech.
71550.................................. Mri chest w/o dye.
72141.................................. Mri neck spine w/o dye.
72146.................................. Mri chest spine w/o dye.
72148.................................. Mri lumbar spine w/o dye.
72195.................................. Mri pelvis w/o dye.
73218.................................. Mri upper extremity w/o dye.
73221.................................. Mri joint upr extrem w/o dye.
73718.................................. Mri lower extremity w/o dye.
73721.................................. Mri jnt of lwr extre w/o dye.
74181.................................. Mri abdomen w/o dye.
75557.................................. Cardiac mri for morph.

[[Page 70343]]

75559.................................. Cardiac mri w/stress img.
C8901.................................. MRA w/o cont, abd.
C8904.................................. MRI w/o cont, breast, uni.
C8907.................................. MRI w/o cont, breast, bi.
C8910.................................. MRA w/o cont, chest.
C8913.................................. MRA w/o cont, lwr ext.
C8919.................................. MRA w/o cont, pelvis.
C8932.................................. MRA, w/o dye, spinal canal.
C8935.................................. MRA, w/o dye, upper extr.
------------------------------------------------------------------------
CY 2016 APC 8008 (MRI and MRA with CY 2016 Approximate APC
Contrast Composite) Geometric Mean Cost = $945
------------------------------------------------------------------------
70549.................................. Mr angiograph neck w/o & w/dye.
70542.................................. Mri orbit/face/neck w/dye.
70543.................................. Mri orbt/fac/nck w/o & w/dye.
70545.................................. Mr angiography head w/dye.
70546.................................. Mr angiograph head w/o & w/dye.
70547.................................. Mr angiography neck w/o dye.
70548.................................. Mr angiography neck w/dye.
70552.................................. Mri brain w/dye.
70553.................................. Mri brain w/o & w/dye.
71551.................................. Mri chest w/dye.
71552.................................. Mri chest w/o & w/dye.
72142.................................. Mri neck spine w/dye.
72147.................................. Mri chest spine w/dye.
72149.................................. Mri lumbar spine w/dye.
72156.................................. Mri neck spine w/o & w/dye.
72157.................................. Mri chest spine w/o & w/dye.
72158.................................. Mri lumbar spine w/o & w/dye.
72196.................................. Mri pelvis w/dye.
72197.................................. Mri pelvis w/o & w/dye.
73219.................................. Mri upper extremity w/dye.
73220.................................. Mri uppr extremity w/o & w/dye.
73222.................................. Mri joint upr extrem w/dye.
73223.................................. Mri joint upr extr w/o & w/dye.
73719.................................. Mri lower extremity w/dye.
73720.................................. Mri lwr extremity w/o & w/dye.
73722.................................. Mri joint of lwr extr w/dye.
73723.................................. Mri joint lwr extr w/o & w/dye.
74182.................................. Mri abdomen w/dye.
74183.................................. Mri abdomen w/o & w/dye.
75561.................................. Cardiac mri for morph w/dye.
75563.................................. Card mri w/stress img & dye.
C8900.................................. MRA w/cont, abd.
C8902.................................. MRA w/o fol w/cont, abd.
C8903.................................. MRI w/cont, breast, uni.
C8905.................................. MRI w/o fol w/cont, brst, un.
C8906.................................. MRI w/cont, breast, bi.
C8908.................................. MRI w/o fol w/cont, breast.
C8909.................................. MRA w/cont, chest.
C8911.................................. MRA w/o fol w/cont, chest.
C8912.................................. MRA w/cont, lwr ext.
C8914.................................. MRA w/o fol w/cont, lwr ext.
C8918.................................. MRA w/cont, pelvis.
C8920.................................. MRA w/o fol w/cont, pelvis.
C8931.................................. MRA, w/dye, spinal canal.
C8933.................................. MRA, w/o&w/dye, spinal canal.
C8934.................................. MRA, w/dye, upper extremity.
C8936.................................. MRA, w/o&w/dye, upper extr.
------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the
same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
assigns the procedure to APC 8008 rather than APC 8007..
------------------------------------------------------------------------

3. Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
Like other prospective payment systems, the OPPS relies on the
concept of averaging to establish a payment rate for services. The
payment may be more or less than the estimated cost of providing a
specific service or a bundle of specific services for a particular
patient. The OPPS packages payment for multiple interrelated items and
services into a single payment to create incentives for hospitals to
furnish services most efficiently and to manage their resources with
maximum flexibility. Our packaging policies support our strategic goal
of using larger payment bundles in the OPPS to maximize hospitals'
incentives to provide care in the most efficient manner. For example,
where there are a

[[Page 70344]]

variety of devices, drugs, items, and supplies that could be used to
furnish a service, some of which are more costly than others, packaging
encourages hospitals to use the most cost-efficient item that meets the
patient's needs, rather than to routinely use a more expensive item,
which often results if separate payment is provided for the item.
Packaging also encourages hospitals to effectively negotiate with
manufacturers and suppliers to reduce the purchase price of items and
services or to explore alternative group purchasing arrangements,
thereby encouraging the most economical health care delivery.
Similarly, packaging encourages hospitals to establish protocols that
ensure that necessary services are furnished, while scrutinizing the
services ordered by practitioners to maximize the efficient use of
hospital resources. Packaging payments into larger payment bundles
promotes the predictability and accuracy of payment for services over
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated
with higher cost cases requiring many ancillary items and services and
lower cost cases requiring fewer ancillary items and services. Because
packaging encourages efficiency and is an essential component of a
prospective payment system, packaging payment for items and services
that are typically integral, ancillary, supportive, dependent, or
adjunctive to a primary service has been a fundamental part of the OPPS
since its implementation in August 2000. For an extensive discussion of
the history and background of the OPPS packaging policy, we refer
readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66580), the CY 2014 OPPS/ASC
final rule with comment period (78 FR 74925), and the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66817). Over the last 15 years,
as we have refined our understanding of the OPPS as a prospective
payment system, we have packaged numerous services that were originally
paid separately. As we continue to develop larger payment groups that
more broadly reflect services provided in an encounter or episode of
care, we have expanded the OPPS packaging policies. Most, but not
necessarily all, items and services currently packaged in the OPPS are
listed in 42 CFR 419.2(b). Our overarching goal is to make OPPS
payments for all services paid under the OPPS more consistent with
those of a prospective payment system and less like those of a per
service fee schedule, which pays separately for each coded item. As a
part of this effort, we have continued to examine the payment for items
and services provided under the OPPS to determine which OPPS services
can be packaged to further achieve the objective of advancing the OPPS
toward a more prospective payment system.
For CY 2016, we have examined the items and services currently
provided under the OPPS, reviewing categories of integral, ancillary,
supportive, dependent, or adjunctive items and services for which we
believe payment would be appropriately packaged into payment of the
primary service that they support. Specifically, we examined the HCPCS
code definitions (including CPT code descriptors) to determine whether
there were categories of codes for which packaging would be appropriate
according to existing OPPS packaging policies or a logical expansion of
those existing OPPS packaging policies. In general, in the CY 2016
OPPS/ASC proposed rule (80 FR 39233 through 39236), for CY 2016, we
proposed to package the costs of selected newly identified ancillary
services into payment with a primary service where we believe that the
proposed packaged item or service is integral, ancillary, supportive,
dependent, or adjunctive to the provision of care that was reported by
the primary service HCPCS code. Below we discuss the items and services
that we proposed to package beginning in CY 2016 and are finalizing in
this final rule with comment period.
b. Packaging Policies for CY 2016
(1) Ancillary Services
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819
through 66822), we conditionally packaged payment for ancillary
services assigned to APCs with a geometric mean cost of less than or
equal to $100 (prior to application of the conditional packaging status
indicator). The ancillary services that we identified are primarily
minor diagnostic tests and procedures that are often performed with a
primary service, although there are instances where hospitals provide
such services alone and without another primary service during the same
encounter. Under this policy, we assigned the conditionally packaged
services to status indicator ``Q1,'' which indicates that the service
is separately payable when not billed on the same date of service as a
HCPCS code assigned status indicator ``S,'' ``T,'' or ``V.'' Exclusions
to this ancillary service packaging policy include preventive services,
certain psychiatric and counseling-related services, and certain low-
cost drug administration services. The policy adopted in CY 2015 was
proposed in response to public comments on the CY 2014 ancillary
packaging proposal, which expressed concern that certain low volume but
relatively costly ancillary services would have been packaged into high
volume but relatively inexpensive primary services (for example, a
visit) (74 FR 74945). We noted in the CY 2015 OPPS/ASC final rule with
comment period that the $100 geometric mean cost limit target was a
selection criterion for the initial set of services in conditionally
packaged ancillary service APCs under this packaging policy. The $100
geometric mean cost target was not intended to be a threshold above
which ancillary services will not be packaged, but was a basis for
selecting the initial set of APCs under the conditional packaging
policy for ancillary services, which would likely be updated and
expanded upon in the future. An increase in the geometric mean cost of
any of those packaged APCs to above $100 in future years does not
change the conditionally packaged status of services assigned to the
APCs selected in CY 2015 in a future year. When we finalized this
policy, we stated that we would continue to consider services in these
APCs to be conditionally packaged and would review the conditionally
packaged status of ancillary services annually. The ancillary services
packaging policy is codified in the regulations at 42 CFR 419.2(b)(7).
For CY 2016, as we did in CY 2015, we examined categories of
ancillary services that are integral, ancillary, supportive, dependent,
or adjunctive items and services for which we believe payment would be
appropriately packaged into payment of the primary services that they
support. As previously stated, the $100 geometric mean cost target we
adopted in CY 2015 was not intended to be a threshold above which
ancillary services will not be packaged, but was a basis for selecting
the initial set of APCs under the conditional packaging policy for
ancillary services, which would likely be updated and expanded upon in
the future. Accordingly, in the CY 2016 OPPS/ASC proposed rule (80 FR
39233), for CY 2016, we proposed to not limit our examination to
ancillary service APCs with a geometric mean cost of $100 or less. The
geometric mean cost limit of $100 only applied in 2015, and it is no
longer relevant. We stated in the

[[Page 70345]]

proposed rule that we believe there are some ancillary services that
are assigned to APCs with a geometric mean cost above $100, but for
which conditional packaging is appropriate, given the context in which
the service is performed. For CY 2016, we proposed to evaluate
categories of ancillary services by considering the clinical similarity
of such categories of services to the currently conditionally packaged
ancillary services that have already been determined to be integral,
ancillary, supportive, dependent, or adjunctive to a primary service.
Under this proposal, we identified services in certain APCs that meet
these criteria. Specifically, for CY 2016, we proposed to expand the
set of conditionally packaged ancillary services to include services in
the three APCs listed in Table 8 of the proposed rule (80 FR 39234)
(APC 5734 (Level 4 Minor Procedures); APC 5673 (Level 3 Pathology); and
APC 5674 (Level 4 Pathology)). Ancillary services in the APCs in Table
8 of the proposed rule are typically furnished with a higher paying,
separately payable primary procedure.
However, to avoid packaging a subset of high-cost pathology
services into lower cost and possibly nonprimary services (for example,
low-cost imaging services) frequently billed with some of the services
assigned to Level 3 and Level 4 pathology APCs, we proposed to package
Level 3 and 4 pathology services only when they are billed with a
surgical service. We believe that pathology services are routine tests
that are typically performed ancillary or adjunctive to another primary
service, most commonly surgery, to establish or confirm a diagnosis.
For the Level 3 and 4 pathology APCs, we proposed that the assigned
status indicator would be ``Q2'' (``T packaging''). The HCPCS codes
that we proposed to conditionally package as ancillary services for CY
2016 were displayed in Addendum B to the CY 2016 OPPS/ASC proposed rule
(which is available via the Internet on the CMS Web site). The
supporting documents for the proposed rule are available at the CMS Web
site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
Comment: Several commenters supported designating as conditionally
packaged the services assigned to APCs 5734, 5673, and 5674.
Response: We appreciate the commenters' support.
Comment: Several commenters objected to the conditional packaging
proposal. Some commenters objected because they believed that CMS has
finalized too many new packaging policies in recent years. Other
commenters objected to the proposed conditionally packaging of the
services in the Levels 3 and 4 Pathology APCs because they believed
that these more expensive pathology tests (as compared to the services
assigned to the Levels 1 and 2 Pathology APCs) could be packaged with
less costly surgical procedures.
Response: The number of other recent packaging proposals in the CY
2014 and CY 2015 OPPS/ASC final rules with comment periods has no
bearing on this CY 2016 packaging proposal. The CY 2016 packaging
proposal is based on the payment packaging principles specified
earlier. We believe that these three APCs consist of services that are
generally integral, ancillary, supportive, dependent, or adjunctive to
a primary service. In addition, because this proposal is for
conditional packaging, if the services are provided alone, the services
would be separately paid. We also have not stated that more costly
services cannot be packaged into less costly services.
After consideration of the public comments we received, we are
finalizing our proposal to conditionally packaged ancillary services
assigned to APCs 5734, 5673, and 5674 for CY 2016. The three APCs and
their CY 2016 final status indicators and payment rates are displayed
in Table 11 below.

Table 11--APCs for Conditionally Packaged Ancillary Services for CY 2016
----------------------------------------------------------------------------------------------------------------
CY 2016 OPPS
Renumbered CY 2016 APC CY 2016 APC title status CY 2016
indicator payment rate
----------------------------------------------------------------------------------------------------------------
5734....................................... Level 4 Minor Procedures.......... Q1 $119.58
5673....................................... Level 3 Pathology................. Q2 229.13
5674....................................... Level 4 Pathology................. Q2 459.96
----------------------------------------------------------------------------------------------------------------

The HCPCS codes that we are conditionally packaging as ancillary
services for CY 2016 are displayed in Addendum B to this CY 2016 OPPS/
ASC final rule with comment period (which is available via the Internet
on the CMS Web site). The supporting documents for the final rule with
comment period are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
In addition, in the CY 2016 OPPS/ASC proposed rule (80 FR 39234),
we proposed to continue to exclude certain services from this ancillary
services packaging policy. As established in CY 2015, preventive
services, certain psychiatric and counseling-related services, and
certain low-cost drug administration services are separately payable
under the OPPS (79 FR 66819). Preventable services that would continue
to be exempted from the ancillary service packaging policy for CY 2016
were listed in Table 9 of the proposed rule.
Comment: Several commenters supported this proposal.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our policy to continue to exempt preventive services from
the ancillary services packaging policy for CY 2016. Preventive
services that will continue to be exempted from the ancillary service
packaging policy for CY 2016 and subsequent years are listed in Table
12 below.

Table 12--Preventive Services Exempted From the Ancillary Services Packaging Policy
----------------------------------------------------------------------------------------------------------------
CY 2016 status
HCPCS code Short descriptor indicator CY 2016 APC
----------------------------------------------------------------------------------------------------------------
76977...................................... Us bone density measure........... S 5732

[[Page 70346]]

77078...................................... Ct bone density axial............. S 5521
77080...................................... Dxa bone density axial............ S 5522
77081...................................... Dxa bone density/peripheral....... S 5521
G0117...................................... Glaucoma scrn hgh risk direc...... S 5732
G0118...................................... Glaucoma scrn hgh risk direc...... S 5732
G0130...................................... Single energy x-ray study......... S 5521
G0389...................................... Ultrasound exam aaa screen........ S 5531
G0404...................................... Ekg tracing for initial prev...... S 5731
Q0091...................................... Obtaining screen pap smear........ S 5731
----------------------------------------------------------------------------------------------------------------

(2) Drugs and Biologicals That Function as Supplies When Used in a
Surgical Procedure
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74930
through 74939), we finalized a policy at 42 CFR 419.2(b)(16) to
unconditionally package all drugs and biologicals that function as
supplies when used in a surgical procedure. As noted in that final rule
with comment period, supplies are a large category of items that
typically are either for single patient use or have a shorter life span
in use than equipment. Supplies can be anything that is not equipment
and include not only minor, inexpensive, or commodity-type items but
also include a wide range of products used in the hospital outpatient
setting, including certain implantable medical devices, drugs,
biologicals, or radiopharmaceuticals (78 FR 74390). When evaluating
whether a particular drug may meet the criteria for packaging under
this policy, we do not consider low drug product utilization and/or
drug product cost (as compared to the primary service APC payment) to
be factors in our determination (79 FR 66875). We unconditionally
package all drugs and biologicals that function as supplies in a
surgical procedure (79 FR 74930).
For CY 2016, we conducted a comprehensive review of CY 2015
separately payable OPPS drugs; that is, drugs with either a status
indicator of ``G'' or ``K.'' For each separately payable drug, we
reviewed the FDA-approved label and conducted a clinical review to
determine whether a drug is indicated for use in a surgical procedure.
Based on our clinical review, in the CY 2016 OPPS/ASC proposed rule (80
FR 39235), for CY 2016, we proposed to package payment for the four
drugs that were listed in Table 10 of the proposed rule (80 FR 39235)
based on their primary function as a supply in a surgical procedure,
which typically means that the drug or biological is integral to or
dependent on or supportive of or adjunctive to a surgical procedure
(HCPCS code J0583 (Injection, bivalirudin, 1 mg); HCPCS code J7315
(Mitomycin, ophthalmic, 0.2 mg); HCPCS code C9447 (Injection,
phenylephrine and ketorolac, 4 ml vial); and HCPCS code J0130
(Injection abciximab, 10 mg)). We noted in the proposed rule that one
drug, described by HCPCS code C9447, whose payment would otherwise be
packaged in CY 2016, currently has pass-through payment status.
Therefore, we did not propose to package payment for the drug described
by HCPCS code C9447 for CY 2016. Instead, we proposed to package
payment for this drug for CY 2018, after its drug pass-through payment
status has expired.
Comment: A few commenters requested that CMS not package the drug
described by HCPCS code J7315 as a surgical supply. One commenter in
particular believed that, because the drug mitomycin is not necessarily
required in all trabeculectomies, the packaging regulation for drugs
and biologicals that function as supplies when used in a surgical
procedure specified at Sec. 419.2(b)(16) of the regulations should not
apply to HCPCS code J7315.
Response: We addressed a similar comment and explained this
packaging policy as it applies to HCPCS code J7315 in the CY 2014 OPPS/
ASC final rule with comment period (78 FR 74938). We are repeating some
of the points made in our response here. First, HCPCS code J7315
describes a drug. Second, indication for the drug described by HCPCS
code J7315 is ``for use as an adjunct to ab externo glaucoma surgery''
(emphasis added). The drugs that function as surgical supplies
packaging policy specified at Sec. 419.2(b)(16) applies to all drugs
and biologicals that are either integral or ancillary or supportive or
dependent or adjunctive to a surgical procedure (78 FR 74938). Because
the drug described by HCPCS code J7315 is an adjunct to surgery (the
drug's only indication), payment for the drug is packaged in CY 2016 in
accordance with Sec. 419.2(b)(16). For purposes of packaging payment,
it does not matter in what percentage of trabeculectomies the drug
described by HCPCS code J7315 is used. Packaging policies apply both to
products that are used as a necessary ingredient to a procedure
(meaning that the test or procedure cannot be performed without the
product) and to products that are optional and only occasionally used
with a procedure. The frequency of use relative to overall procedure
frequency is not a factor in determining whether a drug or biological
is packaged under Sec. 419.2(b)(16). With packaging of a drug or
biological payment into the procedure payment, surgeons, hospitals, and
ASCs can weigh the clinical utility of the product for a particular
case against the cost of the product (because payment is fixed for the
overall procedure and includes all supplies). If the clinical utility
of a product is high relative to the cost, hospitals and ASCs (on an
order by a physician) would be more likely to use the product. If the
opposite is true, they would be less likely to use a product. Packaging
policies support the medically necessary use of products and should
restrain use that may be more a matter of convenience than of medical
necessity. Therefore, we are finalizing our proposal to package the
drug described by HCPCS code J7315 (and assign it status indicator
``N'') for CY 2016 and subsequent years.
Comment: One commenter expressed concern that mitomycin is overused
in trabeculectomies. The commenter believed that target intraocular
pressures (IOPs) should be better tailored to the individual patient
rather than always aiming for very low IOPs that are achievable with
mitomycin. The commenter stated that the current CMS payment policy of
separate payment for mitomycin may encourage the use of mitomycin in
trabeculectomy.

[[Page 70347]]

Response: We appreciate this thoughtful comment. As stated above,
we believe that packaging payment for mitomycin will require facilities
to focus on the clinical utility of mitomycin in a particular case
because using the packaged drug will be a cost that must be covered by
the trabeculectomy procedure payment. On the contrary, separate payment
for drugs creates a financial incentive for hospitals and ASCs to use
drugs because they are paid an additional amount at ASP+6 percent. In
addition, if the facility acquires a drug whose payment is at less than
ASP, the profit for using the drug is even greater than 6 percent of
the drug's ASP.
Comment: One commenter requested that CMS not package the drug
described by HCPCS code C9447 (phenylephrine and ketorolac) as a
surgical supply beginning in CY 2018. While the commenter did not
disagree that the drug would be subject to the packaging regulation at
Sec. 419.2(b)(16), the commenter predicted that packaging of this drug
will result in the use of lower quality alternative drugs. In addition,
the commenter requested that, if CMS packages payment for the drug
described by HCPCS code C9447, CMS create a separate APC with higher
payment rates for procedures that use packaged drugs.
Response: Because the drug described by HCPCS code C9447 functions
as a surgical supply in cataract surgery, payment for the drug will be
packaged under Sec. 419.2(b)(16) after its pass-through status expires
beginning in CY 2018. Which particular drugs surgeons, hospitals, and
ASCs will employ to perform cataract surgery is a matter of choice by
the physician and the facility. Through packaging of the payment for
supplies into the payment for the procedure, CMS generally leaves
decision-making about which packaged services to use during a procedure
in the hands of physicians and providers. We believe that pass-through
payment status should facilitate the use of the drug described by HCPCS
code C9447. With the packaging of the payment for the drug described by
HCPCS code C9447 into the cataract surgery procedure payment, we
believe surgeons, hospitals, and ASCs can weigh the clinical utility of
the product for a particular case against the cost of the product
(because payment is fixed for the overall procedure and includes all
supplies). If the clinical utility of the drug is high relative to its
cost, hospitals and ASCs (on an order by a physician) would be more
likely to use the product. If the opposite is true, they would be less
likely to use the product. If successful cataract surgery depends upon
the use of the drug described by HCPCS code C9447, we expect that
hospitals and ASCs will bear the additional cost of the drug. As noted
above, packaging policies support the medically necessary use of
products and should restrain use that may be more a matter of
convenience than of medical necessity.
We are finalizing our proposal to package the drug described by
HCPCS code C9447 (and assign it status indicator ``N'') beginning in CY
2018 and subsequent years. We are not creating a separate APC with a
higher payment for cataract surgery that uses the drug described by
HCPCS code C9447, as the commenter requested. We believe that doing so
would be inconsistent with the packaging policy. The payment for
cataract surgery is a total payment that includes all necessary
equipment and supplies, including drugs and biologicals that are
employed before, during, and after a surgery.
Comment: One commenter requested that CMS not package payment for
the drug described by HCPCS code J0583. The commenter stated that,
because HCPCS code J0583 describes a specified covered outpatient drug
(SCOD), the drug cannot be packaged because of the specific statutory
payment methodology that applies to SCODs. The commenter also requested
that, if CMS finalizes the proposal to package payment for the drug
described by HCPCS code J0583 as a surgical supply, CMS should also
package payment for the drugs described by HCPCS codes J1327
(Eptifibatide) and J3246 (Tirofiban hydrochloride) to ensure that the
packaging policy is not implemented in an arbitrary and capricious
manner.
Response: We have previously explained why SCODs can be packaged in
the OPPS (72 FR 66766). The drug described by HCPCS code J0583 is
indicated for various types of patients undergoing percutaneous
coronary intervention (PCI), which we consider to be a surgical
procedure for purposes of this packaging policy. The drugs described by
HCPCS codes J1327 and J3246 mentioned by the commenter have other
indications besides facilitating PCI. The drugs described by HCPCS
codes J1327 and J3246 are indicated for the treatment of acute coronary
syndrome (ACS). These drugs were not among the drugs proposed to be
packaged as surgical supplies because they have nonsurgical
indications.
Comment: A few commenters requested that CMS revise its packaging
policy to unpackage payment for diagnostic radiopharmaceuticals, stress
agents, and Cysview. The commenters believed that packaging payment for
these products limits patient access.
Response: We disagree with the commenters that packaging limits
patient access to diagnostic radiopharmaceuticals, stress agents, and
Cysview. We believe that unconditionally packaging diagnostic
radiopharmaceuticals, stress agents, Cysview, and other drugs and
biologicals that function as surgical supplies establishes better
incentives to ensure clinically appropriate patient care.
As discussed in the CY 2014 OPPS/ASC final rule with comment period
(78 FR 74925 through 74926), like other prospective payment systems,
the OPPS relies on the concept of averaging, where the payment may be
more or less than the estimated cost of providing a specific service or
bundle of specific services for a particular patient. There are many
items and services in the OPPS in which use of the item or service may
increase the cost per case above that of the average or typical case,
and there are cases where no additional items or services are necessary
and the cost of a typical case is much less than the average. This is a
fundamental aspect of a prospective payment system. Overall, we believe
that OPPS payments reflect average estimated costs for both situations
and encourage the hospital to assess the appropriate use of those
additional items and services in diagnosing bladder cancer and other
diseases.
While we continuously examine our claims data to identify data
anomalies or inconsistencies in billing patterns, we also welcome and
appreciate public comments that support claims data on how our
packaging policy may adversely impacts patient access.
After consideration of the public comments we received, we are
finalizing our proposal to package payment for the four discussed
drugs. We are not modifying our drug packaging policy and will continue
to package drugs and biologicals that function as supplies when used in
a surgical procedure as codified at 42 CFR 419.2(b)(15) and (b)(16).
Table 13 below lists the drugs that we are finalizing as
unconditionally packaged surgical supplies beginning in the calendar
year indicated in the table.

[[Page 70348]]

Table 13--Drugs Packaged as Surgical Supplies
----------------------------------------------------------------------------------------------------------------
CY 2015 status Primary use in First calendar
HCPCS code Descriptor indicator surgical procedure year packaged
----------------------------------------------------------------------------------------------------------------
J0583........................ Injection, bivalirudin, K Percutaneous Coronary 2016
1 mg. Intervention[PCI]/PCTA
[percutaneous
transluminal coronary
angioplasty]
procedures.
J7315........................ Mitomycin, ophthalmic, G Glaucoma surgery....... 2016
0.2 mg.
C9447........................ Injection, G Cataract surgery....... 2018
phenylephrine and
ketorolac, 4 ml vial.
J0130........................ Injection abciximab, 10 K PCI procedure.......... 2016
mg.
----------------------------------------------------------------------------------------------------------------

(3) Clinical Diagnostic Laboratory Tests
(a) Background
In CY 2014, we finalized a policy to package payment for most
clinical diagnostic laboratory tests in the OPPS (78 FR 74939 through
74942 and 42 CFR 419.2(b)(17)). Under current policy, certain clinical
diagnostic laboratory tests that are listed on the Clinical Laboratory
Fee Schedule (CLFS) are packaged in the OPPS as integral, ancillary,
supportive, dependent, or adjunctive to the primary service or services
provided in the hospital outpatient setting on the same date of service
as the laboratory test. Specifically, we conditionally package
laboratory tests and only pay separately for a laboratory test when (1)
it is the only service provided to a beneficiary on a given date of
service; or (2) it is conducted on the same date of service as the
primary service, but is ordered for a different diagnosis than the
other hospital outpatient services and ordered by a practitioner
different than the practitioner who ordered the other hospital
outpatient services. Also excluded from this conditional packaging
policy are molecular pathology tests described by CPT codes in the
ranges of 81200 through 81383, 81400 through 81408, and 81479 (78 FR
74939 through 74942), which are assigned status indicator ``A'' in
Addendum B to this final rule with comment period (which is available
at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). When laboratory
tests are not packaged under the OPPS and are listed on the CLFS, they
are paid at the CLFS payment rates outside the OPPS under Medicare Part
B.
To implement our packaging policy in CY 2014, we assigned status
indicator ``N,'' which describes unconditionally packaged items and
services, to all laboratory tests paid at the CLFS rates except
molecular pathology tests. We indicated in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 74939) that hospitals should use the
14X bill type for laboratory tests to bill and receive separate payment
for laboratory tests that are the only services provided on a date of
service and laboratory tests provided on the same date of service as
another hospital outpatient service but ordered for a different
diagnosis than the primary service and ordered by a different
practitioner than the practitioner who ordered the other hospital
outpatient service. Therefore, under our final policy, we relied on
hospitals to identify when laboratory tests should be separately paid
and bill those laboratory tests on a 14X bill type.
Upon implementation of this final policy in January 2014, the
National Uniform Billing Committee (NUBC) expressed concern that the
14X bill type was not an appropriate choice of bill type for billing
for laboratory tests other than for laboratory tests on referred
specimens and requested that CMS find another mechanism for hospitals
to bill for separately payable laboratory tests. (We refer readers to
our Medicare Learning Network article on this issue on the CMS Web site
at: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1412.pdf.) In Transmittal
2971, Change Request 8776, July 2014 Update of the Hospital Outpatient
Prospective Payment System (OPPS), which is available on the CMS Web
site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2971CP.pdf, we implemented modifier ``L1''
(Separately payable laboratory test) to be used in lieu of the 14X bill
type. Specifically, we stated that hospitals should use the ``L1''
modifier to indicate when laboratory tests meet either of the two
exceptions for separate payment described above.
(b) CY 2016 Laboratory Test Packaging Proposals and Finalized Policies
In the CY 2016 OPPS/ASC proposed rule (80 FR 39235 through 39236),
for CY 2016 and subsequent years, we proposed a few revisions to the
laboratory packaging policy. First, with regard to the particular
molecular pathology tests in the code range expressly excluded from the
previous policy, we proposed to expand this exclusion to exclude all
molecular pathology tests from our packaging policy, including any new
codes that also describe molecular pathology tests. In our rationale
for excluding these laboratory tests from our final packaging policy in
the CY 2014 OPPS/ASC final rule with comment period (78 FR 74939), we
stated that we did not propose to package molecular pathology
laboratory tests because we believed that these relatively new tests
may have a different pattern of clinical use, which may make them
generally less tied to a primary service in the hospital outpatient
setting than the more common and routine laboratory tests that we
proposed to package. As stated in the CY 2016 OPPS/ASC proposed rule,
we believe that this rationale remains applicable and may be
appropriately extended to any new molecular pathology tests. Therefore,
for CY 2016, we proposed to assign all laboratory tests that describe
molecular pathology tests status indicator ``A'' in Addendum B to the
proposed rule (which is available via the Internet on the CMS Web
site), which means that they would be separately paid at the CLFS rates
outside of the OPPS.
Second, in the CY 2016 OPPS/ASC proposed rule (80 FR 39236), we
proposed for CY 2016 to make separate payment for preventive laboratory
tests and we assigned them status indicator ``A'' in Addendum B to the
proposed rule. Laboratory tests that are considered preventive are
listed in Section 1.2, Chapter 18 of the Medicare Claims Processing
Manual (Pub. 100-04). We currently make an exception to conditional
packaging of ancillary services for ancillary services that are also
preventive services (79 FR 66819). We stated in the proposed rule that,
for consistency, we believe that such an

[[Page 70349]]

exception should also apply to laboratory tests that are classified as
preventive services.
Finally, for CY 2016, we proposed in the CY 2016 OPPS/ASC proposed
rule (80 FR 39236) to modify our current conditional packaging policy
that laboratory tests are integral, ancillary, supportive, dependent,
or adjunctive to a primary service or services provided in the hospital
outpatient setting when those services are provided on the same date of
service as the primary service and when they are ordered for the same
diagnosis and by the same practitioner as the practitioner who ordered
the other hospital outpatient service. Specifically, we proposed to
consider laboratory tests provided during the same outpatient stay
(rather than specifically provided on a same date of service as the
primary service) as integral, ancillary, supportive, dependent, or
adjunctive to a primary service or services, except when a laboratory
test is ordered for a different diagnosis and by a different
practitioner than the practitioner who ordered the other hospital
outpatient services. In some cases, outpatient hospital stays span more
than a single date. For laboratory tests reported on a claim with a
primary service, we stated in the proposed rule that we do not believe
that a different date of service for the laboratory test affects
whether that test is integral, ancillary, supportive, dependent, or
adjunctive to the primary service or services provided in the HOPD.
Further, as we discussed in the proposed rule, in reviewing our CY 2014
claims data, we observed hospitals indicating separate payment by
reporting the ``L1'' modifier for only a few laboratory tests reported
on different days than another hospital outpatient service. We
concluded that hospitals generally do not view laboratory tests
occurring on a different day than a primary service during an
outpatient stay as a reason for separate payment. Therefore, we
proposed to package laboratory tests that are reported on the same
claim with a primary service, regardless of the date of service.
As stated in the proposed rule (80 FR 39236), this proposal does
not affect our existing policy to provide separate payment for
laboratory tests: (1) If they are the only services furnished to an
outpatient and are the only services on a claim and have a payment rate
on the CLFS; or (2) if they are ordered for a different diagnosis than
another hospital outpatient service by a practitioner different than
the practitioner who ordered the other hospital outpatient service (78
FR 74942). As indicated in the proposed rule, we also plan to continue
to have hospitals report the ``L1'' modifier to identify any clinically
``unrelated'' laboratory tests that are furnished on the same claim as
OPPS services, but are ordered by a different practitioner and for a
different diagnosis than the other hospital outpatient service.
However, for ease of administration, we also proposed to implement
claims processing edits through a new conditional packaging status
indicator ``Q4'' that would identify 13X bill type claims where there
are only laboratory HCPCS codes that appear on the CLFS; automatically
change their status indicator to ``A''; and pay them separately at the
CLFS payment rates. For such claims, the ``L1'' modifier would not be
used (80 FR 39236). Status indicator ``Q4'' is defined as ``packaged
APC payment if billed on the same claim as a HCPCS code assigned status
indicator ``J1,'' ``J2,'' ``S,'' ``T,'' ``V,'' ``Q1,'' ``Q2,'' or
``Q3,'' otherwise separately paid, and would apply to conditionally
packaged laboratory tests. In our CY 2014 claims data, we observed some
claims reporting laboratory services and no other OPPS services that
were not paid because the hospital did not appropriately report the
``L1'' modifier. We further believe that the status indicator ``N'' for
unconditional packaging does not accurately reflect the payment status
of these laboratory tests. These tests may be eligible to receive
separate payment at the CLFS payment rates in several circumstances as
discussed above. With the assignment of the proposed ``Q4'' modifier to
laboratory tests, we proposed that modifier ``L1'' would only be used
to identify ``unrelated'' laboratory tests that are ordered for a
different diagnosis and by a different practitioner than the other
hospital outpatient services on the claim.
We invited public comments on these proposals.
Comment: Many commenters agreed with expanding the molecular
pathology test exception to include new molecular pathology tests, and
not only the tests listed in the CY 2014 OPPS/ASC final rule with
comment period. In addition, many commenters agreed with the proposal
for separate payment for preventive laboratory tests.
Response: We appreciate the commenters' support for these
proposals.
Comment: A few commenters disagreed with the assignment of status
indicator ``E'' (Not paid by Medicare when submitted on outpatient
claims) for the following CPT codes that describe new multianalyte
assays with algorithmic analyses (MAAAs):
CPT code 81490 (Autoimmune (rheumatoid arthritis),
analysis of 12 biomarkers using immunoassays, utilizing serum,
prognostic algorithm reported as a disease activity score);
CPT code 81535 (Oncology (gynecologic), live tumor cell
culture and chemotherapeutic response by DAPI stain and morphology,
predictive algorithm reported as a drug response score; first single
drug or drug combination);
CPT code 81536 (Oncology (gynecologic), live tumor cell
culture and chemotherapeutic response by DAPI stain and morphology,
predictive algorithm reported as a drug response score; each additional
single drug or drug combination (List separately in addition to code
for primary procedure)); and
CPT code 81538 (Oncology (lung), mass spectrometric 8-
protein signature, including amyloid A, utilizing serum, prognostic and
predictive algorithm reported as good versus poor overall survival).
In addition, the commenters agreed with CMS' designation of certain
other MAAAs as separately paid molecular pathology tests, but requested
that CMS also assign status indicator ``A'' to the four MAAAs codes
listed above. The commenters believed that the rationale stated in the
proposed rule for not packaging payment for molecular pathology
laboratory tests (that is, that ``we believed that these relatively new
tests [molecular pathology laboratory tests] may have a different
pattern of clinical use, which may make them generally less tied to a
primary service in the hospital outpatient setting than the more common
and routine laboratory tests that we . . . package'' (80 FR 39236))
applies equally to the four new nonmolecular pathology MAAAs listed
above, and for this reason, payment for these MAAAs should also not be
packaged.
Response: We agree in part with the commenters. We agree that the
MAAAs codes in question should not be assigned status indicator ``E''
for CY 2016 because there is some local Medicare coverage for these
codes. However, the proposal was limited to molecular pathology
laboratory tests and not to any laboratory test that could possibly fit
into the molecular pathology test exception rationale. While we did not
propose to extend the packaging exception that applies to molecular
pathology laboratory tests to these nonmolecular pathology MAAAs
laboratory tests, we may consider whether additional exceptions to the
OPPS laboratory test packaging policy should apply to tests other than

[[Page 70350]]

molecular pathology tests in the future. For CY 2016, the four MAAAs
codes listed above are assigned status indicator ``Q4.''
Comment: Many commenters supported the proposed ``Q4'' status
indicator for conditionally packaged laboratory tests. The commenters
expressed their appreciation for the administrative convenience this
policy will afford hospitals in receiving separate payment without the
use of a modifier for laboratory tests provided without other hospital
services. However, some commenters objected to the associated logic of
applying laboratory test packaging at the claim level instead of at the
date of service level. These commenters believed that laboratory tests
performed during an outpatient hospital stay but on a different date of
service might not be ancillary to a primary service on a different date
of service. Some commenters also believed that payment for laboratory
tests should not be packaged into payment for other conditionally
packaged services that are assigned status indicator ``Q1'' or ``Q2,''
because they were concerned that the cost of some packaged laboratory
tests could exceed the cost of other conditionally packaged services
into which the laboratory tests are packaged.
Response: We appreciate the commenters' support for the proposed
``Q4'' status indicator. However, we believe that the ``Q4'' status
indicator should apply at the claim level. We believe that it is
appropriate to package payment for laboratory tests that are provided
on a different date of service than other hospital services. For
example, a patient could be seen in the emergency room and receive some
laboratory tests prior to midnight and receive the remainder of the
services after midnight on a different date of service. This order of
services should not affect whether the laboratory tests are packaged.
Therefore, we believe that the ``Q4'' status indicator should identify
packaging of laboratory tests into procedures on the same claim,
regardless of the date of service, unless an exception applies.
Regarding the commenters' concern about costly laboratory tests
possibly being packaged into less costly services that are assigned
status indicator ``Q1'' or ``Q2,'' it is possible that this could
happen but, given the low cost of most laboratory tests relative to
most other hospital outpatient services, we do not believe that this
would be a common occurrence. In addition, packaging in the OPPS is not
limited to only ancillary or subordinate services that are lower cost
than a primary service. In some cases, the packaged services can have a
higher cost than the primary service.
After consideration of the public comments we received, we are
finalizing the changes to the laboratory test packaging policy as
proposed, with one modification. We are assigning status indicator
``Q4'' (instead of ``E'') to CPT codes 81490, 81535, 81536, and 81538.
Status indicator assignments for laboratory tests are included in
Addendum B to this final rule with comment period (which is available
at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). When laboratory
tests are not packaged under the OPPS and are listed on the CLFS, they
are paid at the CLFS payment rates outside the OPPS under Medicare Part
B.
4. Calculation of OPPS Scaled Payment Weights
In the CY 2016 OPPS/ASC proposed rule (80 FR 39236 through 39237),
we proposed to calculate the relative payment weights for each APC
shown in Addenda A and B to the proposed rule (which are available via
the Internet on the CMS Web site) using the APC costs discussed in
sections II.A.1. and II.A.2. of the proposed rule. Prior to CY 2007, we
standardized all of 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 an
initial unscaled relative payment weight for each APC.
Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all
of the relative payment weights to the median cost of 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 APC because it was the mid-level clinic visit APC (that is, Level
3 of 5 levels). We established a policy in the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68283) of using geometric mean-based
APC costs rather than median-based APC costs to calculate relative
payment weights. In the CY 2016 OPPS/ASC proposed rule (80 FR 39236
through 39237), we proposed to continue this policy for CY 2016 and
subsequent years.
As noted earlier for CY 2012 and CY 2013, outpatient clinic visits
were assigned to one of five levels of clinic visit APCs, with APC 0606
representing a mid-level clinic visit. In the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75036 through 75043), we finalized a
new policy that created alphanumeric HCPCS code G0463 (Hospital
outpatient clinic visit for assessment and management of a patient),
representing any and all clinic visits under the OPPS. HCPCS code G0463
was assigned to APC 0634 (Hospital Clinic Visits). We also finalized a
policy to use CY 2012 claims data to develop the CY 2014 OPPS payment
rates for HCPCS code G0463 based on the total geometric mean cost of
the levels one through five CPT E/M codes for clinic visits previously
recognized under the OPPS (CPT codes 99201 through 99205 and 99211
through 99215). In addition, we finalized a policy to no longer
recognize a distinction between new and established patient clinic
visits.
For the CY 2014 and CY 2015 OPPS final rules with comment period,
we standardized all of the relative payment weights to the geometric
mean cost of APC 0634 as discussed in section VII. of the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66823). As noted in section
VII. of the CY 2016 proposed rule, for CY 2016, we proposed to delete
APC 0634 and to move the outpatient clinic visit HCPCS code G0463 to
APC 0632 (Level 2 Examinations and Related Services) (80 FR 39237).
Accordingly, for CY 2016 and subsequent years, we proposed to
standardize all of the relative payment weights to APC 0632. As stated
in the proposed rule, we believe that standardizing relative payment
weights to the geometric mean of the APC to which HCPCS code G0463 is
assigned maintains consistency in calculating unscaled weights that
represent the cost of some of the most frequently provided OPPS
services. For CY 2016, we proposed to renumber APC 0632 as APC 5012
(Level 2 Examination and Related Services). For CY 2016, we proposed to
assign proposed renumbered APC 5012 a relative payment weight of 1.00
and to divide the geometric mean cost of each APC by the proposed
geometric mean cost for proposed renumbered APC 5012 to derive the
proposed unscaled relative payment weight for each APC. The choice of
the APC on which to standardize the proposed relative payment weights
does not affect payments made under the OPPS because we scale the
weights for budget neutrality.
Section 1833(t)(9)(B) of the Act requires that APC reclassification
and recalibration changes, wage index changes, and other adjustments be
made in a budget neutral manner. Budget neutrality ensures that the
estimated

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aggregate weight under the OPPS for CY 2016 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 proposed to compare the estimated aggregate weight using
the CY 2015 scaled relative payment weights to the estimated aggregate
weight using the proposed CY 2016 unscaled relative payment weights.
We did not receive any public comments on our proposal to use the
geometric mean cost of renumbered APC 5012 to standardize relative
payment weights. Therefore, we are finalizing the use of the relative
payment weight of 1.00 for APC 5012 to derive the unscaled relative
payment weight for each APC.
For CY 2015, we multiplied the CY 2015 scaled APC relative payment
weight applicable to a service paid under the OPPS by the volume of
that service from CY 2014 claims to calculate the total relative
payment weight for each service. We then added together the total
relative payment weight for each of these services in order to
calculate an estimated aggregate weight for the year. For CY 2016, we
proposed to apply the same process using the estimated CY 2016 unscaled
relative payment weights rather than scaled relative payment weights.
We proposed to calculate the weight scaler by dividing the CY 2015
estimated aggregate weight by the unscaled CY 2016 estimated aggregate
weight (80 FR 39237).
For a detailed discussion of the weight scalar calculation, we
refer readers to the OPPS claims accounting document available on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Click on the CY 2016 OPPS
final rule link and open the claims accounting document link at the
bottom of the page.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39237), we proposed to
compare the estimated unscaled relative payment weights in CY 2016 to
the estimated total relative payment weights in CY 2015 using CY 2014
claims data, holding all other components of the payment system
constant to isolate changes in total weight. Based on this comparison,
we proposed to adjust the calculated CY 2016 unscaled relative payment
weights for purposes of budget neutrality. We proposed to adjust the
estimated CY 2016 unscaled relative payment weights by multiplying them
by a weight scaler of 1.3823 to ensure that the proposed CY 2016
relative payment weights are scaled to be budget neutral. The proposed
CY 2016 relative payment weights listed in Addenda A and B to the
proposed rule (which are available via the Internet on the CMS Web
site) were scaled and incorporated the recalibration adjustments
discussed in sections II.A.1. and II.A.2. of the proposed rule.
Section 1833(t)(14) of the Act provides the payment rates for
certain SCODs. Section 1833(t)(14)(H) of the Act provides that
additional expenditures resulting from this paragraph shall not be
taken into account in establishing the conversion factor, weighting,
and other adjustment factors for 2004 and 2005 under paragraph (9), but
shall be taken into account for subsequent years. Therefore, the cost
of those SCODs (as discussed in section V.B.3. of this final rule with
comment period) is included in the budget neutrality calculations for
the CY 2016 OPPS.
We did not receive any public comments on the proposed weight
scaler calculation. Therefore, we are finalizing the calculation
process described in the proposed rule without modification. Using
updating final rule claims data, we are updating the estimated CY 2016
unscaled relative payment weights by multiplying them by a weight
scaler of 1.3852 to ensure that the final CY 2016 relative payment
weights are scaled to be budget neutral.

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to
update the conversion factor used to determine the payment rates under
the OPPS on an annual basis by applying the OPD fee schedule increase
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee
schedule increase factor is equal to the hospital inpatient market
basket percentage increase applicable to hospital discharges under
section 1886(b)(3)(B)(iii) of the Act. In the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49508), consistent with current law, based on IHS
Global Insight, Inc.'s second quarter 2015 forecast of the FY 2016
market basket increase, the FY 2016 IPPS market basket update is 2.4
percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the
Act, as added by section 3401(i) of the Patient Protection and
Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section
10319(g) of that law and further amended by section 1105(e) of the
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152),
provide adjustments to the OPD fee schedule increase factor for CY
2016.
Specifically, section 1833(t)(3)(F)(i) of the Act requires that,
for 2012 and subsequent years, the OPD fee schedule increase factor
under subparagraph (C)(iv) be reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. Section
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as
equal to the 10-year moving average of changes in annual economy-wide,
private nonfarm business multifactor productivity (MFP) (as projected
by the Secretary for the 10-year period ending with the applicable
fiscal year, year, cost reporting period, or other annual period) (the
``MFP adjustment''). In the FY 2012 IPPS/LTCH PPS final rule (76 FR
51689 through 51692), we finalized our methodology for calculating and
applying the MFP adjustment. In the FY 2016 IPPS/LTCH PPS final rule
(80 FR 49509), we discussed the calculation of the final MFP adjustment
for FY 2016, which is a 0.5 percentage point reduction.
In the CY 2016 OPPS/ASC proposed rule, we proposed that if more
recent data became subsequently available after the publication of the
proposed rule (for example, a more recent estimate of the market basket
increase and the MFP adjustment), we would use such updated data, if
appropriate, to determine the CY 2016 market basket update and the MFP
adjustment, components in calculating the OPD fee schedule increase
factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act,
in the CY 2016 OPPS/ASC final rule with comment period. Consistent with
that proposal, and the FY 2016 IPPS/LTCH PPS final rule, we applied the
updated final FY 2016 market basket percentage increase and the MFP
adjustment to the OPD fee schedule increase factor for the CY 2016
OPPS.
In addition, section 1833(t)(3)(F)(ii) of the Act requires that,
for each of years 2010 through 2019, the OPD fee schedule increase
factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the
adjustment described in section 1833(t)(3)(G) of the Act. For CY 2016,
section 1833(t)(3)(G)(iv) of the Act provides a -0.2 percentage point
reduction to the OPD fee schedule increase factor under section
1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act, in the CY 2016
OPPS/ASC proposed rule, we proposed to apply a 0.2 percentage point
reduction to the OPD fee schedule increase factor for CY 2016.
We note that section 1833(t)(3)(F) of the Act provides that
application of this subparagraph may result in the OPD fee

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schedule increase factor under section 1833(t)(3)(C)(iv) of the Act
being less than 0.0 percent for a year, and may result in OPPS payment
rates being less than rates for the preceding year. As described in
further detail below, we are applying an OPD fee schedule increase
factor of 1.7 percent for the CY 2016 OPPS (which is 2.4 percent, the
final estimate of the hospital inpatient market basket percentage
increase, less the final 0.5 percentage point MFP adjustment, and less
the 0.2 percentage point additional adjustment).
Hospitals that fail to meet the Hospital OQR Program reporting
requirements are subject to an additional reduction of 2.0 percentage
points from the OPD fee schedule increase factor adjustment to the
conversion factor that would be used to calculate the OPPS payment
rates for their services, as required by section 1833(t)(17) of the
Act. For further discussion of the Hospital OQR Program, we refer
readers to section XIII. of this final rule with comment period.
In the CY 2016 OPPS/ASC proposed rule, we proposed to amend 42 CFR
419.32(b)(1)(iv)(B) by adding new paragraph (7) to reflect the
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2016,
we reduce the OPD fee schedule increase factor by the MFP adjustment as
determined by CMS, and to reflect the requirement in section
1833(t)(3)(G)(iv) of the Act, as required by section 1833(t)(3)(F)(ii)
of the Act, that we reduce the OPD fee schedule increase factor by an
additional 0.2 percentage point for CY 2016.
We did not receive any public comments on our proposed adjustments
to the OPD fee schedule increase factor or on the proposed changes to
the regulations at 42 CFR 419.32(b)(1)(iv)(B). For the reasons
discussed above, we are adjusting the OPD fee schedule increase factor
and finalizing the changes to the regulations as proposed.
To set the OPPS conversion factor for the CY 2016 proposed rule, we
increased the CY 2015 conversion factor of $74.173 by 1.9 percent. In
accordance with section 1833(t)(9)(B) of the Act, we further adjusted
the conversion factor for CY 2016 to ensure that any revisions made to
the wage index and rural adjustment were made on a budget neutral
basis. We calculated an overall budget neutrality factor of 0.9993 for
wage index changes by comparing total estimated payments from our
simulation model using the FY 2016 IPPS wage indexes to those payments
using the FY 2015 IPPS wage indexes, as adopted on a calendar year
basis for the OPPS.
For the CY 2016 proposed rule, we maintained the current rural
adjustment policy, as discussed in section II.E. of this final rule
with comment period. Therefore, we set the budget neutrality factor for
the rural adjustment is 1.0000.
For the CY 2016 proposed rule, we proposed to continue previously
established policies for implementing the cancer hospital payment
adjustment described in section 1833(t)(18) of the Act, as discussed in
section II.F. of this final rule with comment period. Consistent with
that policy, we calculated a CY 2016 budget neutrality adjustment
factor for the cancer hospital payment adjustment by comparing
estimated total CY 2016 payments under section 1833(t) of the Act,
including the CY 2016 cancer hospital payment adjustment, to estimated
CY 2016 total payments using the CY 2015 final cancer hospital payment
adjustment as required under section 1833(t)(18)(B) of the Act. The CY
2016 estimated payments applying the CY 2016 cancer hospital payment
adjustment are identical to estimated payments applying the CY 2015
final cancer hospital payment adjustment. Therefore, we applied a
budget neutrality adjustment factor of 1.0000 to the conversion factor
for the cancer hospital payment adjustment.
For the proposed rule, we estimated that pass-through spending for
drugs, biologicals, and devices for CY 2016 would equal approximately
$136.8 million, which represented 0.25 percent of total projected CY
2016 OPPS spending. Therefore, the conversion factor was adjusted by
the difference between the 0.13 percent estimate of pass-through
spending for CY 2015 and the 0.25 percent estimate of pass-through
spending for CY 2016, resulting in an adjustment for CY 2016 of -0.12
percent. Estimated payments for outliers remained at 1.0 percent of
total OPPS payments for CY 2016. We estimated for the proposed rule
that outlier payments would be 0.95 percent of total OPPS payments in
CY 2015; the 1.0 percent for outlier payments in CY 2016 would
constitute a 0.05 percent increase in payment in CY 2016 relative to CY
2015.
We did not receive any public comments on our proposed general
methodology for calculating the CY 2016 conversion factor. Therefore,
we are finalizing the methodology in this final rule with comment
period.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39238), we also
proposed to exercise our authority in section 1833(t)(3)(C)(iii) of the
Act to further adjust the conversion factor to eliminate the effect of
coding and classification changes that we believe resulted in a change
in aggregate payments that do not reflect real changes in service-mix
related to our final policy to package certain clinical diagnostic
laboratory tests in the CY 2014 OPPS/ASC final rule with comment period
(78 FR 74939 through 74942). Below we discuss our proposed and final
adjustment to the conversion factor to redress the inflation in the
OPPS payment rates for CY 2016 resulting from excess packaged payment
under the OPPS for laboratory tests that we now understand continue to
be paid separately outside the OPPS.
The current clinical diagnostic laboratory test packaging policy
packages payment for laboratory tests in the OPPS when they are
integral, ancillary, supportive, dependent, or adjunctive to a primary
service or services provided in the hospital outpatient setting. Under
current policy, payment for a laboratory test is not packaged when: (1)
A laboratory test is the only service provided to the beneficiary on
that date of service; or (2) a laboratory test is conducted on the same
date of service as the primary service but is ordered for a different
purpose than the primary service by a practitioner different than the
practitioner who ordered the primary service. The laboratory tests
falling under these two exceptions continue to be paid separately at
the CLFS payment rates outside the OPPS.
In addition, we exclude payment for molecular pathology tests
described by CPT codes in the ranges of 81200 through 81383, 81400
through 81404, and 81479 from packaging (78 FR 74939). In section
II.A.3.b.(3) of the proposed rule, we proposed to expand this exclusion
to exclude all molecular pathology tests from our packaging policy,
including any new codes that also describe molecular pathology tests.
Finally, we continue to pay separately for referred specimens billed on
a 14X bill type because these services will always consist only of
laboratory services. We also make separate (that is, not packaged)
payment for laboratory tests billed on a 12X (inpatient Part B) bill
type claim when billed for reasons other than rebilling for a denied
Part A claim, such as inpatient Part B coverage following exhausted
Part A benefits. We refer readers to section II.A.3.b.(3) of this final
rule with comment period for a detailed discussion of our laboratory
test packaging policy exceptions and to review our proposals, and final
policy, to modify our laboratory test packaging policy in light of
current experience with this policy.
In monitoring aggregate payments for CY 2014, we observed that OPPS

[[Page 70353]]

spending for hospital outpatient services experienced double digit
growth in 2014 compared to typical growth of 6 to 8 percent, due to our
CY 2014 final policy to package laboratory services, without a
comparable reduction in spending for laboratory services paid at the
CLFS payment rates outside the OPPS. As part of our CY 2014 final
policy to package certain clinical diagnostic laboratory tests, we both
revised the OPPS relative payment weights to reflect packaged
laboratory services, and we increased the OPPS relative weight scaler
to reflect the estimated total cost of packaged laboratory services. In
calculating the appropriate increase to the weight scaler for CY 2014,
we estimated that we spent approximately $2.4 billion on laboratory
services on 13X type bill claims, and we incorporated this aggregate
amount of weight into our estimate of the 2013 relative weight when
calculating the budget neutral weight scaler to scale all relative
weights for CY 2014, except those with a fixed payment amount such as
drugs paid at ASP+6 percent (78 FR 74948 through 74949). An adjustment
to the overall weight scaler has a comparable effect on final payment
as an adjustment to the conversion factor. We also assumed that
separate payment would continue for laboratory services billed on 14X
bill type claims for referred specimens and for select inpatient Part B
claims billed on a 12X bill type claim. Thus, we stated that we
expected to experience an increase in OPPS spending due to our final
packaging policy and a commensurate reduction in overall payment for
Medicare Part B laboratory tests paid at the CLFS rates outside the
OPPS.
However, as we discussed in the CY 2016 OPPS/ASC proposed rule (80
FR 39239), upon reviewing actual claims for CY 2014, we observed an
unexpectedly high volume of laboratory tests associated with $1 billion
in spending for exceptions to our packaging policy for laboratory tests
that continued to receive separate payment at the CLFS payment rates
outside the OPPS. We did not observe a significant change in the
overall volume of laboratory services being furnished. Specifically, we
observed a pronounced shift in volume from billing on the 13X bill type
claims to the 14X bill type claims beginning January 1, 2014,
consistent with our final rule policy and then shifting back to the 13X
bill type claims with an ``L1'' modifier when our instructions on
billing for laboratory tests that are excepted from our laboratory
packaging policy were implemented in July 2014. (We refer readers to
Transmittal 2971, Change Request 8776, July 2014 Update of the Hospital
Outpatient Prospective Payment System (OPPS), which is available on the
CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2971CP.pdf.) Because we did not observe a
significant change in the number of laboratory services in our claims
data, we concluded that the changes in aggregate payments under the
OPPS were a result of changes in pricing alone and did not reflect real
changes in service-mix.
Therefore, we overestimated the adjustment necessary to account for
the new policy to package laboratory tests and underestimated the
amount of spending that would continue for laboratory tests paid at the
CLFS rates outside the OPPS by approximately $1 billion. This $1
billion effectively resulted in inflation in the OPPS payment rates
resulting from excess packaged payment under the OPPS for laboratory
tests for all OPPS services and duplicate payments for certain
laboratory tests because we are paying the laboratory tests through
packaged payment incorporated into the OPPS payment rates as well as
through separate payment at the CLFS payment rates outside the OPPS.
Section 1833(t)(3)(C)(iii) of the Act specifies that if the
Secretary determines the adjustments for service-mix for a previous
year (or estimates that such adjustments for a future year) did (or are
likely to) result in a change in aggregate payments during the year
that are a result of changes in the coding or classification of covered
OPD services that do not reflect real changes in service-mix, the
Secretary may adjust the conversion factor for subsequent years so as
to eliminate the effect of such coding or classification changes. Based
on this authority, we proposed a reduction of 2.0 percentage points to
the proposed CY 2016 conversion factor to redress inappropriate
inflation in the OPPS payment rates and prevent CY 2016 payment rates
from including $1 billion in excess packaged payment. We also used the
``L1'' modifier information on the CY 2014 claims data that we use to
model the OPPS to identify which laboratory services should be packaged
into the associated OPPS services when establishing the proposed CY
2016 relative weights. We proposed this reduction in order to eliminate
the effect of the coding and classification changes for payment for
laboratory tests that resulted in changes in aggregate payments, but
which did not result in real changes in service-mix under the OPPS. If
we had been able to accurately forecast the amount of continued
spending on separately payable laboratory tests that would continue in
CY 2014 at the CLFS rates outside the OPPS, we would have incorporated
a reduced amount of estimated spending into our CY 2014 OPPS budget
neutrality calculations in CY 2014 rulemaking.
We conducted several analyses to better understand the derivation
of the overestimated adjustment made in CY 2014. These efforts included
an attempt to determine how much spending at the CLFS payment rates
outside the OPPS should have been packaged in CY 2014 with full
knowledge of the actual volume for exceptions to our final laboratory
tests packaging policy now that CY 2014 claims data are available for
review. This assessment required some assumptions about what payment
would have been at the CY 2014 CLFS payment amounts using the CLFS
national limitation amount (NLA) price or the mode price among
jurisdictions where an NLA did not exist for all laboratory services in
12X, 13X, and 14X bill type claims less actual payments for those same
services and the $2.4 billion in packaged payments. We adjusted our
total estimates for incomplete claims data because the data that we use
to model the proposed rule are data from CY 2014 claims processed as of
December 31, 2014, estimated at 90 percent based on historical claims
data. As a result of this analysis, we estimated that we included a
gross estimate of roughly $1.1 billion in excess packaged payment in
the CY 2014 OPPS payment rates for laboratory tests that were paid
separately, as demonstrated by actual CY 2014 claims data. We also did
a more straightforward analysis assessing total payment for our
exceptions policy, in which we looked at the change in payment on 14X
bill type claims for the first part of CY 2014 along with any payment
for laboratory services billed with the ``L1'' modifier. This analysis
resulted in a similar estimate of roughly $1.003 billion. Because both
analyses resulted in an approximate $1 billion estimate of spending at
the CLFS rates outside the OPPS that was packaged into the OPPS, we
stated that we believe that a prospective adjustment to remove $1
billion from the CY 2016 OPPS payment rates would realign total
aggregate OPPS payments to reflect the resources associated with OPPS
services. When we calculated the $1 billion as a percent of actual
total spending for OPPS services in CY 2014 (approximately $50
billion), we determined an estimated 2.0 percent

[[Page 70354]]

reduction to total spending to be applied to the conversion factor in
CY 2016. Therefore, in the CY 2016 OPPS/ASC proposed rule, we proposed
to apply a 2.0 percent adjustment to the proposed CY 2016 conversion
factor to redress the inflation in the OPPS payment rates resulting
from excess packaged payment under the OPPS for laboratory tests we now
understand continue to be paid at the CLFS rates outside the OPPS for
CY 2016 and subsequent years.
We also stated in the proposed rule that, for the CY 2017 OPPS
rulemaking, we plan to review actual CY 2015 claims data and assess
whether our proposed adjustment for CY 2016 accurately adjusted for the
inflation in the OPPS payment rates under current policy.
We provided a summary file of our analysis of separate payment at
the CLFS rates outside the OPPS for laboratory services that are
exceptions to our packaging policy which is available in the
``Downloads'' section of the CMS Web site accompanying the proposed
rule (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html). We noted that the ``OPPS limited data set'' that we make
available to accompany each proposed and final rule is not a complete
set of institutional Part B claims, containing only the 12X, 13X, and
14X bill types that we use to model the OPPS rates and excluding claims
weeded or trimmed as discussed in our claims accounting document
(http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).
For the proposed rule, we also proposed that hospitals that fail to
meet the reporting requirements of the Hospital OQR Program would
continue to be subject to a further reduction of 2.0 percentage points
to the OPD fee schedule increase factor. For hospitals that fail to
meet the requirements of the Hospital OQR Program, we proposed to make
all other adjustments discussed above, but use a reduced OPD fee
schedule update factor of -0.1 percent (that is, the proposed OPD fee
schedule increase factor of 1.9 percent further reduced by 2.0
percentage points). This would result in a proposed reduced conversion
factor for CY 2016 of $72.478 for hospitals that fail to meet the
Hospital OQR requirements (a difference of -1.451 in the conversion
factor relative to hospitals that meet the requirements).
Comment: MedPAC and other commenters commended CMS for recognizing
that an adjustment to OPPS payment rates was warranted in light of the
effects of the laboratory services packaging policy. MedPAC noted that
the proposal to adjust payment rates to prevent continued excess
payment is consistent with adjustments CMS has made in IPPS, Medicare
Advantage, and the home health prospective payment system in the past.
Response: We appreciate the commenters' support.
Comment: Several commenters suggested that the purpose of the
proposed adjustment was to recoup overpayments in CY 2014 and CY 2015,
and that recouping overpayments made in prior years was inconsistent
with a prospective payment system.
Response: The proposed -2.0 percent adjustment to the conversion
factor would not recoup ``overpayments'' made for CYs 2014 and 2015.
When we classified laboratory tests as OPPS packaged services in 2014,
we increased the conversion factor to account for that change, which
resulted in excess payment being built into the rates. The proposal to
apply a -2.0 percent adjustment to the conversion factor is intended to
address the effects of the OPPS classification changes on OPPS payments
for CY 2016 that do not reflect real changes in service-mix. If we do
not adjust the conversion factor, the excess payment built into the
rates would carry through to the CY 2016 OPPS rates.
Comment: A few commenters suggested that the proposed adjustment to
the conversion factor was unfairly applied across the board to OPPS
services. The commenters suggested that the adjustment should only
apply to services that have packaged laboratory tests.
Response: The proposed adjustment to reduce the conversion factor
would apply to all OPPS services, but we also established relative
weights in a manner that would target payment effects on services whose
payment rates previously reflected excess packaged payment for
laboratory services. In modeling the CY 2016 OPPS, we did not include
costs for laboratory tests that were billed separately in CY 2014 for
purposes of calculating the relative weights of all services. This
means that services with excess payment due to packaged laboratory
tests in CYs 2014 and 2015 would have had the additional weight for
those laboratory services removed from their weight calculation for CY
2016. With that weight removed, all other services would have a higher
relative weight than they otherwise would if the costs for those
packaged laboratory services had been included in the model. As a
result, the proposed adjustment to the conversion factor in conjunction
with the relative weights primarily affects the payment for services
that previously included excess packaged payment for laboratory tests.
Section 1833(t)(3)(C)(iii) of the Act authorizes the agency to adjust
the conversion factor, and adjustments to payment rates such as this
are often applied across the board to all services.
Comment: One commenter questioned the legality of CMS using section
1833(t)(3)(C)(iii) of the Act as the authority to make the conversion
factor adjustment because the commenter viewed the 2.0 percent
reduction as a correction to an error CMS made in CY 2014, not an
adjustment for service-mix.
Response: The commenter misunderstands the basis for the proposed
adjustment. Section 1833(t)(3)(C)(iii) of the Act provides that, if the
Secretary determines that adjustments for service-mix for a previous
year resulted in (or are likely to result in) a change in aggregate
payments that are a result of changes in the coding or classification
of covered OPD services that do not reflect real changes in service-
mix, the Secretary may adjust the conversion factor for subsequent
years to eliminate the effect of such coding or classification changes.
This authority applies to the proposed adjustment.
The increase in aggregate OPPS payments for CY 2014 did not reflect
real changes in the service-mix for CY 2014, but, rather, was
attributable to classification changes relating to the packaging of
laboratory tests in the OPPS.
As we noted in the CY 2016 OPPS proposed rule (80 FR 39239), in our
claims data, we did not observe a significant change in the overall
volume of laboratory services being furnished in CY 2014. Because we
did not observe such a change, and because these services that we
packaged continued to be billed and paid separately, we concluded, and
confirmed based on several analyses, that the changes in aggregate
payments under the OPPS for CY 2014 were the result of classification
changes and not real changes in service-mix. In addition, as stated
above, the excess built into the rates for CY 2014 and CY 2015 would
carry through to the CY 2016 OPPS rates in the absence of an
adjustment. Accordingly, we determined that the classification changes
relating to packaged laboratory services would likely result in a
change in aggregate payments for CY 2016 that does not reflect real
changes in service-mix. In accordance with section

[[Page 70355]]

1833(t)(3)(C)(iii) of the Act, our proposal to adjust the conversion
factor was intended to eliminate the effect of the classification
changes for CY 2016.
The Secretary's adjustment is consistent with the statute, is
reasonable, and is not arbitrary or capricious. We note that section
1833(t)(12) of the Act precludes administrative and judicial review of
the Secretary's calculations under section 1833(t)(3) of the Act,
including adjustments under section 1833(t)(3)(C)(iii) of the Act.
Comment: Some commenters suggested that CMS implement a transition
period for the conversion factor adjustment so that the adjustment is
phased in over several years.
Response: We recognize that the adjustment to the conversion factor
is significant for CY 2016, but we do not believe a transition period
for the adjustment to the conversion factor is appropriate in this
situation because it would allow the excess packaged payments built
into the rates for CY 2014 and CY 2015 to continue into CY 2016. We
believe it is appropriate to adjust for this excess packaged payment as
soon as possible.
Comment: Several commenters suggested that CMS present its analysis
of the need for this adjustment to the Advisory Panel on Hospital
Outpatient Payment (HOP) in the spring of 2016 before implementing this
adjustment to allow the HOP Panel to opine on whether this adjustment
is warranted.
Response: As we indicated earlier, we believe it is appropriate to
make this adjustment for the CY 2016 payment rates because otherwise
the excess packaged payments built into the rates for CY 2014 and CY
2015 would continue into CY 2016. If we waited to present this issue to
the HOP Panel, we would not be able to implement this adjustment until
the CY 2017 payment year.
Comment: One commenter suggested that the increase in ``unrelated''
laboratory services paid under the CLFS in CY 2014 might be a
continuation of the broader trend of inpatient services transitioning
to outpatient services and might not be related to the laboratory
packaging policy implemented in CY 2014.
Response: Our actuaries' analyses included in conjunction with the
proposed rule (80 FR 39239 and the ``Summary Analysis Supporting
Adjustment for Excess Laboratory Packaging'' on the OPPS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1633-P.html) indicate that the total amount of laboratory
services performed in the outpatient setting did not increase and that
the number of laboratory services performed in the outpatient setting
that were deemed ``unrelated'' to OPPS services in CY 2014 were greater
than we had estimated they would be with the implementation of the
laboratory services packaging policy. As a result, we believe that the
higher than expected number of ``unrelated'' laboratory services is
reflective of the classification changes related to the laboratory
packaging policy and not due to services moving from the inpatient
setting to the outpatient setting.
Comment: Several commenters suggested that CMS not implement this
adjustment because CMS had not specified in the CY 2014 OPPS final rule
that $2.4 billion was being included in the CY 2014 OPPS payment rates
to account for newly packaged laboratory services. The commentators
indicated that CMS did not specify in the CY 2014 OPPS final rule or in
the CY 2016 OPPS proposed rule whether CMS was excluding from the $2.4
billion estimate ``unrelated'' laboratory services that under CMS' CY
2014 policy would be separately paid.
Response: The proposed adjustment to the conversion factor would
affect OPPS payments for CY 2016, not CY 2014. In the CY 2014 OPPS/ASC
final rule with comment period, we discussed the incorporation of the
payment weights for outpatient laboratory tests previously paid at the
CLFS payment rates (78 FR 74948 through 74949). The calculation of the
OPPS relative weights and payment rates for CY 2014 reflects estimates
attributable to packaged laboratory services. While we did not specify
the estimated dollar amount ($2.4 billion) attributable to packaged
laboratory services in the CY 2014 final rule with comment period, we
did specify in the CY 2016 OPPS/ASC proposed rule that an estimated
$2.4 billion was effectively added to the OPPS payment system to
account for packaged laboratory services in the CY 2014 OPPS/ASC final
rule with comment period. Insofar as hospitals may have received
significant windfalls for CY 2014 and CY 2015, presumably commenters do
not intend to challenge the payments for those years (at least with
respect to the incorporation of packaged laboratory services). With
respect to the OPPS ratesetting process for CY 2016, we referenced the
$2.4 billion estimate in the CY 2016 OPPS/ASC proposed rule (as
explained above) and thus commenters had notice of the estimate for
purposes of commenting on the proposed adjustment in the CY 2016 OPPS/
ASC proposed rule.
Comment: Several commenters suggested that CMS not implement this
adjustment because the ``Summary Analysis Supporting Adjustment for
Excess Laboratory Packaging,'' released with the CY 2016 OPPS/ASC
proposed rule, included data that were not publicly available. The
commenters indicated that this summary analysis included CY 2014 data
processed through May 31, 2015, while the OPPS limited data set
released with the proposed rule included data processed through
December 31, 2014. In addition, the commenters noted that the summary
analysis displayed monthly data that are not available in the OPPS
limited data set. The commenters also noted that CMS did not detail
every assumption made in calculating the proposed adjustment, and that
without these details it would be difficult for commenters to replicate
our actuaries' analysis.
Response: The ``Summary Analysis Supporting Adjustment for Excess
Laboratory Packaging'' was provided in conjunction with the proposed
rule to give stakeholders/commenters additional information about our
methodology for determining the amount of the proposed adjustment, even
though the data used for purposes of the summary analysis were not the
same exact data used for purposes of the proposed rule. For the
supplemental summary analysis, we used the most recent data available
to us, CY 2014 claims processed through May 31, 2015, which we
estimated to be approximately 98 percent complete. The limited data set
(LDS) used for the proposed rule was approximately 90 percent complete.
While having 90 percent of claims, as opposed to 98 percent, may have
made it difficult for stakeholders to exactly replicate our results, we
note that the 90 percent LDS yielded very similar results to the 98
percent dataset, and we believe it would have been sufficient to enable
stakeholders to meaningfully comment on the proposed adjustment.
Likewise, we provided the table in the supplemental analysis with the
data presented by month because we believed it would help stakeholders
better understand the proposed adjustment, even if these data are not
replicable using the LDS. Specifically, we believed that the monthly
breakdown of unrelated laboratory test billing would show that
unrelated laboratory test billing was fairly consistent across CY 2014
and that the mid-year change in billing methodology

[[Page 70356]]

did not affect billing of unrelated laboratory tests in CY 2014.
We performed multiple analyses to better understand the effect of
the classification changes relating to packaged laboratory services on
aggregate payments, in order to determine the amount of the proposed
adjustment described in the proposed rule (80 FR 39239 through 39240).
As mentioned earlier in this section and explained in the proposed
rule, in one analysis, we analyzed actual claims data for CY 2014
(using data available for the CY 2016 proposed rule) to determine an
estimate of the total dollar amount that ``should have been'' packaged
into the OPPS for laboratory services in CY 2014 if we had had perfect
information about billing patterns of unrelated services when making
our original proposal for CY 2014. We first estimated how much we would
have paid if all laboratory services were paid at CLFS NLA rates and
had not been packaged under the OPPS. To do this, we began with the CY
2014 claims data which we used for the CY 2016 proposed rule. We
identified the number of billed laboratory services for each laboratory
test and associated the CY 2014 CLFS NLA payment rate with that
utilization to determine a total payment amount in CY 2014 for
laboratory services at NLA payment rates. We would expect final CLFS
payment to be less than total payment at NLA amounts because the CLFS
pays the ``lesser of'' the fee schedule amount, the NLA, or changes
(section 1833(a)(1)(D) of the Act). The NLA establishes a ceiling on
possible payment. We estimated an overall adjustment factor of 0.88
from the difference in total estimated NLA payment in CY 2012 rates and
total final actual CLFS payment on the claims. We used that factor to
adjust estimated total payment amounts for laboratory services at NLA
payment rates in CY 2014 claims to better reflect what actual payment
would have been in CY 2014 under CLFS payment methodologies. In
addition, we adjusted the payment amounts to account for the difference
between CY 2014 claims data and CY 2012 claims data and to account for
the fact that the CY 2014 claims data was only 90 percent complete for
the CY 2016 proposed rule. Using our standard methodology, we adjusted
these data to account for what they would have shown had they been
complete at the time of our analysis. We then examined actual CY 2014
claims data to estimate how much was paid separately for laboratory
services in CY 2014. The difference between these estimates reflects a
reasonable approximation of the payment that would have been packaged
into OPPS for laboratory services in CY 2014 if we had had perfect
information about billing patterns of unrelated services when making
our original proposal for CY 2014. This analysis indicates that we
included a gross estimate of roughly $1 billion in packaged payment in
the CY 2014 OPPS payment rates for laboratory tests that ultimately
were paid separately in CY 2014 (that is, excess packaged payment for
laboratory services).
We also performed an analysis to assess the total payment for
laboratory services that were billed on an OPPS claim, but were paid
separately in CY 2014 because they were unrelated to the OPPS services.
Specifically, using CY 2014 data processed through May 31, 2015, we
observed that laboratory services billed on the 14X claim increased
immediately beginning in January 2014 (as displayed in the ``Summary
Analysis Supporting Adjustment for Excess Laboratory Packaging'' posted
with the CY 2016 OPPS/ASC proposed rule) corresponding with use of the
14X bill type to report ``unrelated'' laboratory services. Beginning in
July 2014, corresponding with the change in billing policy to bill
``unrelated'' laboratory services on a 13X bill type with the ``L1''
modifier, we observed most of the increase in 14X billing shifting to
the 13X bill type with the ``L1'' modifier (again, as displayed in the
``Summary Analysis Supporting Adjustment for Excess Laboratory
Packaging'' posted with the CY 2016 OPPS/ASC proposed rule). Summing
the total increase in 14X billing in CY 2014 (compared to CY 2013) and
the total amount billed on 13X claims with an ``L1'' modifier in CY
2014 resulted in a similar estimate of approximately $1 billion in
``unrelated'' laboratory services. Because both analyses resulted in an
approximate $1 billion estimate of spending at the CLFS rates outside
the OPPS that was packaged into the OPPS, we stated that we believe
that a prospective adjustment to remove this $1 billion from the OPPS
would realign total aggregate OPPS payments to reflect the resources
associated with OPPS services. We calculated the $1 billion as a
percent of $50 billion (the approximate actual total spending for OPPS
services in CY 2014), which is 2.0 percent. Therefore, based on our
analysis of the effects of the classification changes for CY 2014, we
proposed a 2.0 percent downward adjustment to the conversion factor for
CY 2016. In addition to the proposed rule itself, we provided a
significant amount of additional information in the ``Summary Analysis
Supporting Adjustment for Excess Laboratory Packaging,'' including a
description of our actuaries' details and methods for its analysis, the
adjustment input quantities, and outpatient monthly unrelated
laboratory test billing. We believe the detail included in the proposed
rule and in conjunction with the proposed rule was sufficient for
stakeholders to be able to understand CMS' methodology for determining
the amount of the proposed adjustment.
Comment: Several commenters suggested that CMS not implement this
adjustment because the CY 2014 data year was an inappropriate base year
for analysis of the laboratory packing proposal because of the changing
methodology for reporting ``unrelated'' laboratory services during CY
2014. Many of these commenters suggested that CMS should wait until CY
2015 data are available before making an adjustment.
Response: As noted in the proposed rule (80 FR 39239) and
illustrated in the ``Outpatient Unrelated Lab Billing Shift
Quantities'' chart in the ``Summary Analysis Supporting Adjustment for
Excess Laboratory Packaging'' files released in conjunction with the CY
2016 OPPS proposed rule, monthly total ``unrelated'' laboratory test
billing was very consistent throughout CY 2014, with most ``unrelated''
laboratory test billing shifting from the 14X claim to the 13X claim
with the ``L1'' modifier in July 2014. Because monthly total
``unrelated'' billing was consistent over the CY 2014 payment year, we
do not believe that the mid-year change in how providers were to bill
for ``unrelated'' laboratory services led to an increase in billing for
such services in CY 2014. We believe that the consistency in the CY
2014 ``unrelated'' billing patterns across different billing
instructions shows that the change in billing requirements for
reporting unrelated laboratory services in CY 2014 did not cause a
higher than expected amount of unrelated laboratory service payments in
CY 2014. We continue to believe that the CY 2014 data regarding
``unrelated'' billing are appropriate for purposes of determining
whether an adjustment to the conversion factor is warranted for CY 2016
and the amount of any adjustment. We will monitor ``unrelated''
laboratory test billing patterns in the CY 2015 OPPS claims data as we
establish ratesetting for the CY 2017 OPPS payments to confirm this
conclusion.
Comment: Several commenters suggested that CMS not implement this
adjustment because CMS did not specify

[[Page 70357]]

whether the proposed changes to laboratory test packaging policy in the
CY 2016 OPPS/ASC proposed rule were factored into the -2.0 percent
adjustment to the conversion factor to address excess packaged payment
for laboratory services.
Response: The proposed adjustment to the conversion factor for CY
2016 is based on the effects of the OPPS classification changes
implemented for CY 2014; the proposed adjustment is not based on the
proposed classification changes for CY 2016. We did not propose an
adjustment to the conversion factor based on classification changes for
CY 2016, but we will monitor the effects of those changes. At this
time, we do not believe that a separate adjustment to the conversion
factor based on CY 2016 classification changes is warranted. Our
analysis indicates that the estimated effect of the CY 2016
classification changes on shifts between aggregate payments for
laboratory tests paid separately using CLFS payment rates and those
packaged under the OPPS is small and that, if we did make an adjustment
to account for those changes, it would be a further reduction to OPPS
payments. We will examine CY 2015 claims data when we set CY 2017 OPPS
payment rates.
After consideration of the public comments we received, we are
finalizing our proposal to adjust the CY 2016 conversion factor by -2.0
percent to eliminate the effects of classification changes on aggregate
payments that do not reflect real changes in service-mix.
In summary, for CY 2016, we are finalizing our proposal to amend
Sec. 419.32(b)(1)(iv)(B) by adding a new paragraph (7) to reflect the
reductions to the OPD fee schedule increase factor that are required
for CY 2016 to satisfy the statutory requirements of sections
1833(t)(3)(F) and (t)(3)(G)(iv) of the Act. We are using a reduced
conversion factor of $72.251 in the calculation of payments for
hospitals that fail to meet the Hospital OQR Program requirements (a
difference of -$1.474 in the conversion factor relative to hospitals
that meet the requirements).
For CY 2016, we are continuing previously established policies for
implementing the cancer hospital payment adjustment described in
section 1833(t)(18) of the Act, as discussed in section II.F. of this
final rule with comment period.
As a result of these finalized policies, the OPD fee schedule
increase factor for the CY 2016 OPPS is 1.7 percent (which is 2.4
percent, the estimate of the hospital inpatient market basket
percentage increase, less the 0.5 percentage point MFP adjustment, and
less the 0.2 percentage point additional adjustment). For CY 2016, we
are using a conversion factor of $73.725 in the calculation of the
national unadjusted payment rates for those items and services for
which payment rates are calculated using geometric mean costs. That is,
the OPD fee schedule increase factor of 1.7 percent for CY 2016, the
required wage index budget neutrality adjustment of 0.9992, the cancer
hospital payment adjustment of 0.9994, the -2.0 percent adjustment to
the conversion factor to eliminate the effects of classification
changes that would otherwise result in an increase in aggregate OPPS
payments (due to excess packaged payment under the OPPS for laboratory
tests), and the adjustment of -0.13 percentage point of projected OPPS
spending for the difference in the pass-through spending result in a
conversion factor for CY 2016 of $73.725.

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust the portion of payment and
coinsurance attributable to labor-related costs for relative
differences in labor and labor-related costs across geographic regions
in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion
of the OPPS payment rate is called the OPPS labor-related share. Budget
neutrality is discussed in section II.B. of this final rule with
comment period.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that, for all hospitals, approximately 60 percent of
the costs of services paid under the OPPS were attributable to wage
costs. We confirmed that this labor-related share for outpatient
services is appropriate during our regression analysis for the payment
adjustment for rural hospitals in the CY 2006 OPPS final rule with
comment period (70 FR 68553). Therefore, in the CY 2016 OPPS/ASC
proposed rule, we proposed to continue this policy for the CY 2016
OPPS. We refer readers to section II.H. of this final rule with comment
period for a description and an example of how the wage index for a
particular hospital is used to determine payment for the hospital.
As discussed in section II.A.2.c. of this final rule with comment
period, for estimating APC costs, we standardize 60 percent of
estimated claims costs for geographic area wage variation using the
same FY 2016 pre-reclassified wage index that the IPPS uses to
standardize costs. This standardization process removes the effects of
differences in area wage levels from the determination of a national
unadjusted OPPS payment rate and copayment amount.
Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original
OPPS April 7, 2000 final rule with comment period (65 FR 18495 and
18545)), the OPPS adopted the final fiscal year IPPS post-reclassified
wage index as the calendar year wage index for adjusting the OPPS
standard payment amounts for labor market differences. Therefore, the
wage index that applies to a particular acute care short-stay hospital
under the IPPS also applies to that hospital under the OPPS. As
initially explained in the September 8, 1998 OPPS proposed rule (63 FR
47576), we 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.
The Affordable Care Act contained several provisions affecting the
wage index. These provisions were discussed in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74191). Section 10324 of the
Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act,
which defines a frontier State and amended section 1833(t) of the Act
to add new paragraph (19), which requires a frontier State wage index
floor of 1.00 in certain cases, and states that the frontier State
floor shall not be applied in a budget neutral manner. We codified
these requirements in Sec. 419.43(c)(2) and (c)(3) of our regulations.
For the CY 2016 OPPS, we proposed to implement this provision in the
same manner as we have since CY 2011. Under this policy, the frontier
State hospitals would receive a wage index of 1.00 if the otherwise
applicable wage index (including reclassification, rural and imputed
floor, and rural floor budget neutrality) is less than 1.00. Because
the HOPD receives a wage index based on the geographic location of the
specific inpatient hospital with which it is associated, the frontier
State wage index adjustment applicable for the inpatient hospital also
would apply for any associated HOPD. We refer readers to the following
sections in the FY 2011 through FY 2016 IPPS/LTCH PPS final rules for
discussions regarding this provision, including our methodology for
identifying which areas meet the definition of ``frontier States'' as
provided for in section 1886(d)(3)(E)(iii)(II) of the Act: for FY 2011,
75 FR 50160 through 50161; for

[[Page 70358]]

FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369
through 53370; for FY 2014, 78 FR 50590 through 50591; for FY 2015, 79
FR 49971; and for FY 2016, 80 FR 49498.
In addition to the changes required by the Affordable Care Act, we
note that the FY 2016 IPPS wage indexes continue to reflect a number of
adjustments implemented over the past few years, including, but not
limited to, reclassification of hospitals to different geographic
areas, the rural and imputed floor provisions, an adjustment for
occupational mix, and an adjustment to the wage index based on
commuting patterns of employees (the out-migration adjustment). We
refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488
through 49508) for a detailed discussion of all changes to the FY 2016
IPPS wage indexes. In addition, we refer readers to the CY 2005 OPPS
final rule with comment period (69 FR 65842 through 65844) and
subsequent OPPS rules for a detailed discussion of the history of these
wage index adjustments as applied under the OPPS.
As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951
through 49963) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488
through 49513), the Office of Management and Budget (OMB) issued
revisions to the labor market area delineations on February 28, 2013
(based on 2010 Decennial Census data), that included a number of
significant changes such as new Core Based Statistical Areas (CBSAs),
urban counties that became rural, rural counties that became urban, and
existing CBSAs that were split apart (OMB Bulletin 13-01). This
bulletin can be found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final
rule (79 FR 49950 through 49985), we adopted the use of the OMB labor
market area delineations that were based on the 2010 Decennial Census
data.
In the CY 2016 OPPS/ASC proposed rule, we proposed to use the FY
2016 hospital IPPS post-reclassified wage index for urban and rural
areas as the wage index for the OPPS to determine the wage adjustments
for both the OPPS payment rate and the copayment standardized amount
for CY 2016. Thus, any adjustments that were proposed for the FY 2016
IPPS post-reclassified wage index would be reflected in the proposed CY
2016 OPPS wage index. (We referred readers to the FY 2016 IPPS/LTCH PPS
proposed rule (80 FR 24463 through 24477) and the proposed FY 2016
hospital wage index files posted on the CMS Web site.)
Hospitals that are paid under the OPPS, but not under the IPPS, do
not have an assigned hospital wage index under the IPPS. Therefore, for
non-IPPS hospitals paid under the OPPS, it is our longstanding policy
to assign the wage index that would be applicable if the hospital were
paid under the IPPS, based on its geographic location and any
applicable wage index adjustments. We proposed to continue this policy
for CY 2016. The following is a brief summary of the major FY 2016 IPPS
wage index policies and adjustments that we proposed to apply to these
hospitals under the OPPS for CY 2016. We further refer readers to the
FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49508) for a
detailed discussion of the final changes to the FY 2016 IPPS wage
indexes.
It has been our longstanding policy to allow non-IPPS hospitals
paid under the OPPS to qualify for the out-migration adjustment if they
are located in a section 505 out-migration county (section 505 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA)). Applying this adjustment is consistent with our policy of
adopting IPPS wage index policies for hospitals paid under the OPPS. We
note that, because non-IPPS hospitals cannot reclassify, they would be
eligible for the out-migration wage adjustment if they are located in a
section 505 out-migration county. This is the same out-migration
adjustment policy that would apply if the hospital were paid under the
IPPS. For CY 2016, we proposed to continue our policy of allowing non-
IPPS hospitals paid under the OPPS to qualify for the out-migration
adjustment if they are located in a section 505 out-migration county
(section 505 of the MMA).
As stated earlier, in the FY 2015 IPPS/LTCH PPS final rule, we
adopted the OMB labor market area delineations issued by OMB in OMB
Bulletin No. 13-01 on February 28, 2013, based on standards published
on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data
to delineate labor market areas for purposes of the IPPS wage index.
For IPPS wage index purposes, for hospitals that were located in urban
CBSAs in FY 2014 but were designated as rural under these revised OMB
labor market area delineations, we generally assigned them the urban
wage index value of the CBSA in which they were physically located for
FY 2014 for a period of 3 fiscal years (79 FR 49957 through 49960). To
be consistent, we applied the same policy to hospitals paid under the
OPPS but not under the IPPS so that such hospitals will maintain the
wage index of the CBSA in which they were physically located for FY
2014 for 3 calendar years (until December 31, 2017). Thus, for the CY
2016 OPPS, consistent with the FY 2016 IPPS/LTCH PPS final rule (80 FR
49494 through 49496), this 3-year transition will continue for the
second year in CY 2016. For CY 2015, we also finalized a 1-year blended
wage index for all hospitals that experienced any decrease in their
actual payment wage index exclusively due to the implementation of the
new OMB delineations. In the CY 2015 OPPS/ASC final rule with comment
period, for purposes of the OPPS, we finalized a policy to apply this
1-year, 50-percent transition blend to hospitals paid under the OPPS
but not under the IPPS. Therefore, this one-year transition blend does
not apply for the CY 2016 OPPS wage index because it expires at the end
of CY 2015.
In addition, for the FY 2016 IPPS, we extended the imputed floor
policy (both the original methodology and alternative methodology) for
another year, through September 30, 2016 (80 FR 49497 through 49498).
For purposes of the CY 2016 OPPS, we also proposed to apply the imputed
floor policy to hospitals paid under the OPPS but not under the IPPS so
long as the IPPS continues an imputed floor policy.
For CMHCs, for CY 2016, we proposed to continue to calculate the
wage index by using the post-reclassification IPPS wage index based on
the CBSA where the CMHC is located. As with OPPS hospitals and for the
same reasons, in CY 2015, we applied a 1-year, 50/50 blended wage index
to CMHCs that would receive a lower wage index due to the new OMB labor
market area delineations. However, this blended wage index does not
apply in CY 2016 because it expires at the end of CY 2015. In addition,
as with OPPS hospitals and for the same reasons, for CMHCs previously
located in urban CBSAs that were designated as rural under the new OMB
labor market area delineations, we finalized a policy to maintain the
urban wage index value of the CBSA in which they were physically
located for CY 2014 for 3 calendar years (until December 31, 2017).
Consistent with our current policy, the wage index that applies to
CMHCs includes both the imputed floor adjustment and the rural floor
adjustment, but does not include the out-migration adjustment because
that adjustment only applies to hospitals.
Comment: One commenter noted that the IPPS wage index does not
account for the difficulty of recruiting health professionals to rural
areas. The

[[Page 70359]]

commenter suggested that a higher wage index for rural areas would help
these hospitals recruit professionals from other areas to underserved
rural areas.
Response: Section 1833(t)(2)(D) of the Act requires the Secretary
to determine a wage adjustment factor to adjust the portion of payment
and coinsurance attributable to labor-related costs for relative
differences in labor and labor-related costs across geographic regions
in a budget neutral manner. We continue to believe that using the IPPS
wage index as the source of the OPPS wage index is reasonable and
logical, given the inseparable, subordinate status of the HOPD within
the hospital. As we discussed in the FY 2015 IPPS/LTCH PPS final rule
(79 FR 49951), we believe that the IPPS wage index reflects the reality
of population shifts and labor market conditions, and provides an
accurate representation of geographic variation in wage levels.
After consideration of the public comment we received, we are
finalizing our proposal, without modification, to continue to use an
OPPS labor-related share of 60 percent of the national OPPS payment for
the CY 2016 OPPS. We also are finalizing the use of the final FY 2016
IPPS post-reclassified wage index for urban and rural areas in its
entirety, including the frontier State wage index floor, the rural
floor, geographic reclassifications, and all other applicable wage
index adjustments, as the final CY 2016 wage index for OPPS hospitals
and CMHCs based on where the facility is located for both the OPPS
payment rate and the copayment standardized amount, as discussed above
and as set forth in the CY 2016 OPPS/ASC proposed rule (80 FR 39240
through 39242). We refer readers to the FY 2016 IPPS/LTCH PPS final
rule (80 FR 49488 through 49508) and the final FY 2016 hospital wage
index files posted on the CMS Web site. For non-IPPS hospitals under
the OPPS, we are finalizing our proposal to continue to assign the wage
index that would be applicable if the hospital were paid under the
IPPS, based on its geographic location and any applicable wage index
adjustments. We also are finalizing our proposal to apply the imputed
floor policy to hospitals paid under the OPPS but not under the IPPS so
long as the IPPS continues an imputed floor policy, which CMS has
extended for an additional year under the IPPS in the FY 2016 IPPS/LTCH
PPS final rule. In addition, we are finalizing our proposal to continue
our policy of allowing non-IPPS hospitals paid under the OPPS to
qualify for the out-migration adjustment if they are located in a
section 505 out-migration county (section 505 of the MMA). The new
Table 2 from the FY 2016 IPPS/LTCH PPS final rule (available via the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies
counties eligible for the out-migration adjustment and IPPS hospitals
that will receive the adjustment for FY 2016. (We note that the new FY
2016 IPPS Table 2 consolidates information on counties eligible for the
out-migration adjustment that was previously issued as Table 4J.) We
are including the out-migration adjustment information from the new
consolidated Table 2 from the FY 2016 IPPS/LTCH PPS final rule as
Addendum L to this final rule with comment period with the addition of
non-IPPS hospitals that will receive the section 505 out-migration
adjustment under the CY 2016 OPPS. Addendum L is available via the
Internet on the CMS Web site. With the exception of the out-migration
wage adjustment table (Addendum L to this final rule with comment
period, which is available via the Internet on the CMS Web site), which
includes non-IPPS hospitals paid under the OPPS, we are not reprinting
the final FY 2016 IPPS wage indexes referenced in this discussion of
the wage index. We refer readers to the CMS Web site for the OPPS at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a
link to the final FY 2016 IPPS wage index tables and Addendum L.

D. Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, CMS uses overall hospital-specific CCRs calculated
from the hospital's most recent cost report to determine outlier
payments, payments for pass-through devices, and monthly interim
transitional corridor payments under the OPPS during the PPS year. MACs
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 MAC 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, hospitals that have not
accepted assignment of an existing hospital's provider agreement, and
hospitals that have not yet submitted a cost report. CMS also uses the
statewide average default CCRs to determine payments for hospitals that
appear to have a biased CCR (that is, the CCR falls outside the
predetermined ceiling threshold for a valid CCR) or for hospitals in
which the most recent cost report reflects an all-inclusive rate status
(Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section
10.11). In this final rule with comment period, as we proposed, we are
updating the default ratios for CY 2016 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.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39242), for CY 2016,
we proposed to continue to use our standard methodology of calculating
the statewide average default CCRs using the same hospital overall CCRs
that we use to adjust charges to costs on claims data for setting the
proposed CY 2016 OPPS relative payment weights. Table 11 published in
the proposed rule (80 FR 39243) listed the proposed CY 2016 default
urban and rural CCRs by State and compared them to the CY 2015 default
CCRs. These proposed CCRs represented the ratio of total costs to total
charges for those cost centers relevant to outpatient services from
each hospital's most recently submitted cost report, weighted by
Medicare Part B charges. We also proposed to adjust ratios from
submitted cost reports to reflect the final settled status by applying
the differential between settled to submitted overall CCRs for the cost
centers relevant to outpatient services from the most recent pair of
final settled and submitted cost reports. We then proposed to weight
each hospital's CCR by the volume of separately paid line-items on
hospital claims corresponding to the year of the majority of cost
reports used to calculate the overall CCRs. We refer readers to the CY
2008 OPPS/ASC final rule with comment period (72 FR 66680 through
66682) and prior OPPS rules for a more detailed discussion of our
established methodology for calculating the statewide average default
CCRs, including the hospitals used in our calculations and our trimming
criteria.
For Maryland, we used an overall weighted average CCR for all
hospitals in the Nation as a substitute for Maryland CCRs. Few
hospitals in Maryland are eligible to receive payment under the OPPS,
which limits the data available to calculate an accurate and
representative CCR. The weighted CCR is used for Maryland because it
takes into account each

[[Page 70360]]

hospital's volume, rather than treating each hospital equally. We refer
readers to the CY 2005 OPPS final rule with comment period (69 FR
65822) for further discussion and the rationale for our longstanding
policy of using the national average CCR for Maryland. In general,
observed changes in the statewide average default CCRs between CY 2015
and CY 2016 are modest and the few significant changes are associated
with areas that have a small number of hospitals.
We did not receive any public comments on our CY 2016 proposal.
Therefore, we are finalizing our proposal, without modification, to
apply our standard methodology of calculating the statewide average
default CCRs using the same hospital overall CCRs that we used to
adjust charges to costs on claims data for setting the final CY 2016
OPPS relative payment weights.
Table 14 below lists the statewide average default CCRs for OPPS
services furnished on or after January 1, 2016.

TABLE 14--CY 2016 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
Previous default
State Urban/rural CY 2016 CCR (CY 2015 OPPS
default CCR final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA...................................... RURAL......................... 0.588 0.439
ALASKA...................................... URBAN......................... 0.269 0.294
ALABAMA..................................... RURAL......................... 0.224 0.235
ALABAMA..................................... URBAN......................... 0.168 0.186
ARKANSAS.................................... RURAL......................... 0.223 0.262
ARKANSAS.................................... URBAN......................... 0.218 0.239
ARIZONA..................................... RURAL......................... 0.246 0.228
ARIZONA..................................... URBAN......................... 0.170 0.181
CALIFORNIA.................................. RURAL......................... 0.179 0.178
CALIFORNIA.................................. URBAN......................... 0.190 0.196
COLORADO.................................... RURAL......................... 0.366 0.410
COLORADO.................................... URBAN......................... 0.208 0.219
CONNECTICUT................................. RURAL......................... 0.366 0.339
CONNECTICUT................................. URBAN......................... 0.257 0.273
DISTRICT OF COLUMBIA........................ URBAN......................... 0.298 0.299
DELAWARE.................................... URBAN......................... 0.308 0.314
FLORIDA..................................... RURAL......................... 0.170 0.180
FLORIDA..................................... URBAN......................... 0.150 0.156
GEORGIA..................................... RURAL......................... 0.251 0.256
GEORGIA..................................... URBAN......................... 0.199 0.211
HAWAII...................................... RURAL......................... 0.339 0.337
HAWAII...................................... URBAN......................... 0.313 0.307
IOWA........................................ RURAL......................... 0.305 0.321
IOWA........................................ URBAN......................... 0.256 0.269
IDAHO....................................... RURAL......................... 0.337 0.353
IDAHO....................................... URBAN......................... 0.459 0.463
ILLINOIS.................................... RURAL......................... 0.234 0.252
ILLINOIS.................................... URBAN......................... 0.208 0.217
INDIANA..................................... RURAL......................... 0.314 0.334
INDIANA..................................... URBAN......................... 0.237 0.262
KANSAS...................................... RURAL......................... 0.287 0.300
KANSAS...................................... URBAN......................... 0.209 0.231
KENTUCKY.................................... RURAL......................... 0.202 0.231
KENTUCKY.................................... URBAN......................... 0.203 0.212
LOUISIANA................................... RURAL......................... 0.256 0.272
LOUISIANA................................... URBAN......................... 0.202 0.209
MASSACHUSETTS............................... RURAL......................... 0.324 0.326
MASSACHUSETTS............................... URBAN......................... 0.330 0.333
MAINE....................................... RURAL......................... 0.470 0.430
MAINE....................................... URBAN......................... 0.395 0.432
MARYLAND.................................... RURAL......................... 0.277 0.296
MARYLAND.................................... URBAN......................... 0.234 0.244
MICHIGAN.................................... RURAL......................... 0.317 0.371
MICHIGAN.................................... URBAN......................... 0.319 0.320
MINNESOTA................................... RURAL......................... 0.449 0.485
MINNESOTA................................... URBAN......................... 0.377 0.347
MISSOURI.................................... RURAL......................... 0.238 0.267
MISSOURI.................................... URBAN......................... 0.253 0.274
MISSISSIPPI................................. RURAL......................... 0.235 0.247
MISSISSIPPI................................. URBAN......................... 0.169 0.181
MONTANA..................................... RURAL......................... 0.480 0.501
MONTANA..................................... URBAN......................... 0.403 0.386
NORTH CAROLINA.............................. RURAL......................... 0.229 0.280
NORTH CAROLINA.............................. URBAN......................... 0.235 0.246
NORTH DAKOTA................................ RURAL......................... 0.443 0.660
NORTH DAKOTA................................ URBAN......................... 0.355 0.395
NEBRASKA.................................... RURAL......................... 0.283 0.290
NEBRASKA.................................... URBAN......................... 0.238 0.255
NEW HAMPSHIRE............................... RURAL......................... 0.306 0.362
NEW HAMPSHIRE............................... URBAN......................... 0.306 0.280

[[Page 70361]]

NEW JERSEY.................................. URBAN......................... 0.194 0.202
NEW MEXICO.................................. RURAL......................... 0.280 0.296
NEW MEXICO.................................. URBAN......................... 0.290 0.294
NEVADA...................................... RURAL......................... 0.219 0.241
NEVADA...................................... URBAN......................... 0.146 0.149
NEW YORK.................................... RURAL......................... 0.311 0.333
NEW YORK.................................... URBAN......................... 0.298 0.340
OHIO........................................ RURAL......................... 0.295 0.317
OHIO........................................ URBAN......................... 0.212 0.222
OKLAHOMA.................................... RURAL......................... 0.255 0.282
OKLAHOMA.................................... URBAN......................... 0.192 0.203
OREGON...................................... RURAL......................... 0.265 0.287
OREGON...................................... URBAN......................... 0.341 0.352
PENNSYLVANIA................................ RURAL......................... 0.277 0.283
PENNSYLVANIA................................ URBAN......................... 0.195 0.197
PUERTO RICO................................. URBAN......................... 0.590 0.577
RHODE ISLAND................................ URBAN......................... 0.290 0.297
SOUTH CAROLINA.............................. RURAL......................... 0.188 0.191
SOUTH CAROLINA.............................. URBAN......................... 0.197 0.207
SOUTH DAKOTA................................ RURAL......................... 0.367 0.286
SOUTH DAKOTA................................ URBAN......................... 0.224 0.214
TENNESSEE................................... RURAL......................... 0.198 0.203
TENNESSEE................................... URBAN......................... 0.177 0.188
TEXAS....................................... RURAL......................... 0.238 0.251
TEXAS....................................... URBAN......................... 0.179 0.203
UTAH........................................ RURAL......................... 0.493 0.481
UTAH........................................ URBAN......................... 0.325 0.335
VIRGINIA.................................... RURAL......................... 0.195 0.219
VIRGINIA.................................... URBAN......................... 0.233 0.241
VERMONT..................................... RURAL......................... 0.434 0.439
VERMONT..................................... URBAN......................... 0.336 0.353
WASHINGTON.................................. RURAL......................... 0.349 0.300
WASHINGTON.................................. URBAN......................... 0.308 0.330
WISCONSIN................................... RURAL......................... 0.317 0.328
WISCONSIN................................... URBAN......................... 0.296 0.294
WEST VIRGINIA............................... RURAL......................... 0.276 0.312
WEST VIRGINIA............................... URBAN......................... 0.294 0.300
WYOMING..................................... RURAL......................... 0.433 0.429
WYOMING..................................... URBAN......................... 0.311 0.262
----------------------------------------------------------------------------------------------------------------

E. Adjustment for Rural SCHs and EACHs Under Section 1833(t)(13)(B) of
the Act

In the CY 2006 OPPS final rule with comment period (70 FR 68556),
we finalized a payment increase for rural SCHs of 7.1 percent for all
services and procedures paid under the OPPS, excluding drugs,
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the
Act, as added by section 411 of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173).
Section 1833(t)(13) of the Act provided the Secretary the authority to
make an adjustment to OPPS payments for rural hospitals, effective
January 1, 2006, if justified by a study of the difference in costs by
APC between hospitals in rural areas and hospitals in urban areas. Our
analysis showed a difference in costs for rural SCHs. Therefore, for
the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of
7.1 percent for all services and procedures paid under the OPPS,
excluding separately payable drugs and biologicals, brachytherapy
sources, and devices paid under the pass-through payment policy, in
accordance with section 1833(t)(13)(B) of the Act.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010
and 68227), for purposes of receiving this rural adjustment, we revised
Sec. 419.43(g) of the regulations to clarify that EACHs also are
eligible to receive the rural SCH adjustment, assuming these entities
otherwise meet the rural adjustment criteria. Currently, two hospitals
are classified as EACHs, and as of CY 1998, under section 4201(c) of
Pub. L. 105-33, a hospital can no longer become newly classified as an
EACH.
This adjustment for rural SCHs is budget neutral and applied before
calculating outlier payments and copayments. We stated in the CY 2006
OPPS final rule with comment period (70 FR 68560) that we would not
reestablish the adjustment amount on an annual basis, but we may review
the adjustment in the future and, if appropriate, would revise the
adjustment. We provided the same 7.1 percent adjustment to rural SCHs,
including EACHs, again in CYs 2008 through 2015. Further, in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated
the regulations at Sec. 419.43(g)(4) to specify, in general terms,
that items paid at charges adjusted to costs by application of a
hospital-specific CCR are excluded from the 7.1 percent payment
adjustment.
For the CY 2016 OPPS, we proposed to continue our policy of a 7.1
percent payment adjustment that is done in a budget neutral manner for
rural SCHs, including EACHs, for all services and procedures paid under
the OPPS,

[[Page 70362]]

excluding separately payable drugs and biologicals, devices paid under
the pass-through payment policy, and items paid at charges reduced to
costs (80 FR 39244).
Comment: Several commenters supported the proposed policy of a 7.1
percent payment adjustment.
Response: We appreciate the commenters' support.
Comment: A few commenters suggested that CMS perform a new analysis
to determine if a different rural adjustment amount is warranted. The
commenters noted that they performed their own analysis which suggested
that a higher adjustment was warranted for SCHs and that an adjustment
was warranted for small rural hospitals that were not SCHs. One
commenter suggested that CMS revisit its original analysis because an
adjustment for rural SCHs may no longer be warranted.
Response: We plan to review whether a revised analysis is warranted
for future rulemaking.
After consideration of the public comments we received, we are
finalizing our proposal for CY 2016 to continue our policy of a 7.1
percent payment adjustment that is done in a budget neutral manner 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.

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

1. Background
Since the inception of the OPPS, which was authorized by the
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid
the 11 hospitals that meet the criteria for cancer hospitals identified
in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered
outpatient hospital services. These cancer hospitals are exempted from
payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced
Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established
section 1833(t)(7) of the Act, ``Transitional Adjustment to Limit
Decline in Payment,'' to determine OPPS payments to cancer and
children's hospitals based on their pre-BBA payment amount (often
referred to as ``held harmless'').
As required under section 1833(t)(7)(D)(ii) of the Act, a cancer
hospital receives the full amount of the difference between payments
for covered outpatient services under the OPPS and a ``pre-BBA
amount.'' That is, cancer hospitals are permanently held harmless to
their ``pre-BBA amount,'' and they receive transitional outpatient
payments (TOPs) or hold harmless payments to ensure that they do not
receive a payment that is lower in amount under the OPPS than the
payment amount they would have received before implementation of the
OPPS, as set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA
amount'' is the product of the hospital's reasonable costs for covered
outpatient services occurring in the current year and the base payment-
to-cost ratio (PCR) for the hospital defined in section
1833(t)(7)(F)(ii) of the Act. The ``pre-BBA amount'' and the
determination of the base PCR are defined at 42 CFR 419.70(f). TOPs are
calculated on Worksheet E, Part B, of the Hospital Cost Report or the
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, respectively) as applicable each year. Section 1833(t)(7)(I)
of the Act exempts TOPs from budget neutrality calculations.
Section 3138 of the Affordable Care Act amended section 1833(t) of
the Act by adding a new paragraph (18), which instructs the Secretary
to conduct a study to determine if, under the OPPS, outpatient costs
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of
the Act with respect to APC groups exceed outpatient costs incurred by
other hospitals furnishing services under section 1833(t) of the Act,
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of
the Act requires the Secretary to take into consideration the cost of
drugs and biologicals incurred by cancer hospitals and other hospitals.
Section 1833(t)(18)(B) of the Act provides that, if the Secretary
determines that cancer hospitals' costs are greater than other
hospitals' costs, the Secretary shall provide an appropriate adjustment
under section 1833(t)(2)(E) of the Act to reflect these higher costs.
In 2011, after conducting the study required by section 1833(t)(18)(A)
of the Act, we determined that outpatient costs incurred by the 11
specified cancer hospitals were greater than the costs incurred by
other OPPS hospitals. For a complete discussion regarding the cancer
hospital cost study, we refer readers to the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74200 through 74201).
Based on these findings, we finalized a policy to provide a payment
adjustment to the 11 specified cancer hospitals that reflects their
higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74202 through 74206). Specifically, we
adopted a policy to provide additional payments to the cancer hospitals
so that each cancer hospital's final PCR for services provided in a
given calendar year is equal to the weighted average PCR (which we
refer to as the ``target PCR'') for other hospitals paid under the
OPPS. The target PCR is set in advance of the calendar year and is
calculated using the most recent submitted or settled cost report data
that are available at the time of final rulemaking for the calendar
year. The amount of the payment adjustment is made on an aggregate
basis at cost report settlement. We note that the changes made by
section 1833(t)(18) of the Act do not affect the existing statutory
provisions that provide for TOPs for cancer hospitals. The TOPs are
assessed as usual after all payments, including the cancer hospital
payment adjustment, have been made for a cost reporting period. For CYs
2012 and 2013, the target PCR for purposes of the cancer hospital
payment adjustment was 0.91. For CY 2014, the target PCR for purposes
of the cancer hospital payment adjustment was 0.89. For CY 2015, the
target PCR was 0.90, as discussed in the CY 2015 OPPS/ASC final rule
with comment period correction notice (80 FR 9629).
2. Payment Adjustment for Certain Cancer Hospitals for CY 2016
For CY 2016, we proposed to continue our policy to provide
additional payments to the 11 specified cancer hospitals so that each
cancer hospital's final PCR is equal to the weighted average PCR (or
``target PCR'') for the other OPPS hospitals using the most recent
submitted or settled cost report data that were available at the time
of the development of the CY 2016 OPPS/ASC proposed rule (80 FR 39245).
To calculate the proposed CY 2016 target PCR, we used the same extract
of cost report data from HCRIS, as discussed in section II.A. of the
proposed rule, used to estimate costs for the CY 2016 OPPS. Using these
cost report data, we included data from Worksheet E, Part B, for each
hospital, using data from each hospital's most recent cost report,
whether as submitted or settled.
We then limited the dataset to the hospitals with CY 2014 claims
data that we used to model the impact of the proposed CY 2016 APC
relative payment weights (3,794 hospitals) because it is appropriate to
use the same set of hospitals that we are using to calibrate the
modeled CY 2016 OPPS. The cost report data for the hospitals in this
dataset were from cost report periods with fiscal year ends ranging

[[Page 70363]]

from 2013 to 2014. We then removed the cost report data of the 47
hospitals located in Puerto Rico from our dataset because we do not
believe that their cost structure reflects the costs of most hospitals
paid under the OPPS and, therefore, their inclusion may bias the
calculation of hospital-weighted statistics. We also removed the cost
report data of 18 hospitals because these hospitals had cost report
data that were not complete (missing aggregate OPPS payments, missing
aggregate cost data, or missing both), so that all cost reports in the
study would have both the payment and cost data necessary to calculate
a PCR for each hospital, leading to a proposed analytic file of 3,729
hospitals with cost report data.
Using this smaller dataset of cost report data, we estimated that,
on average, the OPPS payments to other hospitals furnishing services
under the OPPS are approximately 90 percent of reasonable cost
(weighted average PCR of 0.90). Therefore, we proposed that the payment
amount associated with the cancer hospital payment adjustment to be
determined at cost report settlement would be the additional payment
needed to result in a PCR equal to 0.90 for each cancer hospital. Table
12 published in the proposed rule indicated the proposed estimated
percentage increase in OPPS payments to each cancer hospital for CY
2016 due to the cancer hospital payment adjustment policy.
We indicated that the actual amount of the CY 2016 cancer hospital
payment adjustment for each cancer hospital will be determined at cost
report settlement and will depend on each hospital's CY 2016 payments
and costs. We noted that the requirements contained in section
1833(t)(18) of the Act do not affect the existing statutory provisions
that provide for TOPs for cancer hospitals. The TOPs will be assessed
as usual after all payments, including the cancer hospital payment
adjustment, have been made for a cost reporting period.
Comment: Several commenters supported the proposed cancer hospital
payment adjustment for CY 2016.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing the proposed methodology for calculating the cancer hospital
payment adjustment for CY 2016. For this final rule with comment
period, we are using the most recent cost report data through September
30, 2015 to update the adjustment. This update yields a target PCR of
0.92. We limited the dataset to the hospitals with CY 2014 claims data
that we used to model the impact of the CY 2016 APC relative payment
weights (3,781 hospitals) because it is appropriate to use the same set
of hospitals that we are using to calibrate the modeled CY 2016 OPPS.
The cost report data for the hospitals in this dataset were from cost
report periods with fiscal year ends ranging from 2012 to 2015. We then
removed the cost report data of the 49 hospitals located in Puerto Rico
from our dataset because we do not believe that their cost structure
reflects the costs of most hospitals paid under the OPPS and,
therefore, their inclusion may bias the calculation of hospital-
weighted statistics. We also removed the cost report data of 11
hospitals because these hospitals had cost report data that were not
complete (missing aggregate OPPS payments, missing aggregate cost data,
or missing both), so that all cost reports in the study would have both
the payment and cost data necessary to calculate a PCR for each
hospital, leading to a proposed analytic file of 3,721 hospitals with
cost report data.
Using this smaller dataset of cost report data, we estimated that,
on average, the OPPS payments to other hospitals furnishing services
under the OPPS are approximately 92 percent of reasonable cost
(weighted average PCR of 0.92). Therefore, we are finalizing that the
payment amount associated with the cancer hospital payment adjustment
to be determined at cost report settlement would be the additional
payment needed to result in a PCR equal to 0.92 for each cancer
hospital.
Table 15 below indicates estimates in percentage terms of the CY
2016 payment adjustment for each cancer hospital. The actual amount of
the CY 2016 cancer hospital payment adjustment for each cancer hospital
will be determined at cost report settlement and will depend on each
hospital's CY 2016 payments and costs.

TABLE 15--Estimated CY 2016 Hospital-Specific Payment Adjustment for
Cancer Hospitals to be Provided at Cost Report Settlement
------------------------------------------------------------------------
Estimated percentage
Provider No. Hospital name increase in OPPS
payments for CY 2016
------------------------------------------------------------------------
050146..................... City of Hope 21.6
Comprehensive
Cancer Center.
050660..................... USC Norris Cancer 21.9
Hospital.
100079..................... Sylvester 25.1
Comprehensive
Cancer Center.
100271..................... H. Lee Moffitt 27.3
Cancer Center &
Research
Institute.
220162..................... Dana-Farber Cancer 51.1
Institute.
330154..................... Memorial Sloan- 46.9
Kettering Cancer
Center.
330354..................... Roswell Park 31.4
Cancer Institute.
360242..................... James Cancer 35.4
Hospital & Solove
Research
Institute.
390196..................... Fox Chase Cancer 23.7
Center.
450076..................... M.D. Anderson 50.9
Cancer Center.
500138..................... Seattle Cancer 57.3
Care Alliance.
------------------------------------------------------------------------

G. Hospital Outpatient Outlier Payments

1. Background
The OPPS provides outlier payments to hospitals to help mitigate
the financial risk associated with high-cost and complex procedures,
where a very costly service could present a hospital with significant
financial loss. As explained in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66832 through 66834), we set our projected target
for aggregate outlier payments at 1.0 percent of the estimated
aggregate total payments under the OPPS for the prospective year.
Outlier payments are provided on a service-by-service basis when the
cost of a service exceeds the APC payment amount multiplier threshold
(the APC payment amount multiplied by a certain amount) as well as the
APC payment amount plus a fixed-dollar amount threshold (the APC
payment plus a certain amount of dollars). In CY 2015, the outlier
threshold was met when the hospital's

[[Page 70364]]

cost of furnishing a service exceeded 1.75 times (the multiplier
threshold) the APC payment amount and exceeded the APC payment amount
plus $2,775 (the fixed-dollar amount threshold) (79 FR 66834). If the
cost of a service exceeds both the multiplier 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 amount. Beginning with CY 2009 payments, outlier
payments are subject to a reconciliation process similar to the IPPS
outlier reconciliation process for cost reports, as discussed in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68594 through
68599).
It has been our policy to report the actual amount of outlier
payments as a percent of total spending in the claims being used to
model the proposed OPPS. Our estimate of total outlier payments as a
percent of total CY 2014 OPPS payment, using CY 2014 claims available
for this final rule with comment period and the revised OPPS
expenditure estimate for the FY 2016 President's Budget Mid-Session
Review, is approximately 0.9 percent of the total aggregated OPPS
payments. Therefore, for CY 2014, we estimate that we paid 0.1
percentage points below the CY 2014 outlier target of 1.0 percent of
total aggregated OPPS payments.
Using CY 2014 claims data and CY 2015 payment rates, we currently
estimate that the aggregate outlier payments for CY 2015 will be
approximately 0.9 percent of the total CY 2015 OPPS payments. The
difference between 0.9 percent and the 1.0 percent target is reflected
in the regulatory impact analysis in section XXI. of this final rule
with comment period. We provide estimated CY 2016 outlier payments for
hospitals and CMHCs with claims included in the claims data that we
used to model impacts in the Hospital-Specific Impacts--Provider-
Specific Data file on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Outlier Calculation
In the CY 2016 OPPS/ASC proposed rule (80 FR 39246), we proposed to
continue our policy of estimating outlier payments to be 1.0 percent of
the estimated aggregate total payments under the OPPS. We proposed that
a portion of that 1.0 percent, an amount equal to 0.49 percent of
outlier payments (or 0.0049 percent of total OPPS payments) would be
allocated to CMHCs for PHP outlier payments. This is the amount of
estimated outlier payments that would result from the proposed CMHC
outlier threshold as a proportion of total estimated OPPS outlier
payments. As discussed in section VIII.D. of the proposed rule and this
final rule with comment period, we proposed to continue our
longstanding policy that if a CMHC's cost for partial hospitalization
services, paid under either proposed renumbered APC 5851 (Level 1
Partial Hospitalization (3 services) for CMHCs) (existing APC 0172) or
proposed renumbered APC 5852 (Level 2 Partial Hospitalization (4 or
more services) for CMHCs) (existing APC 0173), exceeds 3.40 times the
payment rate for proposed renumbered APC 5852, the outlier payment
would be calculated as 50 percent of the amount by which the cost
exceeds 3.40 times the proposed renumbered APC 5852 payment rate. For
further discussion of CMHC outlier payments, we refer readers to
section VIII.D. of the proposed rule and this final rule with comment
period.
To ensure that the estimated CY 2016 aggregate outlier payments
would equal 1.0 percent of estimated aggregate total payments under the
OPPS, we proposed that the hospital outlier threshold be set so that
outlier payments would be triggered when a hospital's cost of
furnishing a service exceeds 1.75 times the APC payment amount and
exceeds the APC payment amount plus $3,650.
We calculated the proposed fixed-dollar threshold of $3,650 using
the standard methodology most recently used for CY 2015 (79 FR 66833
through 66834). For purposes of estimating outlier payments for the
proposed rule, we used the hospital-specific overall ancillary CCRs
available in the April 2015 update to the Outpatient Provider-Specific
File (OPSF). The OPSF contains provider-specific data, such as the most
current CCRs, which are maintained by the MACs and used by the OPPS
Pricer to pay claims. The claims that we use to model each OPPS update
lag by 2 years.
In order to estimate the CY 2016 hospital outlier payments for the
proposed rule, we inflated the charges on the CY 2014 claims using the
same inflation factor of 1.0985 that we used to estimate the IPPS
fixed-dollar outlier threshold for the FY 2016 IPPS/LTCH PPS proposed
rule (80 FR 24632 through 24633). We used an inflation factor of 1.0481
to estimate CY 2015 charges from the CY 2014 charges reported on CY
2014 claims. The methodology for determining this charge inflation
factor is discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR
24632). As we stated in the CY 2005 OPPS final rule with comment period
(69 FR 65845), we believe that the use of these charge inflation
factors are appropriate for the OPPS because, with the exception of the
inpatient routine service cost centers, hospitals use the same
ancillary and outpatient cost centers to capture costs and charges for
inpatient and outpatient services.
As noted in the CY 2007 OPPS/ASC final rule with comment period (71
FR 68011), we are concerned that we could systematically overestimate
the OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, we proposed to apply the same CCR
inflation adjustment factor that we proposed to apply for the FY 2016
IPPS outlier calculation to the CCRs used to simulate the proposed CY
2016 OPPS outlier payments to determine the fixed-dollar threshold.
Specifically, for CY 2016, we proposed to apply an adjustment factor of
0.9795 to the CCRs that were in the April 2015 OPSF to trend them
forward from CY 2015 to CY 2016. The methodology for calculating this
proposed adjustment is discussed in the FY 2016 IPPS/LTCH PPS proposed
rule (80 FR 24633) and finalized in the FY 2016 IPPS/LTCH PPS final
rule (80 FR 49784).
To model hospital outlier payments for the proposed rule, we
applied the overall CCRs from the April 2015 OPSF after adjustment
(using the proposed CCR inflation adjustment factor of 0.9795 to
approximate CY 2016 CCRs) to charges on CY 2014 claims that were
adjusted (using the proposed charge inflation factor of 1.0985 to
approximate CY 2016 charges). We simulated aggregated CY 2016 hospital
outlier payments using these costs for several different fixed-dollar
thresholds, holding the 1.75 multiple threshold constant and assuming
that outlier payments would continue to be made at 50 percent of the
amount by which the cost of furnishing the service would exceed 1.75
times the APC payment amount, until the total outlier payments equaled
1.0 percent of aggregated estimated total CY 2016 OPPS payments. We
estimated that a proposed fixed-dollar threshold of $3,650, 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. For CMHCs, we proposed that, if a CMHC's cost for
partial hospitalization services, paid under either proposed renumbered
APC 5851 (existing APC 0172) or proposed renumbered APC 5852 (existing
APC 0173), exceeds 3.40 times the payment rate for proposed

[[Page 70365]]

renumbered 5852, the outlier payment would be calculated as 50 percent
of the amount by which the cost exceeds 3.40 times the proposed
renumbered APC 5852 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
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. The application of a reduced OPD fee
schedule increase factor results in reduced national unadjusted payment
rates that will apply to certain outpatient items and services
furnished by hospitals that are required to report outpatient quality
data and that fail to meet the Hospital OQR Program requirements. For
hospitals that fail to meet the Hospital OQR Program requirements, we
proposed to continue the policy that we implemented in CY 2010 that the
hospitals' costs will be compared to the reduced payments for purposes
of outlier eligibility and payment calculation. For more information on
the Hospital OQR Program, we refer readers to section XIII. of this
final rule with comment period.
Comment: A few commenters suggested that the proposed outlier fixed
dollar threshold of $3,650 was too high for CMS to pay the target
aggregate outlier payment amount of 1.0 percent of the estimated
aggregate total payments under the OPPS for the prospective year. The
commenters noted that 2014 and 2015 estimated outlier payments were
below 1.0 percent, despite a lower fixed-dollar threshold.
Response: As indicated earlier, we introduced a fixed-dollar
threshold in order to better target outlier payments to those high-cost
and complex procedures where a very costly service could present a
hospital with significant financial loss. We maintain the target
outlier percentage of 1.0 percent of estimated aggregate total payment
under the OPPS and have a fixed-dollar threshold so that OPPS outlier
payments are made only when the hospital would experience a significant
loss for supplying a particular service. While the commenters expressed
concern based on the assumption that OPPS outlier payments would
decrease under an increased fixed-dollar threshold, we note that the
threshold may increase or decrease from year to year, to maintain the
1.0 percent outlier spending target. The methodology we use to
calculate the fixed-dollar threshold for the prospective payment year
factors is based on several data inputs that may change from prior
payment years. For instance, updated hospital CCR data and changes to
the OPPS payment methodology influence projected outlier payments in
the prospective year. For this final rule with comment period, we used
the same methodology for calculating the outlier fixed-dollar threshold
that we used for the proposed rule but used updated data. However,
these updated data inputs for this final rule with comment period do
yield a lower threshold than for the proposed rule.
3. Final Outlier Calculation
Consistent with historical practice, we used updated data for this
final rule with comment period for outlier calculations. For CY 2016,
we are applying the overall CCRs from the July 2015 OPSF file after
adjustment (using the CCR inflation adjustment factor of 0.9701 to
approximate CY 2016 CCRs) to charges on CY 2014 claims that were
adjusted (using the charge inflation factor of 1.0766 to approximate CY
2016 charges). These are the same CCR adjustment and charge inflation
factors that were used to set the IPPS fixed-dollar thresholds for the
FY 2016 IPPS/LTCH PPS final rule (80 FR 49784). We simulated aggregated
CY 2016 hospital outlier payments using these costs for several
different fixed-dollar thresholds, holding the 1.75 multiple threshold
constant and assuming that outlier payments will 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 2016 OPPS
payments. We estimated that a fixed-dollar threshold of $3,250,
combined with the multiple threshold of 1.75 times the APC payment
rate, will allocate 1.0 percent of aggregated total OPPS payments to
outlier payments. For CMHCs, if a CMHC's cost for partial
hospitalization services, paid under either renumbered APC 5851
(existing APC 0172) or renumbered APC 5852 (existing APC 0173), exceeds
3.40 times the payment rate for renumbered APC 5852, the outlier
payment will be calculated as 50 percent of the amount by which the
cost exceeds 3.40 times the renumbered APC 5852 payment rate.

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

The basic methodology for determining prospective payment rates for
HOPD services under the OPPS is set forth in existing regulations at 42
CFR part 419, subparts C and D. For this CY 2016 OPPS/ASC final rule
with comment period, 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
final rule with comment period and the relative payment weight
determined under section II.A. of this final rule with comment period.
Therefore, the national unadjusted payment rate for most APCs contained
in Addendum A to this final rule with comment period (which is
available via the Internet on the CMS Web site) and for most HCPCS
codes to which separate payment under the OPPS has been assigned in
Addendum B to this final rule with comment period (which is available
via the Internet on the CMS Web site) was calculated by multiplying the
CY 2016 scaled weight for the APC by the CY 2016 conversion factor.
We note that section 1833(t)(17) of the Act, which applies to
hospitals as defined under section 1886(d)(1)(B) of the Act, requires
that hospitals that fail to submit data required to be submitted on
quality measures selected by the Secretary, in the form and manner and
at a time specified by the Secretary, incur a reduction of 2.0
percentage points to their OPD fee schedule increase factor, that is,
the annual payment update factor. The application of a reduced OPD fee
schedule increase factor results in reduced national unadjusted payment
rates that apply to certain outpatient items and services provided by
hospitals that are required to report outpatient quality data and that
fail to meet the Hospital OQR Program (formerly referred to as the
Hospital Outpatient Quality Data Reporting Program (HOP QDRP))
requirements. For further discussion of the payment reduction for
hospitals that fail to meet the requirements of the Hospital OQR
Program, we refer readers to section XIII. of this final rule with
comment period.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39247 through 39249),
we demonstrated the steps on how to determine the APC payments that
will be made in a calendar year under the OPPS to a hospital that
fulfills the Hospital OQR Program requirements and to a hospital that
fails to meet the Hospital OQR Program requirements for a service that
has any of the following status indicator assignments: ``J1,'' ``J2,''
``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``Q4,'' ``R,'' ``S,'' ``T,'' ``U,'' or
``V'' (as defined in Addendum D1 to the proposed rule, which is
available via the Internet on the CMS Web site), in a circumstance in

[[Page 70366]]

which the multiple procedure discount does not apply, the procedure is
not bilateral, and conditionally packaged services (status indicator of
``Q1'' and ``Q2'') qualify for separate payment. We note that, although
blood and blood products with status indicator ``R'' and brachytherapy
sources with status indicator ``U'' are not subject to wage adjustment,
they are subject to reduced payments when a hospital fails to meet the
Hospital OQR Program requirements. We note that, in the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66799), we created new status
indicator ``J1'' to reflect the comprehensive APCs discussed in section
II.A.2.e. of this final rule with comment period. We also note that we
deleted status indicator ``X'' as part of the CY 2015 packaging policy
for ancillary services, discussed in section II.A.3. of this final rule
with comment period. In the CY 2016 OPPS/ASC proposed rule, we proposed
to create new status indicator ``J2'' to reflect the new C-APC 8011
(Comprehensive Observation Services) and new status indicator ``Q4'' to
reflect conditionally packaged laboratory tests. In this CY 2016 OPPS/
ASC final rule with comment period, we are finalizing the new status
indicators ``J2'' and ``Q4'' as proposed, as discussed in sections
II.A.2.e.(2) and II.A.3.b.(3) of this final rule with comment period,
respectively.
We did not receive any public comments on these steps under the
methodology that we included in the proposed rule to determine the APC
payments for CY 2016. Therefore, we are using the steps in the
methodology specified below, as we proposed, to demonstrate the
calculation of the final CY 2016 OPPS payments using the same
parameters.
Individual providers interested in calculating the payment amount
that they will receive for a specific service from the national
unadjusted payment rates presented in Addenda A and B to this final
rule with comment period (which are available via the Internet on the
CMS Web site) should follow the formulas presented in the following
steps. For purposes of the payment calculations below, we refer to the
national unadjusted payment rate for hospitals that meet the
requirements of the Hospital OQR Program as the ``full'' national
unadjusted payment rate. We refer to the national unadjusted payment
rate for hospitals that fail to meet the requirements of the Hospital
OQR Program as the ``reduced'' national unadjusted payment rate. The
reduced national unadjusted payment rate is calculated by multiplying
the reporting ratio of 0.980 times the ``full'' national unadjusted
payment rate. The national unadjusted payment rate used in the
calculations below is either the full national unadjusted payment rate
or the reduced national unadjusted payment rate, depending on whether
the hospital met its Hospital OQR Program requirements in order to
receive the full CY 2016 OPPS fee schedule increase factor.
Step 1. Calculate 60 percent (the labor-related portion) of the
national unadjusted payment rate. Since the initial implementation of
the OPPS, we have used 60 percent to represent our estimate of that
portion of costs attributable, on average, to labor. We refer readers
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496
through 18497) for a detailed discussion of how we derived this
percentage. During our regression analysis for the payment adjustment
for rural hospitals in the CY 2006 OPPS final rule with comment period
(70 FR 68553), we confirmed that this labor-related share for hospital
outpatient services is appropriate.
The formula below is a mathematical representation of Step 1 and
identifies the labor-related portion of a specific payment rate for a
specific service.

X is the labor-related portion of the national unadjusted payment rate.

X = .60 * (national unadjusted payment rate).

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. We note that under the CY 2016 OPPS policy for continuing to
use the OMB labor market area delineations based on the 2010 Decennial
Census data for the wage indexes used under the IPPS, a hold harmless
policy for the wage index may apply, as discussed in section II.C. of
this final rule with comment period. 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 2016 under
the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B)
``Lugar'' hospitals, reclassifications under section 1886(d)(8)(E) of
the Act, as defined in Sec. 412.103 of the regulations, and hospitals
designated as urban under section 601(g) of Pub. L. 98-21. (For further
discussion of the changes to the FY 2016 IPPS wage indexes, as applied
to the CY 2016 OPPS, we refer readers to section II.C. of this final
rule with comment period.) As we proposed, we are continuing to apply a
wage index floor of 1.00 to frontier States, in accordance with section
10324 of the Affordable Care Act of 2010.
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of 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 Pub. L.
108-173. Addendum L to this final rule with comment period (which is
available via the Internet on the CMS Web site) contains the qualifying
counties and the associated wage index increase developed for the FY
2016 IPPS, which are listed in Table 2 in the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49326) and available via the Internet on the CMS Web
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the
hospital is not reclassified or redesignated under section 1886(d)(8)
or section 1886(d)(10) of the Act.
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
The formula below is a mathematical representation of Step 4 and
adjusts the labor-related portion of the national unadjusted payment
rate for the specific service by the wage index.

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

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

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

Y is the nonlabor-related portion of the national unadjusted payment
rate.

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

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

[[Page 70367]]

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 are providing examples below of the calculation of both the full
and reduced national unadjusted payment rates that will apply to
certain outpatient items and services performed by hospitals that meet
and that fail to meet the Hospital OQR Program requirements, using the
steps outlined above. For purposes of this example, we used a provider
that is located in Brooklyn, New York that is assigned to CBSA 35614.
This provider bills one service that is assigned to renumbered APC 5072
(Level 2 Excision/Biopsy/Incision and Drainage) (previously APC 0019).
The CY 2016 full national unadjusted payment rate for APC 5072 is
approximately $480.64. The reduced national unadjusted payment rate for
renumbered APC 5072 for a hospital that fails to meet the Hospital OQR
Program requirements is approximately $471.03. This reduced rate is
calculated by multiplying the reporting ratio of 0.980 by the full
unadjusted payment rate for renumbered APC 5072.
The FY 2016 wage index for a provider located in CBSA 35614 in New
York is 1.2991. The labor-related portion of the full national
unadjusted payment is approximately $374.64 (.60 * $480.64 * 1.2991).
The labor-related portion of the reduced national unadjusted payment is
approximately $367.15 (.60 * $471.03 * 1.2991). The nonlabor-related
portion of the full national unadjusted payment is approximately
$192.26 (.40 * $480.64). The nonlabor-related portion of the reduced
national unadjusted payment is approximately $188.41 (.40 * $471.03).
The sum of the labor-related and nonlabor-related portions of the full
national adjusted payment is approximately $566.90 ($374.64 + $192.26).
The sum of the portions of the reduced national adjusted payment is
approximately $555.56 ($367.15 + $188.41).

I. Beneficiary Copayments

1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining the unadjusted copayment amounts to be paid by
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of
the Act specifies that the Secretary must reduce the national
unadjusted copayment amount for a covered OPD service (or group of such
services) furnished in a year in a manner so that the effective
copayment rate (determined on a national unadjusted basis) for that
service in the year does not exceed a specified percentage. As
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective
copayment rate for a covered OPD service paid under the OPPS in CY
2006, and in calendar years thereafter, shall not exceed 40 percent of
the APC payment rate.
Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered
OPD service (or group of such services) furnished in a year, the
national unadjusted copayment amount cannot be less than 20 percent of
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the
Act limits the amount of beneficiary copayment that may be collected
for a procedure performed in a year to the amount of the inpatient
hospital deductible for that year.
Section 4104 of the Affordable Care Act eliminated the Part B
coinsurance for preventive services furnished on and after January 1,
2011, that meet certain requirements, including flexible
sigmoidoscopies and screening colonoscopies, and waived the Part B
deductible for screening colonoscopies that become diagnostic during
the procedure. Our discussion of the changes made by the Affordable
Care Act with regard to copayments for preventive services furnished on
and after January 1, 2011, may be found in section XII.B. of the CY
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
In the CY 2016 OPPS/ASC proposed rule (80 FR 39249), for CY 2016,
we proposed 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 proposed to use the same
standard rounding principles that we have historically used in
instances where the application of our standard copayment methodology
would result in a copayment amount that is less than 20 percent and
cannot be rounded, under standard rounding principles, to 20 percent.
(We refer readers to the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66687) in which we discuss our rationale for applying
these rounding principles.) The proposed national unadjusted copayment
amounts for services payable under the OPPS that would be effective
January 1, 2016, were shown in Addenda A and B to the proposed rule
(which are available via the Internet on the CMS Web site). As
discussed in section XIII.E. of the proposed rule and this final rule
with comment period, for CY 2016, the Medicare beneficiary's minimum
unadjusted copayment and national unadjusted copayment for a service to
which a reduced national unadjusted payment rate applies will equal the
product of the reporting ratio and the national unadjusted copayment,
or the product of the reporting ratio and the minimum unadjusted
copayment, respectively, for the service.
We note that OPPS copayments may increase or decrease each year
based on changes in the calculated APC payment rates due to updated
cost report and claims data, and any changes to the OPPS cost modeling
process. However, as described in the CY 2004 OPPS final rule with
comment period, the development of the copayment methodology generally
moves beneficiary copayments closer to 20 percent of OPPS APC payments
(68 FR 63458 through 63459).
In the CY 2004 OPPS final rule with comment period (68 FR 63459),
we adopted a new methodology to calculate unadjusted copayment amounts
in situations including reorganizing APCs, and we finalized the
following rules to determine copayment amounts in CY 2004 and
subsequent years.
When an APC group consists solely of HCPCS codes that were
not paid under the OPPS the prior year because they were packaged or
excluded or are new codes, the unadjusted copayment amount would be 20
percent of the APC payment rate.
If a new APC that did not exist during the prior year is
created and consists of HCPCS codes previously assigned to other APCs,
the copayment amount is calculated as the product of the APC payment
rate and the lowest coinsurance percentage of the codes comprising the
new APC.
If no codes are added to or removed from an APC and, after
recalibration of its relative payment weight, the new payment rate is
equal to or greater than the prior year's rate, the copayment amount
remains constant (unless the resulting coinsurance percentage is less
than 20 percent).
If no codes are added to or removed from an APC and, after
recalibration of its relative payment weight, the new payment rate is
less than the prior year's rate, the copayment amount is calculated as
the product of the new payment rate and the prior year's coinsurance
percentage.
If HCPCS codes are added to or deleted from an APC, and,
after

[[Page 70368]]

recalibrating its relative payment weight, holding its unadjusted
copayment amount constant results in a decrease in the coinsurance
percentage for the reconfigured APC, the copayment amount would not
change (unless retaining the copayment amount would result in a
coinsurance rate less than 20 percent).
If HCPCS codes are added to an APC, and, after
recalibrating its relative payment weight, holding its unadjusted
copayment amount constant results in an increase in the coinsurance
percentage for the reconfigured APC, the copayment amount would be
calculated as the product of the payment rate of the reconfigured APC
and the lowest coinsurance percentage of the codes being added to the
reconfigured APC.
We noted in that CY 2004 OPPS final rule with comment period that
we would seek to lower the copayment percentage for a service in an APC
from the prior year if the copayment percentage was greater than 20
percent. We noted that this principle was consistent with section
1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the
national unadjusted coinsurance rate so that beneficiary liability will
eventually equal 20 percent of the OPPS payment rate for all OPPS
services to which a copayment applies, and with section 1833(t)(3)(B)
of the Act, which is consistent with the Congressional goal of
achieving a 20-percent copayment percentage when fully phased in and
gives the Secretary the authority to set rules for determining
copayment amounts for new services. We further noted that the use of
this methodology would, in general, reduce the beneficiary coinsurance
rate and copayment amount for APCs for which the payment rate changes
as the result of the reconfiguration of APCs and/or recalibration of
relative payment weights (68 FR 63459). We believe the proposed
reorganization of APCs discussed in section III.D. of the proposed rule
and finalized under section III.D. of this final rule with comment
period hastens this movement toward copayments equal to 20 percent of
an APC for reorganized APCs that previously had copayment percentages
greater than 20 percent.
We did not receive any comments on the copayment percentage. For
the reasons set forth in this final rule with comment period, we are
finalizing our proposed CY 2016 copayment methodology without
modification.
3. Calculation of an Adjusted Copayment Amount for an APC Group
Individuals interested in calculating the national copayment
liability for a Medicare beneficiary for a given service provided by a
hospital that met or failed to meet its Hospital OQR Program
requirements should follow the formulas presented in the following
steps.
Step 1. Calculate the beneficiary payment percentage for the APC by
dividing the APC's national unadjusted copayment by its payment rate.
For example, using renumbered APC 5072 (previously APC 0019), $96.13 is
approximately 20 percent of the full national unadjusted payment rate
of $480.64. For APCs with only a minimum unadjusted copayment in
Addenda A and B to this final rule with comment period (which are
available via the Internet on the CMS Web site), the beneficiary
payment percentage is 20 percent.
The formula below is a mathematical representation of Step 1 and
calculates the national copayment as a percentage of national payment
for a given service.

B is the beneficiary payment percentage.

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

Step 2. Calculate the appropriate wage-adjusted payment rate for
the APC for the provider in question, as indicated in Steps 2 through 4
under section II.H. of this final rule with comment period. Calculate
the rural adjustment for eligible providers as indicated in Step 6
under section II.H. of this final rule with comment period.
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 payment percentage to the
adjusted payment rate for a service calculated under section II.H. of
this final rule with comment period, with and without the rural
adjustment, to calculate the adjusted beneficiary copayment for a given
service.

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

Step 4. For a hospital that failed to meet its Hospital OQR Program
requirements, multiply the copayment calculated in Step 3 by the
reporting ratio of 0.980.
The unadjusted copayments for services payable under the OPPS that
are effective January 1, 2016, are shown in Addenda A and B to this
final rule with comment period (which are available via the Internet on
the CMS Web site). We note that the national unadjusted payment rates
and copayment rates shown in Addenda A and B to this final rule with
comment period reflect the full CY 2016 OPD fee schedule increase
factor discussed in section II.B. of this final rule with comment
period.
In addition, as noted above, section 1833(t)(8)(C)(i) of the Act
limits the amount of beneficiary copayment that may be collected for a
procedure performed in a year to the amount of the inpatient hospital
deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the hospital OPPS. Specifically,
CMS recognizes the following codes on OPPS claims:
Category I CPT codes, which describe surgical procedures
and medical services;
Category III CPT codes, which describe new and emerging
technologies, services, and procedures; and
Level II HCPCS codes, which are used primarily to identify
products, supplies, temporary procedures, and services not described by
CPT codes.
CPT codes are established by the American Medical Association (AMA)
and the Level II HCPCS codes are established by the CMS HCPCS
Workgroup. These codes are updated and changed throughout the year. CPT
and HCPCS code changes that affect the OPPS are published both through
the annual rulemaking cycle and through the OPPS quarterly update
Change Requests (CRs). CMS releases new Level II HCPCS codes to the
public or recognizes the release of new CPT codes by the AMA and makes
these codes effective (that is, the codes can be reported on Medicare
claims) outside of the formal rulemaking process via OPPS quarterly
update CRs. Based on our review, we assign the new CPT and Level II
HCPCS codes to interim status indicators (SIs) and APCs. These interim
assignments are finalized in the OPPS/ASC final rules. This quarterly
process offers hospitals access to codes that may more accurately
describe items or services furnished and provides payment or more
accurate payment for these items or services in a timelier manner than
if we waited for the annual rulemaking process. We solicit public

[[Page 70369]]

comments on these new codes and finalize our proposals related to these
codes through our annual rulemaking process.
We note that, under the OPPS, the APC assignment determines the
payment rate for an item, procedure, or service. For those items,
procedures, or services not paid separately under the hospital OPPS,
they are assigned to appropriate status indicators. Section XI. of this
final rule with comment period provides a discussion of the various
status indicators used under the OPPS. Certain payment indicators
provide separate payment while others do not.
In Table 16 below, we summarize our comment process for updating
codes through our OPPS quarterly update CRs, seeking public comments,
and finalizing the treatment of these new codes under the OPPS.

Table 16--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
OPPS quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2015................... Level II HCPCS April 1, 2015..... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
July 1, 2015.................... Level II HCPCS July 1, 2015...... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
Category I July 1, 2015...... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT codes.
October 1, 2015................. Level II HCPCS October 1, 2015... CY 2016 OPPS/ASC CY 2017 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
January 1, 2016................. Level II HCPCS January 1, 2016... CY 2016 OPPS/ASC CY 2017 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
Category I and III January 1, 2016... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
CPT Codes. proposed rule. final rule with
comment period.
----------------------------------------------------------------------------------------------------------------

This process is discussed in detail below. We have separated our
discussion into two sections based on whether we solicited public
comments in the CY 2016 OPPS/ASC proposed rule or whether we are
soliciting public comments in this CY 2016 OPPS/ASC final rule with
comment period. We note that we sought public comments in the CY 2015
OPPS/ASC final rule with comment period on the interim APC and status
indicator assignments for new CPT and Level II HCPCS codes that were
effective January 1, 2015. We also sought public comments in the CY
2015 OPPS/ASC final rule with comment period on the interim APC and
status assignments for new Level II HCPCS codes that became effective
October 1, 2014. These new and revised codes, with an effective date of
October 1, 2014, or January 1, 2015, 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 2015 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, and were subject to public comment following
publication of the CY 2015 OPPS/ASC final rule with comment period. We
are responding to public comments and finalizing our interim OPPS
treatment of these codes in this CY 20165 OPPS/ASC final rule with
comment period.
Further, we received public comments on some new codes that were
assigned to comment indicator ``NI'' in Addendum B of the CY 2015 OPPS/
ASC final rule with comment period. We also received public comments on
new CPT codes that will be effective January 1, 2016, that were
assigned to comment indicator ``NP'' in Addendum B of the CY 2016 OPPS/
ASC proposed rule. We respond to those comments in section III.C. of
this CY 2016 OPPS/ASC final rule with comment period.
1. Treatment of New CY 2015 Level II HCPCS and CPT Codes Effective
April 1, 2015 and July 1, 2015 for Which We Solicited Public Comments
in the CY 2016 OPPS/ASC Proposed Rule
Through the April 2015 OPPS quarterly update CR (Transmittal 3217,
Change Request 9097, dated March 13, 2015), and the July 2015 OPPS
quarterly update CR (Transmittal 3280, Change Request 9205, dated June
5, 2015), we recognized several new HCPCS codes for separate payment
under the OPPS.
Effective April 1, 2015, we made effective eight new Level II HCPCS
codes and also assigned them to appropriate interim OPPS status
indicators and APCs. Through the April 2015 OPPS quarterly update CR,
we allowed separate payment for eight new Level II HCPCS codes.
Specifically, as displayed in Table 14 of the CY 2016 proposed rule (80
FR 39251), we provided separate payment for HCPCS codes C2623, C9445,
C9448, C9449, C9450, C9451, C9452, and Q9975. We note that HCPCS code
C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978,
effective July 1, 2015.
In the CY 2016 OPPS/ASC proposed rule, we solicited public comments
on the proposed APC and status indicator assignments for the Level II
HCPCS codes implemented on April 1, 2015 and listed in Table 14 of the
proposed rule (80 FR 39251). Specifically, we solicited public comments
on HCPCS codes C2623, C9445, C9448, C9449, C9450, C9451, C9452, and
Q9975. We note that HCPCS code C9448 was deleted on June 30, 2015, and
replaced with HCPCS code Q9978, effective July 1, 2015. We indicated
that the proposed payment rates for these codes, where applicable,
could be found in Addendum B to the proposed rule (which is available
via the Internet on the CMS Web site).
For the CY 2016 update, the HCPCS Workgroup replaced the temporary
drug HCPCS C-codes and Q-codes that were listed in Table 14 of the
proposed rule with permanent HCPCS J-codes effective January 1, 2016.
Because the replacement HCPCS J-codes describe the

[[Page 70370]]

same drugs with the same dosage descriptors as their predecessor HCPCS
C-codes and Q-codes, they will continue to receive pass-through payment
status in CY 2016. Therefore, we are assigning the replacement HCPCS J-
codes to the same APCs and status indicators as their predecessor HCPCS
codes, as shown in Table 17 below.
We did not receive any public comments on the proposed APC and
status indicator assignments for the new Level II HCPCS codes
implemented in April 2015. Therefore, we are finalizing the proposed
APC assignments and status indicators for the new Level II HCPCS codes
implemented in April 2015, as indicated in Table 17 below. The final
payment rates for these codes, where applicable, can be found in
Addendum B to this final rule with comment period (which is available
via the Internet on the CMS Web site).

Table 17--Final CY 2016 Status Indicators and APC Assignments for the New Level II HCPCS Codes That Were
Implemented in April 2015
----------------------------------------------------------------------------------------------------------------
Final CY 2016
CY 2015 CPT/HCPCS code CY 2016 CPT/HCPCS code CY 2016 long descriptor status Final CY 2016
indicator APC
----------------------------------------------------------------------------------------------------------------
C2623................... C2623................... Catheter, transluminal H 2623
angioplasty, drug-coated,
non-laser.
C9445................... J0596................... Injection, c1 esterase G 9445
inhibitor (recombinant),
Ruconest, 10 units.
C9448 *................. J8655................... Netupitant 300 mg and G 9448
palonosetron 0.5 mg.
C9449................... J9039................... Injection, blinatumomab, 1 G 9449
microgram.
C9450................... J7313................... Injection, fluocinolone G 9450
acetonide intravitreal
implant, 0.01 mg.
C9451................... J2547................... Injection, peramivir, 1 mg. G 9451
C9452................... J0695................... Injection, ceftolozane 50 G 9452
mg and tazobactam 25 mg.
Q9975 **................ J7205................... Injection, factor viii fc G 1656
fusion (recombinant), per
iu.
----------------------------------------------------------------------------------------------------------------
* HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015.
** HCPCS code C9136 (Injection, factor viii, fc fusion protein (recombinant), per i.u.) was deleted on March 31,
2015 and replaced with HCPCS code Q9975.

Effective July 1, 2015, we made effective several new CPT and Level
II HCPCS codes and also assigned them to appropriate interim OPPS
status indicators and APCs. Through the July 2015 OPPS quarterly update
CR (Transmittal 3280, Change Request 9205, dated June 5, 2015), we
assigned interim OPPS status indicators and APCs for two new Category
III CPT codes and eight Level II HCPCS codes that were made effective
July 1, 2015. Specifically, as displayed in Table 15 of the CY 2016
proposed rule (80 FR 39252), we made interim OPPS status indicators and
APC assignments for Category III CPT codes 0392T and 0393T, and Level
II HCPCS codes C2613, C9453, C9454, C9455, Q5101, Q9976, Q9977, and
Q9978. We note that CPT code 0392T replaced HCPCS code C9737
(Laparoscopy, surgical, esophageal sphincter augmentation with device
(e.g., magnetic band)), beginning July 1, 2015. Because CPT code 0392T
describes the same procedure as HCPCS code C9737, we proposed to assign
the CPT code to the same APC and status indicator as its predecessor
HCPCS C-code, as shown in Table 15 of the proposed rule.
Table 15 of the proposed rule (89 FR 39252) listed the CPT and
Level II HCPCS codes that were implemented on July 1, 2015, along with
the proposed status indicators, proposed APC assignments, and proposed
payment rates, where applicable, for CY 2016. We solicited public
comments on the proposed APC and status indicator assignments.
One commenter addressed CPT code 0392T which relates to
gastrointestinal procedures and services and which replaced HCPCS code
C9737. We have responded to this comment in section II.A.2.e. of this
final rule with comment period. We did not receive any public comments
on the proposed APC and status indicator assignments for Category III
CPT code 0393T and Level II HCPCS codes C2613, C9453, C9454, C9455,
Q9976, Q9977, and Q9978 for CY 2016.
In this final rule with comment period, we are adopting as final,
without modification, the proposed APC and status indicator assignments
for CPT code 0393T and for Level II HCPCS codes C2613, C9453, C9454,
C9455, Q9976, Q9977, Q9978. However, we are finalizing the APC and
status indicator assignments for HCPCS code Q5101 (Zarxio) with
modification. Specifically, we are assigning HCPCS code Q5101 to APC
1822 and status indicator ``G'' (pass-through drugs and biologicals).
We noted in the CY 2016 OPPS/ASC proposed rule (80 FR 39252) that
Zarxio (the drug described by HCPCS code Q5101) was currently not being
marketed. However, once pricing information was made available, the
drug would be paid separately under the OPPS. Zarxio was marketed on
September 3, 2015, and therefore, we began making separate payments
under the OPPS beginning on this date. From September 3, 2015, through
December 31, 2015, HCPCS code Q5101 is assigned status indicator ``K''
(Nonpass-through drugs and nonimplantable biologicals, including
therapeutic radiopharmaceuticals). Because Zarxio has been approved for
pass-through status beginning January 1, 2016, we are changing its OPPS
status indicator from ``K'' to ``G'' beginning January 1, 2016.
For the CY 2016 update, the HCPCS Workgroup replaced temporary
HCPCS codes C9453, C9454, C9455, and Q9978 with permanent HCPCS J codes
effective January 1, 2016. Because the replacement HCPCS J- codes
describe the same drugs with the same dosage descriptors as their
predecessor HCPCS C codes and Q codes, they will continue to receive
pass-through payment status in CY 2016. Therefore, we are assigning the
replacement HCPCS J-codes to the same APCs and status indicators as
their predecessor HCPCS codes, as shown in Table 18 below. Table 18
lists the final APCs and status indicator assignments for the new
category III CPT and Level II HCPCS codes that were implemented on July
1, 2015. The final payment rates for these codes, where applicable, can
be found in Addendum B to this final rule with comment period (which is
available via the Internet on the CMS Web site).

[[Page 70371]]

Table 18--Final CY 2016 Status Indicators and APC Assignments for the New Category III CPT and Level II HCPCS
Codes Implemented in July 2015
----------------------------------------------------------------------------------------------------------------
Final CY 2016
CY 2015 CPT/HCPCS code CY 2016 CPT/HCPCS code CY 2016 long descriptor status Final CY 2016
indicator APC
----------------------------------------------------------------------------------------------------------------
C2613................... C2613................... Lung biopsy plug with H 2613
delivery system.
C9453................... J9299................... Injection, nivolumab, 1 mg. G 9453
C9454................... J2502................... Injection, pasireotide long G 9454
acting, 1 mg.
C9455................... J2860................... Injection, siltuximab, 10 G 9455
mg.
Q5101 *................. Q5101*.................. Injection, Filgrastim (G- G 1822
CSF), Biosimilar, 1
microgram.
Q9976................... J1443................... Injection, ferric E N/A
pyrophosphate citrate
solution, 0.1 mg of iron.
Q9977................... Q9977 **................ Compounded Drug, Not D N/A
Otherwise Classified.
Q9978................... J8655................... Netupitant 300 mg and G 9448
palonosetron 0.5 mg.
0392T................... 0392T................... Laparoscopy, surgical, J1 5362
esophageal sphincter
augmentation procedure,
placement of sphincter
augmentation device (ie,
magnetic band).
0393T................... 0393T................... Removal of esophageal Q2 5361
sphincter augmentation
device.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q5101, which described the drug Zarxio, was approved by the FDA on March 6, 2015. Separate payment
for Zarxio was effective September 3, 2015, the date the drug was marketed.
** HCPCS code Q9977 will be deleted December 31, 2015, and a replacement code will not be established.

2. Process for New Level II HCPCS Codes That Became Effective October
1, 2015 and New Level II HCPCS Codes That Will Be Effective January 1,
2016 for Which We Are Soliciting Public Comments in This CY 2016 OPPS/
ASC Final Rule With Comment Period
As has been our practice in the past, we incorporate those new
Level II HCPCS codes that are effective October 1 and January 1 in the
final rule with comment period thereby updating the OPPS for the
following calendar year. These codes are released to the public through
the October and January OPPS quarterly update CRs and via the CMS HCPCS
Web site (for Level II HCPCS codes). For CY 2016, these codes are
flagged with comment indicator ``NI'' in Addendum B to this 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 indicators and the APC assignments for codes
flagged with comment indicator ``NI'' are open to public comment in
this final rule with comment period, and we will respond to these
public comments in the OPPS/ASC final rule with comment period for the
next year's OPPS/ASC update. In the CY 2016 OPPS/ASC proposed rule (80
FR 39252 through 39253), we proposed to continue this process for CY
2016. Specifically, for CY 2016, we proposed to include in Addendum B
to the CY 2016 OPPS/ASC final rule with comment period the following
new HCPCS codes:
New Level II HCPCS codes effective October 1, 2015, that
would be incorporated in the October 2015 OPPS quarterly update CR;
New Level II HCPCS codes effective January 1, 2016, that
would be incorporated in the January 2016 OPPS quarterly update CR.
As stated above, the October 1, 2015 and January 1, 2016 codes are
flagged with comment indicator ``NI'' in Addendum B to this CY 2016
OPPS/ASC final rule with comment period to indicate that we have
assigned the codes an interim OPPS payment status for CY 2016. We are
inviting public comments on the interim status indicator and APC
assignments and payment rates for these codes, if applicable, that will
be finalized in the CY 2017 OPPS/ASC final rule with comment period.
3. Treatment of New and Revised CY 2016 Category I and III CPT Codes
That Will Be Effective January 1, 2016, for Which We Solicited Public
Comments in the CY 2016 OPPS/ASC Proposed Rule
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841
through 66844), we finalized a revised process of assigning APC and
status indicators for new and revised Category I and III CPT codes that
would be effective January 1. Specifically, for the new/revised CPT
codes that we receive in a timely manner from the AMA's CPT Editorial
Panel, we finalized our proposal to include the codes that would be
effective January 1 in the OPPS/ASC proposed rules, along with proposed
APC and status indicator assignments for them, and to finalize the APC
and status indicator assignments in the OPPS/ASC final rules beginning
with the CY 2016 OPPS update. For those new/revised CPT codes that were
received too late for inclusion in the OPPS/ASC proposed rule, we
finalized our proposal to establish and use HCPCS G codes that mirror
the predecessor CPT codes and retain the current APC and status
indicator assignments for a year until we can propose APC and status
indicator assignments in the following year's rulemaking cycle. We
noted that even if we find that we need to create HCPCS G-codes in
place of certain CPT codes for the MPFS proposed rule, we do not
anticipate that these HCPCS G codes will always be necessary for OPPS
purposes. We will make every effort to include proposed APC and status
indicator assignments for all new and revised CPT codes that the AMA
makes publicly available in time for us to include them in the proposed
rule, and to avoid establishing HCPCS G codes and the resulting delay
in utilization of the most current CPT codes. In addition, we finalized
our proposal to make interim APC and status indicator assignments for
CPT codes that are not available in time for the proposed rule and that
describe wholly new services (such as new technologies or new surgical
procedures), solicit public comments, and finalize the specific APC and
status indicator assignments for those codes in the following year's
final rule.
For the CY 2016 OPPS update, we received the CY 2016 CPT codes from
AMA in time for inclusion in the CY 2016 OPPS/ASC proposed rule. In the
proposed rule (80 FR 39253), we indicated that the new and revised CY
2016 Category I and III CPT codes can be found in OPPS Addendum B to
the proposed rule and were assigned to new comment indicator ``NP'' to
indicate that the code is new for the next calendar year or the code is
an existing code with substantial revision to its code descriptor in
the next calendar year as compared to current calendar year with a
proposed APC assignment and that comments will be accepted on the
proposed APC assignment and

[[Page 70372]]

status indicator. We refer readers to section XI.B. of the CY 2016
OPPS/ASC proposed rule for further discussion on the proposed new
comment indicator ``NP.''
Further, in the proposed rule, we reminded readers that the CPT
code descriptors that appear in Addendum B are short descriptors and do
not accurately describe the complete procedure, service, or item
described by the CPT code. Therefore, we included the long descriptors
for the new and revised CY 2016 CPT codes in Addendum O to the proposed
rule (which is available via the Internet on the CMS Web site) so that
the public could adequately comment on our proposed APCs and status
indicator assignments. Because CPT procedure codes are 5 alpha-numeric
characters and CMS systems only utilize 5-character HCPCS codes, we
stated that we developed alternative 5-character placeholder codes for
the proposed rule. We indicated that the placeholder codes can be found
in Addendum O, specifically under the column labeled ``CY 2016 OPPS/ASC
Proposed Rule 5-Digit CMS Placeholder Code,'' to the proposed rule. We
also indicated that the final CPT code numbers would be included in
this CY 2016 OPPS/ASC final rule with comment period. We note that not
every code listed in Addendum O of the proposed rule was subject to
comment. For the new/revised Category I and III CPT codes, we requested
public comments on only those codes that were assigned to comment
indicator ``NP.'' We indicated that public comments would not be
accepted for new Category I CPT laboratory codes that were not assigned
to ``NP'' comment indicator in Addendum O to the proposed rule. We
stated that comments to these codes must be submitted at the Clinical
Laboratory Fee Schedule (CLFS) Public Meeting, which was scheduled for
July 16, 2015.
In summary, we solicited public comments on the proposed CY 2016
status indicators and APC assignments for the new and revised Category
I and III CPT codes that will be effective January 1, 2016. The CPT
codes are listed in Addendum B to the proposed rule with short
descriptors only. We listed them again in Addendum O to the proposed
rule with long descriptors. We also proposed to finalize the status
indicator and APC assignments for these codes (with their final CPT
code numbers) in the CY 2016 OPPS/ASC final rule with comment period.
Commenters addressed several of the new CPT codes that were
assigned to comment indicator ``NP'' in Addendum B of the CY 2016 OPPS/
ASC proposed rule. We respond to those comments in section III.D. of
this CY 2016 OPPS/ASC final rule with comment period.
The final status indicators, APC assignments, and payment rates for
the new CPT codes that will be effective January 1, 2016 can be found
in Addendum B to this final rule with comment period (which is
available via the Internet on the CMS Web site).

B. OPPS Changes--Variations Within APCs

1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient department
(OPD) services. Section 1833(t)(2)(B) of the Act provides that the
Secretary may establish groups of covered OPD services within this
classification system, so that services classified within each group
are comparable clinically and with respect to the use of resources. In
accordance with these provisions, we developed a grouping
classification system, referred to as Ambulatory Payment
Classifications (APCs), as set forth in Sec. 419.31 of the
regulations. We use Level I and Level II HCPCS codes to identify and
group the services within each APC. The APCs are organized such that
each group is homogeneous both clinically and in terms of resource use.
Using this classification system, we have established distinct groups
of similar services. We also have developed separate APC groups for
certain medical devices, drugs, biologicals, therapeutic
radiopharmaceuticals, and brachytherapy devices that are not packaged
into the payment for the procedure.
We have packaged into the payment for each procedure or service
within an APC group the costs associated with those items and services
that are typically integral, ancillary, supportive, dependent, or
adjunctive to a primary service. Therefore, we do not make separate
payment for these packaged items or services. In general, packaged
items and services include, but are not limited to the items and
services listed in Sec. 419.2(b) of the regulations. A further
discussion of packaged services is included in section II.A.3. of this
final rule with comment period.
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. In the
CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed
that each APC relative payment weight represents the hospital cost of
the services included in that APC, relative to the hospital cost of the
services included in proposed renumbered APC 5012 (Level 2 Examinations
and Related Services) (existing APC 0632). The APC relative payment
weights were scaled to proposed renumbered APC 5012 because it is the
hospital clinic visit APC and clinic visits are among the most
frequently furnished services in the hospital outpatient setting. We
noted that, historically, we have proposed APC relative payment weights
relative to the hospital costs of services included in existing APC
0634. In the proposed rule, we proposed to reassign HCPCS code G0463
(Hospital outpatient clinic visit for assessment and management of a
patient) from existing APC 0634 to proposed renumbered APC 5012 (for CY
2015, this is existing APC 0632). Proposed new APC 5012 includes other
services that are clinically similar with similar resource costs to the
service described by HCPCS code G0463, such as HCPCS code G0402
(Initial preventive physical examination). Accordingly, for the CY 2016
OPPS update, we proposed to delete existing APC 0634 and replace it
with proposed renumbered APC 5012.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39254), for CY 2016,
we proposed that each APC relative payment weight represents the
hospital cost of the services included in that APC, relative to the
hospital cost of the services included in proposed renumbered APC 5012
(existing APC 0632).
We did not receive any public comments on the proposed reassignment
for HCPCS code G0463 from APC 0634 to proposed renumbered APC 5012.
However, some commenters expressed concern about CMS' use of a single
clinic visit code (HCPCS G0463) and a single APC payment for all clinic
Evaluation and Management (E/M) visits. We refer readers to section
VII. of this CY 2016 OPPS/ASC final rule with comment period for a
discussion of public comments and our responses and our finalized
policies on payments for hospital outpatient visits for CY 2016.
In this final rule with comment period, we are finalizing our
proposal, without modification, to assign HCPCS code G0463 to APC 5012
and to delete existing APC 0634 because it will be replaced with APC
5012, effective January 1, 2016.

[[Page 70373]]

2. Application of the 2 Times Rule
In accordance with section 1833(t)(2) of the Act and Sec. 419.31
of the regulations, we annually review the items and services within an
APC group to determine, with respect to comparability of the use of
resources, if the highest cost for an item or service in the APC group
is more than 2 times greater than the lowest cost for an item or
service within the same APC group (referred to as the ``2 times
rule''). The statute authorizes the Secretary to make exceptions to the
2 times rule in unusual cases, such as low-volume items and services
(but the Secretary may not make such an exception in the case of a drug
or biological that has been designated as an orphan drug under section
526 of the Federal Food, Drug, and Cosmetic Act). In determining the
APCs with a 2 times rule violation, we consider only those HCPCS codes
that are significant based on the number of claims. We note that, for
purposes of identifying significant procedure codes for examination
under the 2 times rule, we consider procedure codes that have more than
1,000 single major claims or procedure codes that have both greater
than 99 single major claims and contribute at least 2 percent of the
single major claims used to establish the APC cost to be significant
(75 FR 71832). This longstanding definition of when a procedure code is
significant for purposes of the 2 times rule was selected because we
believe that a subset of 1,000 claims (or less than 1,000 claims) is
negligible within the set of approximately 100 million single procedure
or single session claims we use for establishing costs. Similarly, a
procedure code for which there are fewer than 99 single claims and
which comprises less than 2 percent of the single major claims within
an APC will have a negligible impact on the APC cost. In the CY 2016
OPPS/ASC proposed rule (80 FR 39254), for CY 2016, we proposed 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 the CY 2016 OPPS, we identified the APCs with violations of the
2 times rule. Therefore, we proposed changes to the procedure codes
assigned to these APCs in Addendum B to the proposed rule. We noted
that Addendum B does not appear in the printed version of the Federal
Register as part of the CY 2016 OPPS/ASC proposed rule. Rather, it is
published and made available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
In these cases, to eliminate a violation of the 2 times rule or to
improve clinical and resource homogeneity, we proposed to reassign
these procedure codes to new APCs that contain services that are
similar with regard to both their clinical and resource
characteristics. In many cases, the proposed procedure code
reassignments and associated APC reconfigurations for CY 2016 included
in the proposed rule are related to changes in costs of services that
were observed in the CY 2014 claims data newly available for CY 2016
ratesetting. We also proposed changes to the status indicators for some
procedure codes that were not specifically and separately discussed in
the proposed rule. In these cases, we proposed to change the status
indicators for these procedure 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 2016. In addition, we proposed to rename existing APCs or create
new clinical APCs to complement the proposed procedure code
reassignments. Addendum B to the CY 2016 OPPS/ASC proposed rule
identified with a comment indicator ``CH'' those procedure codes for
which we proposed a change to the APC assignment or status indicator,
or both, that were initially assigned in the July 1, 2015 OPPS Addendum
B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html). In contrast, Addendum B to this final rule with comment
period (available via the Internet on the CMS Web site) identifies with
the ``CH'' comment indicator the final CY 2016 changes compared to the
HCPCS codes' status as reflected in the October 2015 Addendum B update.
3. APC Exceptions to the 2 Times Rule
Taking into account the APC changes that we proposed for CY 2016,
we reviewed all of the APCs to determine which APCs would not meet the
requirements of the 2 times rule. We used the following criteria to
evaluate whether to propose exceptions to the 2 times rule for affected
APCs:
Resource homogeneity;
Clinical homogeneity;
Hospital outpatient setting utilization;
Frequency of service (volume); and
Opportunity for upcoding and code fragments.
Based on the CY 2014 claims data that were available for the CY
2016 proposed rule, we identified three APCs with violations of the 2
times rule. We applied the criteria as described above to identify the
APCs that we proposed to make exceptions for under the 2 times rule for
CY 2016. We did not include in that determination those APCs where a 2
times rule violation was not a relevant concept, such as existing APC
0375 (proposed for CY 2016 to be renumbered APC 5881 (Ancillary
Outpatient Services When Patient Dies)), which had a proposed APC
payment rate for a single service of $5,653.37. (We note that, in
section II.A.2.e. of this final rule with comment period, we are
converting renumbered APC 5881 to a comprehensive APC for CY 2016.
However, the APC cost is still not relevant to determine whether there
is a violation of the 2 times rule in that comprehensive APC.) We only
identified those APCs, including those with criteria-based costs, with
violations of the 2 times rule. For a detailed discussion of these
criteria, we refer readers to the April 7, 2000 OPPS final rule with
comment period (65 FR 18457 and 18458).
We note that, for cases in which a recommendation by the Panel
appears to result in or allow a violation of the 2 times rule, we may
accept the Panel's recommendation because those recommendations are
based on explicit consideration (that is, a review of the latest OPPS
claims data and group discussion of the issue) of resource use,
clinical homogeneity, site of service, and the quality of the claims
data used to determine the APC payment rates.
Table 16 of the proposed rule (80 FR 39255) listed the three APCs
that we proposed to make exceptions for under the 2 times rule for CY
2016 based on the criteria cited above and claims data submitted
between January 1, 2014, and December 31, 2014, and processed on or
before December 31, 2014. We stated in the proposed rule that, for the
final rule with comment period, we intended to use claims data for
dates of service between January 1, 2014, and December 31, 2014, that
were processed on or before June 30, 2015, and updated CCRs, if
available. For this final rule with comment period, after we reassigned
some codes, a violation of the 2 times rule no longer exists in APCs
5221 and 5673.
We applied the criteria described earlier to determine whether to
make exceptions to the 2 times rule for three APCs: APC 5165 (Level 5
ENT Procedures); APC 5731 (Level 1 Minor

[[Page 70374]]

Procedures) and APC 5841 (Psychotherapy). Based on our analysis of the
updated CY 2014 claims data available for this final rule with comment
period (and consideration of any related finalized changes to APC
assignments), we determined that APCs 5165, 5731 and 5841 meet the
exceptions criteria because these APC groupings optimize resource and
clinical homogeneity. Therefore, we are making these three APCs
exceptions to the 2 times rule.
Furthermore, although APC 5165 does not appear with a 2 times rule
indicator in the 2 times rule document that is posted with the CY 2016
OPPS/ASC final rule data files, an exception to the 2 times rule is
required so that a complexity adjustment is not made for CPT 60252 from
APC 5165 to APC 5166.
After consideration of the public comments we received and our
review of the CY 2014 costs from hospital claims and cost report data
available for this final rule with comment period, we are finalizing
three exceptions to the 2 times rule: APCs 5165, 5731 and 5841. We are
not finalizing our proposal to make exceptions for APC 5221 and APC
5673. Table 19 below lists the three APCs that we are excepting from
the 2 times rule for CY 2016 based on the criteria above and a review
of updated claims data. The geometric mean costs for hospital
outpatient services for these and all other APCs that were used in the
development of this final rule with comment period can be found on the
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

Table 19--Final APC Exceptions to the 2 Times Rule for CY 2016
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5165.............................. Level 5 ENT Procedures.
5731.............................. Level 1 Minor Procedures.
5841.............................. Psychotherapy.
------------------------------------------------------------------------

The final costs for hospital outpatient services for these and all
other APCs that were used in the development of this final rule with
comment period can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

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 an appropriate clinical APC. This policy
allows us to move a service from a New Technology APC in less than 2
years if sufficient data are available. It also allows us to retain a
service in a New Technology APC for more than 2 years if sufficient
data upon which to base a decision for reassignment have not been
collected.
Currently, there are 37 New Technology APC levels, ranging from the
lowest cost band assigned to APC 1491 (New Technology--Level 1A ($0--
$10)) through the highest cost band assigned to APC 1574 (New
Technology--Level XXXVII ($9,500--$10,000)). In the CY 2004 OPPS final
rule with comment period (68 FR 63416), we 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. We note that we did not propose to
renumber the New Technology APCs in the CY 2016 OPPS/ASC proposed rule.
We note that the cost bands for the New Technology APCs,
specifically, APCs 1491 through 1574, vary with increments ranging from
$10 to $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.
Every year we receive several requests for higher payment amounts
under the New Technology APCs for specific procedures paid under the
OPPS because they require the use of expensive equipment. We are taking
this opportunity to reiterate our response in general to the issue of
hospitals' capital expenditures as they relate to the OPPS and
Medicare.
Under the OPPS, one of our goals is to make payments that are
appropriate for the services that are necessary for the treatment of
Medicare beneficiaries. The OPPS, like other Medicare payment systems,
is budget neutral and increases are limited to the annual hospital
inpatient market basket increase. We believe that our payment rates
generally reflect the costs that are associated with providing care to
Medicare beneficiaries, and we believe that our payment rates are
adequate to ensure access to services.
For many emerging technologies, there is a transitional period
during which utilization may be low, often because providers are first
learning about the techniques and their clinical utility. Quite often,
parties request that Medicare make higher payment amounts under the New
Technology APCs for new procedures in that transitional phase. These
requests, and their accompanying estimates for expected total patient
utilization, often reflect very low rates of patient use of expensive
equipment, resulting in high per use costs for which requesters believe
Medicare should make full payment. However, we believe that it is most
appropriate to set payment rates based on costs that are associated
with providing care to Medicare beneficiaries. As claims data for new
services become available, we use these data to establish payment rates
for new technology.
2. Additional New Technology APC Groups
Currently, there are 37 levels of New Technology APC groups with
two parallel status indicators; one set with a status indicator of
``S'' and the other set with a status indicator of ``T.'' To improve
our ability to pay appropriately for new technology services and
procedures, in the CY 2016 OPPS/ASC proposed rule (80 FR 39256), we
proposed to expand the New Technology APC groups by adding 9 more
levels, specifically, adding New Technology Levels 38 through 46. We
proposed this expansion to accommodate the assignment of the retinal
prosthesis implantation procedure to a New Technology APC, which is
discussed further below. Therefore, for the CY 2016 OPPS update, we
proposed to establish a new set of New Technology APCs 1575 through
1583 (for Levels 38 through 46) with OPPS status indicator ``S'' and a

[[Page 70375]]

new set of New Technology APCs 1585 through 1593 (for Levels 38 through
46) with OPPS status indicator ``T.'' These two new sets of APCs have
the same payment levels with one set subject to the multiple procedure
payment reduction (status indicator ``T'') and the other set not
subject to the multiple procedure payment reduction (status indicator
``S''). Each proposed set of new technology APC groups has identical
group titles, payment rates, and minimum unadjusted copayments, but a
different status indicator. Table 17 of the proposed rule included the
complete list of the proposed additional 18 New Technology APCs for CY
2016.
Comment: One commenter noted that the inconsistency in the
increment increases in the new levels for the New Technology APCs,
specifically that Level 38 through Level 41 increased in increments of
$5,000, while Level 42 through Level 46 increased in increments of
$10,000. The commenter suggested that increments of $5,000 is more
appropriate and provides more accurate payment for providers as well as
consistency among payment levels beginning at Level 38.
Response: As stated above, for CY 2015, there are 37 levels of New
Technology APC groups with two parallel status indicators; one set with
a status indicator of ``S'' and the other set with a status indicator
of ``T.'' The cost bands for these New Technology APCs range from $0 to
$50 in increments of $10, from $50 to $100 in increments of $50, from
$100 to $2,000 in increments of $100, and from $2,000 to $10,000 in
increments of $500. These cost bands identify the APCs to which new
technology procedures and services with estimated service costs that
fall within those cost bands are assigned under the OPPS. Payment for
each APC is made at the mid-point of the APC's assigned cost band. For
example, payment for New Technology APC 1530 (New Technology--Level 30
($6,000-$6,500)) is made at $6,250. We believe that the increments for
New Technology APC Levels 38 through 46 are appropriate because they
maintain a similar proportionality to the total payment as the original
New Technology APCs, and they allow us to price new technology
procedures and services on a temporary basis with sufficient accuracy
without an excessive and cumbersome number of cost bands. We will
monitor these APCs during our annual review and establish New
Technology APC cost bands in the future as warranted.
Comment: Several commenters supported expanding the New Technology
APCs by adding New Technology Levels 38 through 46. They believed that
the addition of these new cost bands provides flexibility for CMS to
properly assign qualifying services and technologies to the most
appropriate payment level, as well as an opportunity for the collection
of more accurate claims data to ensure appropriate payments when the
procedures and services transition out of the New Technology APC cost
bands to clinical APCs. The commenters also recommended revising the
payment level descriptions for the New Technology APCs by adding one
dollar to the lower end of the payment range (for example, Level 1502
at $51-$100) for the various levels to avoid pricing overlap. In
addition, the commenters suggested that CMS remain open to the idea of
creating new payment band levels in the future, as needed, to
accommodate the growing number of new procedures, services, and
technologies that can be safely performed and delivered in the hospital
outpatient setting.
Response: We appreciate the commenters' support for our proposal to
add New Technology Levels 38 through 46 for CY 2016. However, because
the payment rate for each New Technology APC is at the midpoint of the
specified range, we do not believe that revising the limits of these
ranges for the New Technology APCs is necessary to eliminate what
commenters believe is a pricing overlap. In addition, when we lack
claims data (as we do for new services that have not be reported on
hospital outpatient claims), our cost estimates typically suggest a
range as represented by a New Technology APC cost band. These estimates
are not so precise that they result in an exact dollar amount that
would correspond to a dollar amount limit of a New Technology APC
range. We typically estimate an approximate range that we believe
corresponds to the approximate cost of the new service and match that
range to the closest New Technology APC. Therefore, the overlap of the
limits of the ranges of adjacent New Technology APCs makes no
difference.
We agree with the commenters that adding New Technology APC cost
bands on an as needed basis is appropriate. In addition to the
additional New Technology APCs that we proposed, we are establishing
two additional New Technology APC levels (4 new APCs in total, for
which two APCs are assigned status indicator ``S'' and two APCs are
status indicator ``T''). These APCs are depicted in Table 20.

Table 20--Additional New Technology APCs for CY 2016
----------------------------------------------------------------------------------------------------------------
Status
APC No. APC title indicator
----------------------------------------------------------------------------------------------------------------
1584....................................................... New Technology--Level 47 ($80,000- S
$90,000).
1585....................................................... New Technology--Level 48 ($90,000- S
$100,000).
1598....................................................... New Technology--Level 47 ($80,000- T
$90,000).
1599....................................................... New Technology--Level 48 ($90,000- T
$100,000).
----------------------------------------------------------------------------------------------------------------

The explanation as to why we are creating these additional New
Technology APCs is contained below in the discussion of the New
Technology APC for the retinal prosthesis implant procedure.
After consideration of the public comments we received, we are
finalizing our proposal, with a modification, to add New Technology
Levels 38 through 46 for CY 2016. We also are adding two additional
levels, New Technology Levels 47 and 48. Table 21 below includes the
final complete list of the additional 22 New Technology APC groups for
CY 2016.

[[Page 70376]]

Table 21--Additional New Technology APC Groups for CY 2016
----------------------------------------------------------------------------------------------------------------
Final CY 2016
New CY 2016 APC CY 2016 APC group title status
indicator
----------------------------------------------------------------------------------------------------------------
1575....................................................... New Technology--Level 38 ($10,000- S
$15,000).
1576....................................................... New Technology--Level 39 ($15,000- S
$20,000).
1577....................................................... New Technology--Level 40 ($20,000- S
$25,000).
1578....................................................... New Technology--Level 41 ($25,000- S
$30,000).
1579....................................................... New Technology--Level 42 ($30,000- S
$40,000).
1580....................................................... New Technology--Level 43 ($40,000- S
$50,000).
1581....................................................... New Technology--Level 44 ($50,000- S
$60,000).
1582....................................................... New Technology--Level 45 ($60,000- S
$70,000).
1583....................................................... New Technology--Level 46 ($70,000- S
$80,000).
1584....................................................... New Technology--Level 47 ($80,000- S
$90,000).
1585....................................................... New Technology--Level 48 ($90,000- S
$100,000).
1589....................................................... New Technology--Level 38 ($10,000- T
$15,000).
1590....................................................... New Technology--Level 39 ($15,000- T
$20,000).
1591....................................................... New Technology--Level 40 ($20,000- T
$25,000).
1592....................................................... New Technology--Level 41 ($25,000- T
$30,000).
1593....................................................... New Technology--Level 42 ($30,000- T
$40,000).
1594....................................................... New Technology--Level 43 ($40,000- T
$50,000).
1595....................................................... New Technology--Level 44 ($50,000- T
$60,000).
1596....................................................... New Technology--Level 45 ($60,000- T
$70,000).
1597....................................................... New Technology--Level 46 ($70,000- T
$80,000).
1598....................................................... New Technology--Level 47 ($80,000- T
$90,000).
1599....................................................... New Technology--Level 48 ($90,000- T
$100,000).
----------------------------------------------------------------------------------------------------------------

The final payment rates for New Technology APC groups 1575 through
1598 (with status indicator ``S'') and APC groups 1585 through 1599
(with status indicator ``T'') can be found in Addendum A to this final
rule with comment period (which is available via the Internet on the
CMS Web site).
3. Procedures Assigned to New Technology APC Groups for CY 2016
As we explained in the CY 2002 OPPS final rule with comment period
(66 FR 59902), we generally retain a procedure in the New Technology
APC to which it is initially assigned until we have obtained sufficient
claims data to justify reassignment of the procedure to a clinically
appropriate APC. However, in cases where we find that our initial 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 more
appropriately reflects its cost (66 FR 59903).
Consistent with our current policy, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39256), for CY 2016, we proposed to retain
services within New Technology APC groups until we obtain sufficient
claims data to justify reassignment of the service to a clinically
appropriate APC. The flexibility associated with this policy allows us
to reassign a service from a New Technology APC in less than 2 years if
sufficient claims data are available. It also allows us to retain a
service in a New Technology APC for more than 2 years if sufficient
claims data upon which to base a decision for reassignment have not
been obtained (66 FR 59902).
We did not receive any public comments related to this proposal.
Therefore, we are finalizing our CY 2016 proposal, without
modification, to retain services within New Technology APCs until we
gather sufficient claims data to assign the services to a clinically
appropriate APC. Thus, a service can be assigned to a New Technology
APC for more than 2 years if we have insufficient claims data to
reassign the service to a clinical APC, or it could be reassigned to a
clinical APC in less than 2 years if we have adequate claims data.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39256), we proposed to
assign two surgical procedures to New Technology APCs. Specifically, we
proposed to continue to assign HCPCS code C9740 (Cystourethroscopy,
with insertion of transprostatic implant; 4 or more implants) to New
Technology APC 1564 (New Technology--Level 27 ($4,500-$5,000)) and to
reassign CPT code 0100T (Placement of a subconjunctival retinal
prosthesis receiver and pulse generator, and implantation of intra-
ocular retinal electrode array, with vitrectomy) from APC 0673 (Level 2
Intraocular Procedures) to proposed newly established New Technology
APC 1593 (New Technology--Level 46 ($70,000-$80,000) to pay
appropriately for the procedures.
a. Transprostatic Urethral Implant Procedure
Currently, in CY 2015, there is one procedure that is receiving
payment through a New Technology APC. Specifically, the surgical
procedure described by HCPCS code C9740 is assigned to New Technology
APC 1564 (New Technology--Level 27 ($4,500-$5,000)), with a payment
rate of $4,750. This procedure was assigned to New Technology APC 1564
on April 1, 2014, when the HCPCS C-code was established.
For the CY 2016 OPPS update, based on our review of the claims data
for HCPCS code C9740 from April through December 2014, we found 100
single claims (out of 128 total claims) with a geometric mean cost of
approximately $5,648. Because there is not a full year of claims data
and only 100 single claims are in our database for HCPCS code C9740, in
the CY 2016 OPPS/ASC proposed rule, we proposed to maintain the
assignment of HCPCS code C9740 to New Technology APC 1564 for CY 2016.
As described in section IV.B. of the proposed rule, we note that, based
on the costs of the device relative to the procedure in this APC, the
procedures assigned to APC 1564 would be device-intensive for CY 2016.
The proposed CY 2016 payment rate for HCPCS code C9740 was included in
Addendum B to

[[Page 70377]]

the proposed rule (which is available via the Internet on the CMS Web
site).
Comment: Several commenters supported CMS' proposal to retain HCPCS
code C9740 in New Technology APC 1564 for CY 2016. The commenters
stated that retaining this surgical procedure in a new technology APC
for another year will allow CMS to continue collecting the claims data
necessary to identify an appropriate APC assignment for the procedure.
The commenters also supported the proposed designation of APC 1564 as a
device-intensive APC so that the procedure assigned to the APC can be
performed and paid adequately in the ASC setting. However, one
commenter disagreed with the APC assignment for HCPCS code C9740. The
commenter believed that, based on the cost data, HCPCS code C9740
should be assigned to New Technology APC 1567 (New Technology--Level 30
($6,000-$6,500)), with a payment rate of approximately $6,250.
Response: Based on the latest claims data used for this final rule
with comment period, which is based on claims submitted between January
1, 2014, and December 31, 2014, and processed on or before June 30,
2015, we are reassigning HCPCS code C9740 from New Technology APC 1564
to New Technology APC 1565 (New Technology--Level 28 ($5,000-$5,500)).
Specifically, we found a geometric mean cost of approximately $5,627
based on 130 single claims (out of 161 total claims) for HCPCS code
C9740, which is comparable to the payment rate of $5,250 for New
Technology APC 1565. We note that HCPCS code C9740 is the only code
assigned to New Technology APC 1565. We do not believe HCPCS code C9740
should be assigned to either New Technology APC 1566 (New Technology--
Level 29 ($5500-$6000)), with a payment rate of approximately $5,750 or
New Technology APC 1567 (New Technology--Level 30 ($6000-$6500)), with
a payment rate of approximately $6,250) because the payment rates for
these APCs are significantly higher than the geometric mean cost of
approximately $5,627 for HCPCS code C9740. Therefore, in this final
rule with comment period, we are revising the APC assignment for HCPCS
code C9740 to New Technology APC 1565 for CY 2016. We note that HCPCS
code C9740 is the only procedure assigned to New Technology APC 1565,
which is a device-intensive APC for CY 2016. We anticipate that the CY
2015 claims data (which will be used for CY 2017 ratesetting) for HCPCS
code C9740 will be sufficient for the assignment of the code to a
clinical APC in CY 2017.
Comment: One commenter suggested that CMS reassign HCPCS code C9739
(Cystourethroscopy, with insertion of transprostatic implant; 1 to 3
implants), from clinical APC 5374 (Level 4 Urology and Related
Services) to C-APC 5375 (Level 5 Urology and Related Services). The
commenter believed that, similar to HCPCS code C9740, HCPCS code C9739
should be assigned to a device-intensive APC. In addition, the
commenter believed that because both procedures describe an Urolift
implant procedure and the only difference is that HCPCS code C9739
involves 1 to 3 transprostatic implants while HCPCS code C9740 involves
4 or more implants, both procedure codes should be assigned to device-
intensive APCs.
Response: We agree with the commenter's suggestion to assign HCPS
code C9739 to APC 5375. Analysis of the latest claims data used for
this final rule revealed a geometric mean cost of approximately $4,263
based on 53 single claims (out of 54 total claims) for HCPCS code
C9739. We believe that the geometric mean cost for HCPCS code C9739 is
similar to other procedures assigned to APC 5375, which has a geometric
mean cost of approximately $3,551. Therefore, for CY 2016, we are
reassigning HCPCS code C9739 to APC 5375.
Comment: One commenter suggested that a device HCPCS C-code or
HCPCS code L8699 (Prosthetic implant, not otherwise specified) should
be required on all claims that report HCPCS code C9739 or C9740. The
commenter reported that, based on the review of the CY 2016 OPPS/ASC
proposed rule claims data, approximately 50 percent of the claims did
not have a device code reported, thus making it impossible to determine
the number of implants used. The commenter requested the establishment
of device edits to ensure that implant costs are included in the claims
to facilitate ratesetting.
Response: We do not believe that we should establish device edits
for every procedure code, including HCPCS code C9739 or C9740. We rely
on hospitals to report procedures, services, and items accurately. As
we have stated in previous final rules, it is extremely important that
hospitals use all of the required HCPCS codes to report the performance
of all services they furnish, consistent with the code descriptors, CPT
and/or CMS instructions, and correct coding principles, whether payment
for the services is made separately or packaged. The accuracy of the
OPPS payment rates depends on the quality and completeness of the
claims data that hospitals submit for the services they furnish to
Medicare beneficiaries.
However, in the CY 2016 OPPS/ASC proposed rule, we proposed to
establish claims processing edits such that a device HCPCS code must be
reported on the same claim form for any procedure code assigned to a
device-intensive APC (80 FR 39268). We further stated that claims
submitted with a procedure code requiring a device that is assigned to
a device-intensive APC but without any device HCPCS code on the claim
would be returned to the provider. We are finalizing this proposal for
CY 2016. Specifically, only the procedures that require the
implantation of a device that are assigned to a device-intensive APC
will require a device code on the claim and claims processing edits
will apply only to those APCs that are listed in Table 42 of this final
rule with comment period. Further discussion of this final policy can
be found in section IV.B. of this final rule with comment period.
Because HCPCS code C9740 is assigned to a device-intensive APC for CY
2016, we expect hospitals to report the appropriate device code with
the implant procedure. In this case, we also would expect hospitals to
report HCPCS code L8699 when reporting HCPCS code C9740. This will
ensure that device costs are always reported on the claim and are
appropriately captured in claims that CMS uses for ratesetting.
In summary, after consideration of the public comments we received,
we are finalizing our proposals, with modification. Specifically, we
are reassigning HCPCS code C9740 from New Technology APC 1564 to New
Technology APC 1565, and reassigning HCPCS code C9739 from clinical APC
5374 to APC 5375 for CY 2016. We note that the APC to which HCPCS code
C9740 is assigned is designated as a device-intensive APC, which will
require reporting the appropriate device code (in this case, HCPCS code
L8699) when the surgical procedure describing HCPCS C9740 is reported
on the claim. The final CY 2016 payment rates for HCPCS codes C9739 and
C9740 are included in Addendum B to this final rule with comment period
(which is available via the Internet on the CMS Web site).
b. Retinal Prosthesis Implant Procedure
CPT code 0100T describes the implantation of a retinal prosthesis.
This surgical procedure is currently assigned to APC 0673, which has a
CY 2015 payment rate of approximately $3,123. The retinal prosthesis
device that is used in the procedure described by CPT code 0100T is
described by HCPCS code C1841 (Retinal prosthesis,

[[Page 70378]]

includes all internal and external components). The first retinal
prosthesis (Argus[supreg] II Retinal Prosthesis System) was approved by
the FDA in 2013 for adult patients with advanced retinitis pigmentosa.
Pass-through status was granted for HCPCS code C1841 beginning October
1, 2013, and is proposed to expire on December 31, 2015. We refer
readers to section IV.A.1.b. of this final rule with comment period for
the discussion of the expiration of pass-through for HCPCS code C1841.
After pass-through status expires for a medical device, the payment
for the device is packaged into the payment for the associated surgical
procedure. The surgical procedure in which the Argus device (HCPCS code
C1841) is implanted is described by CPT code 0100T. Review of the CY
2014 OPPS claims data used for the CY 2016 OPPS/ASC proposed rule
showed only one single claim for CPT code 0100T with HCPCS code C1841
on the claim. Due to the newness of this surgical procedure and its
associated implantable device and the extremely low number of CY 2014
HOPD claims for this procedure, in the CY 2016 OPPS/ASC proposed rule
(80 FR 39257), we proposed to reassign CPT code 0100T from existing APC
0673 (Level III Intraocular Procedures) to proposed newly established
New Technology APC 1593 (New Technology--Level 46 ($70,000-$80,000)),
with a payment of approximately $75,000 for CY 2016. We refer readers
to section III.C.2. of the proposed rule and this final rule with
comment period for a discussion of the proposed expansion of the New
Technology APC levels. We stated in the proposed rule (80 FR 39257)
that ``[w]e are proposing a CY 2016 OPPS payment of approximately
$75,000 for proposed new APC 1593, which would be the payment for CPT
code 0100T (not including the retinal prosthesis), plus the proposed
maximum FY 2016 IPPS new technology add-on payment for a case involving
the Argus[supreg] II Retinal Prosthesis System of $72,028.75 (80 FR
24425).'' In the proposed rule (80 FR 39257), we also stated that we
believe that, given the newness of this procedure and the severe
paucity of OPPS claims data, this approach provides a reasonable
payment amount that is similar to the payment for the same procedure
provided in the hospital inpatient setting. Once we have more claims
data, we indicated that we will reassess the APC placement of the
retinal prosthesis implantation procedure in light of our standard rate
setting methodology. We invited public comments on this proposal.
Comment: Several commenters expressed concern over the proposed
payment rate of $75,000 for CPT code 0100T. The commenters reported
that the cost of the Argus II device is approximately $144,000 while
the cost of the surgical procedure to implant the device is between
approximately $5,000 and $10,000. The commenters urged CMS to establish
a payment rate of approximately $150,000 to accurately pay hospitals
for the full cost of providing the procedure and furnishing the device.
Other commenters reported confusion about the proposed policy. Based on
their reading of the proposal, the commenters believed that CMS is
proposing to pay (1) $75,000 for New Technology APC 1593 plus (2) the
IPPS New Technology payment amount of approximately $72,029, which
would result in a total procedure payment of approximately $147,029.
The commenters requested clarification on the proposed total procedure
payment. Another commenter indicated that a total payment of $75,000
for the device and surgical procedure is inappropriate and further
disagreed with CMS' use of the IPPS new technology add-on payment as a
proxy for the Argus II procedure cost because this add-on payment is
set at 50 percent of costs of the new technology.
Response: We appreciate the commenters' request for clarification.
In the CY 2016 OPPS/ASC proposed rule, we proposed to pay for the
surgical implant procedure including the retinal prosthesis device
under newly proposed New Technology APC 1593. The following sentence in
the proposed rule (80 FR 39257) may be the source of some commenters'
confusion: ``[w]e are proposing a CY 2016 OPPS payment of approximately
$75,000 for proposed new APC 1593, which would be the payment for CPT
code 0100T (not including the retinal prosthesis), plus the proposed
maximum FY 2016 IPPS new technology add-on payment for a case involving
the Argus[supreg] II Retinal Prosthesis System of $72,028.75.'' What we
meant by that sentence is the payment amount of $75,000 for APC 1593
would be comprised of the approximate sum of: (1) The payment amount
for the procedure ($3,123, which is the CY 2015 payment rate for the
procedure described by CPT code 0100T); and (2) the payment amount for
the device ($72,028.75--the proposed IPPS payment amount for the
device). That is, the approximate $75,000 payment for APC 1593 is the
total payment amount, which includes payment for both the procedure and
the device.
The final rule claims data contain additional claims data for CPT
code 0100T. There are 5 total claims (2 single claims) with a geometric
mean cost of approximately $95,866. Although this remains a very low
volume of claims, we prefer to base the cost estimate for this
procedure (which include the cost of the device) on the hospital
outpatient claims data rather than using the IPPS new technology add-on
payment as a proxy for the procedure cost. However, we do not believe
that there are a sufficient number of claims upon which to base a
clinical APC for the retinal prosthesis procedure. Therefore, we are
creating a New Technology APC (Level 48) for CPT code 0100T with the
cost band range of $90,000 to $100,000 and a payment amount of $95,000.
In addition, because the proposed additional New Technology APCs ended
with Level 46 ($70,000-$80,000), we also are creating a New Technology
Level 47 with the cost band range of $80,000 to $90,000 and a payment
amount of $85,000 to fill in the gap between New Technology APC Level
46 and Level 48.
Comment: One commenter recommended the establishment of a HCPCS G-
code for the Argus implant procedure and the assignment of this G-code
to a new technology APC with a payment rate of $150,000.
Response: We disagree with establishing a HCPCS G-code and
assigning it to a new technology APC with a payment rate of $150,000
because CPT code 0100T accurately describes the procedure associated
with implanting the Argus II device.
Comment: One commenter recommended, as an alternative to the New
Technology APC payment, that CMS continue to pay separately for CPT
code 0100T and HCPCS code C1841. Specifically, the commenter requested
that CMS pay separately for surgical procedure CPT code 0100T and also
extend the pass-through status for the device HCPCS code C1841 through
December 31, 2016 because of very limited claims data.
Response: We stated in the CY 2016 OPPS/ASC proposed rule that
pass-through payment status for device HCPCS code C1841 would expire on
December 31, 2015 because it was approved for pass-through status
effective October 1, 2013 (80 FR 39264). We also proposed to package
and assign device HCPCS code C1841 to OPPS status indicator ``N'' to
indicate that the payment for this code would be included in the
surgical procedure CPT code 0100T. We do not agree that

[[Page 70379]]

extending the pass-through status would be appropriate because we
believe it would be inconsistent with the statutory pass-through
provision. Section 1833(t)(6)(B)(iii) requires that, under the OPPS, a
category of devices be eligible for transitional pass-through payments
for at least 2 years, but not more than 3 years.
After consideration of the public comments we received, we are
assigning CPT code 0100T to New Technology APC 1599, which has a final
payment of $95,000 for CY 2016. This payment rate includes the payment
for the retinal prosthesis system as well as all other items and
supplies used in the surgical procedure to implant the device. Because
payment for retinal prosthesis is included in CPT code 100T, we are
finalizing our proposal to assign HCPCS code C1841 to OPPS status
indicator ``N'' to indicate that this code is packaged under the
hospital OPPS. We also are designating APC 1599 as a device-intensive
APC because almost all of the cost of the implantation procedure is
attributable to the cost of the device. Because CPT code 0100T is
assigned to a device-intensive APC, a device HCPCS C-code will be
required on claims with CPT code 0100T according to the device edit
policy described in section IV. of this final rule with comment period.

D. OPPS Ambulatory Payment Classification (APC) Group Policies

Section 1833(t)(9)(A) of the Act requires the Secretary to review,
not less often than annually, and to revise the groups, relative
payment weights, and the wage and other adjustments to take into
account changes in medical practices, changes in technology, the
addition of new services, new cost data, and other relevant information
and factors. Therefore, every year we review and revise the APC
assignments for many procedure codes and diagnosis codes based on our
evaluation of these factors using the latest OPPS claims data. Although
we do not discuss every APC change in the proposed and final rules,
these changes are listed in the OPPS Addendum B of the proposed and
final rules. Specifically, procedure and diagnosis codes with revised
APC and/or status indicator assignments are identified by comment
indicator ``CH'' (Active HCPCS code in current year and next calendar
year, status indicator and/or APC assignment has changed) in the OPPS
Addendum B payment file.
In our efforts to improve clinical and resource homogeneity among
the APC groupings and update the hospital OPPS, we conducted a
comprehensive review of the current structure of the APCs and codes
assignments for CY 2015. Consequently, as part of our broader efforts
to thoroughly review, revise, and consolidate APCs to improve both
resource and clinical homogeneity, we proposed in the CY 2015 OPPS/ASC
proposed rule (79 FR 40981 through 40983) to restructure the first set
of clinical families, specifically the ophthalmology and gynecology
APCs. We proposed to restructure the APCs for these clinical families
based on the following principles:
Improved clinical homogeneity;
Improved resource homogeneity;
Reduced resource overlap in APCs within a clinical family;
and
Greater simplicity and improved understanding of the
structure of the APCs.
Based on our review, for CY 2015, we finalized the APC
restructuring for the ophthalmology and gynecology APCs. For the
complete discussion on the APC restructuring for the ophthalmology
APCs, we refer readers to the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66857 through 66859). Similarly, for the complete
discussion on the APC restructuring for the gynecology APCs, we refer
readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR
66849 through 66851).
For the CY 2016 update, as a part of our continued review of the
structure of the APCs, in the CY 2016 OPPS/ASC proposed rule (80 FR
39257), we proposed to restructure nine APC clinical families based on
the same principles used for restructuring the ophthalmology and
gynecology APCs for CY 2015. We discuss below our proposed
restructuring for the nine APC clinical families. We note that, in
conjunction with the proposed restructuring, we proposed to renumber
several families of APCs to provide consecutive APC numbers for
consecutive APC levels within a clinical family for improved
identification of APCs and ease of understanding the APC groupings. For
example, the seven APC levels for urology procedures were proposed to
be renumbered as APC 5371 (Level 1 Urology and Related Services), APC
5372 (Level 2 Urology and Related Services), APC 5373 (Level 3 Urology
and Related Services), APC 5374 (Level 4 Urology and Related Services),
APC 5375 (Level 5 Urology and Related Services), APC 5376 (Level 6
Urology and Related Services), and APC 5377 (Level 7 Urology and
Related Services). We stated in the proposed rule that we believe that
consecutive numbering of the APCs will enhance the public understanding
of the APC groups and will make it easier for them to communicate to
the agency about issues concerning APCs. We note that, under this
initiative, we did not propose to change the numbering of the composite
APCs or the New Technology APCs for CY 2016.
Comment: Several commenters expressed concern about the lack of
detail in the proposed rule on the proposed consolidation and
restructuring of the nine APC groups. The commenters stated that CMS
provided few details in the proposed rule to enable commenters to
adequately assess the full impact of the proposed APC reconfiguration,
and requested a delay in the implementation of the proposal until more
information is available. They also stated that CMS did not provide
impact tables to show the projected impact that the proposed APC
consolidation would have on Medicare payments by departments or
specialties, or provide the rationale behind the decisions for each
combination of APC groups, which they believed further complicated
analysis of each proposed APC group. Some commenters indicated that
they had difficulty analyzing the impact and interrelationship of the
different proposed policies to adequately determine Medicare payments
to hospitals. Several commenters requested that CMS not finalize the
proposal and stated that the proposed APC groupings do not reflect
clinical or resource homogeneity. Some commenters believed that CMS
should develop and establish criteria before finalizing the
reconfiguration of the nine APC groups.
However, many other commenters supported the consolidation and
restructuring of the nine clinical family APCs but requested
modification to the APC groupings. In particular, the commenters
requested the reassignment of several procedures and services to
certain APCs for the final rule. In addition, several commenters
requested further information in the final rule, and urged CMS to
include a separate impact analysis for each restructured APC clinical
family showing the distributional impact of the restructuring across
CMS' usual categories (such as urban/rural location, bed size, type of
ownership and teaching status).
Response: Based on our experience with the existing APCs under the
OPPS, we believe that establishing more inclusive categories of
procedures and services is more appropriate for future ratesetting
under the OPPS. Therefore, we believe that the proposed restructured
APCs have a more clinically appropriate granularity, while improving
resource similarity. We also

[[Page 70380]]

believe the proposed restructure and consolidation of APCs more
appropriately categorizes all of the procedures and services within
each of the nine APC groups such that the procedures and services
within each proposed newly configured APC are more comparable with
respect to clinical characteristics and resource use.
In addition, we disagree that we should delay or not finalize the
proposed consolidation and restructuring of the nine APC groups pending
provision of the extensive data that the commenters requested. We make
available a considerable amount of data for public analysis each year
for both the proposed rule and the final rule. While we are not
developing and providing the extensively detailed information that the
commenters requested, we are providing the public use files of claims
and a detailed narrative description of our data process that the
public can use to perform any desired analyses (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
We note that we included the impact of the CY 2016 OPPS proposals
on payment to different classes of hospitals in Table 65 of the
proposed rule (80 FR 39362 through 39363). We believe our estimate of
the impact of these proposed changes provided valuable information to
hospitals. We believe that it would be impractical and nonproductive to
develop impact tables for each of the primary clinical families that
were proposed to be reorganized. Hospitals generally do not perform a
limited set of services confined to one clinical family. Therefore, we
believe that impacts reflecting the interaction and collective effect
of the proposed APC restructuring best depict how most hospitals will
fare under the proposed reorganization. Many commenters submitted
comments relating to particular services and were able to provide
detailed analysis in their comments based on the data and other
information provided with the proposed rule.
Further, we do not agree that we should develop and establish
additional criteria before finalizing the proposed consolidation and
restructuring of the nine APC groups. The OPPS statute provides that
procedures grouped in APCs must be similar clinically and in terms of
resource use. In various sections of this final rule with comment
period, we have applied those criteria and responded to many of the
public comments we received, which included evaluations of the
recommended changes to the APC assignments, based on those criteria.
Each year, under the OPPS, we revise and make changes to the APC
groupings based on the latest hospital outpatient claims data to
appropriately place procedures and services in APCs based on clinical
characteristics and resource similarity.
Therefore, after consideration of the public comments we received,
we are finalizing, with some modifications that are discussed below in
the sections specific to each clinical family, the proposed
consolidation and restructuring of the nine clinical families of APCs
for CY 2016. Each of the nine clinical families, the public comments we
received, and our responses on those families are discussed below. The
final payment rates for the nine individual clinical family APCs are
included in Addendum A to this final rule with comment period.
1. Airway Endoscopy Procedures
As a part of our CY 2016 comprehensive review of the structure of
the APCs and procedure code assignments, we examined the APCs that
contain airway endoscopy procedures. In the CY 2016 OPPS/ASC proposed
rule (80 FR 39257), for CY 2016, we proposed to restructure the OPPS
APC groupings for airway endoscopy procedures to more appropriately
reflect the costs and clinical characteristics of the procedures within
each APC grouping in the context of the OPPS. The current APCs for
airway endoscopy procedures are divided into upper airway and lower
airway endoscopy APC series. After reviewing these APCs, we believe
that consolidating the current upper airway and lower airway APC series
into a single APC grouping for airway endoscopy procedures would result
in improved resource homogeneity for the various airway endoscopy
procedures, while maintaining clinical homogeneity. Therefore, for CY
2016, we proposed to restructure and consolidate the APCs that include
airway endoscopy procedures into a single APC grouping. Table 18 of the
proposed rule listed the current CY 2015 APCs that contain the airway
endoscopy procedures, and Table 19 of the proposed rule listed the
proposed CY 2016 APCs that would result from our consolidation and
restructuring of the current airway endoscopy procedure APCs into a
single APC grouping. The proposed restructured/renumbered CY 2016
airway endoscopy APCs were: Proposed APC 5151 (Level 1Airway
Endoscopy); proposed APC 5152 (Level 2 Airway Endoscopy); proposed APC
5153 (Level 3 Airway Endoscopy); proposed APC 5154 (Level 4 Airway
Endoscopy); and proposed APC 5155 (Level 5 Airway Endoscopy.
We invited public comments on this proposal.
Comment: Several commenters supported the proposed restructuring of
the airway endoscopy APCs. However, the commenters submitted a list of
procedure codes (indicated in Table 22 below) that they requested CMS
to reassign to higher-level APCs in the airway endoscopy grouping based
on greater resource similarity of the procedures described by the codes
listed by the commenters compared to the procedures described by the
proposed codes assigned to the proposed APCs. In addition, the HOP
Panel recommended that CMS reassign the procedures described by CPT
codes 31652 and 31653 from proposed APC 5153 to proposed APC 5154
because the Panel agreed with the presenter that the procedures
described by these new codes are most similar to the procedures
assigned to CPT code 31629, which is assigned to APC 5154. One
commenter requested that CMS assign the procedure described by CPT code
31652 to APC 5154 and the procedure described by CPT code 31653 to APC
5155. Another commenter requested that CMS reassign the procedure
described by CPT code 31515 from proposed APC 5152 to proposed APC 5154
because the commenter believed that this procedure is more clinically
similar to other procedures (described by CPT codes 31629 and 31645)
assigned to proposed APC 5154. One commenter requested that CMS create
a Level 6 Airway Endoscopy APC and assign the procedures described by
CPT codes 31636, 31634, and 31647 to this newly APC because the costs
of these procedures are not similar to the costs of other procedures
assigned to APC 5155.
Response: We agree in part with the commenters' requested code
reassignments and with the Panel's recommendation. However, we do not
believe that the procedure described by CPT code 31515 should be
reassigned to proposed APC 5154, that the procedure described by CPT
code 31653 should be assigned to proposed APC 5153 instead of proposed
APC 5155, or that we should create a Level 6 Airway Endoscopy APC. We
are reassigning seven of the eight recommended procedure codes (as
listed in Table 22 below) to the next higher level airway endoscopy APC
to improve the resource homogeneity of all the procedures assigned to
the airway endoscopy APCs. We do not agree with the commenter

[[Page 70381]]

that the procedure described by CPT code 31515 should be assigned to
the higher level APC 5154 instead of APC 5152. The geometric mean cost
of the procedure described by CPT code 31515 is approximately $444, and
the geometric mean cost of APC 5152 is approximately $393. The
geometric mean cost of APC 5154 is approximately $2,084. We believe
that, given the significant difference in resource use and similarity
between the procedure described by CPT code 31515 and the procedures
assigned to APC 5154, assigning the procedure described by CPT code
31515 to APC 5154 would be an inappropriate APC assignment. We also
believe that, based on the clinical characteristics of the new airway
endoscopy procedure grouping described by CPT code 31653, the procedure
is most appropriately assigned to APC 5154, which is one level higher
than what was proposed. In addition, we do not believe it is necessary
to create a sixth level to the Airway Endoscopy APC grouping to
appropriately pay for the procedures described by CPT codes 31636,
31634, and 31647. The procedures described by these CPT codes are low
volume procedures, and even if the procedures represented a significant
volume in the CY 2014 claims data, assigning these procedures to APC
5155 would not result in a violation of the 2 times rule for the APC.
Table 22 below shows the airway endoscopy procedure codes with the
commenters' specific APC recommendations and the final CMS decisions,
final APC assignment, and final status indicator assignment for CY
2016.

Table 22--Airway Endoscopy Procedure Codes With Commenters' Specific APC Recommendations and Final CMS Decisions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY Commenter Final CY Final CY
CPT/HCPCS code Short descriptor 2016 SI 2016 APC requested APC CMS Decision 2016 SI 2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
31295..................... Sinus endo w/balloon dil. T 5154 5155 Agree...................... T 5155
31296..................... Sinus endo w/balloon dil. T 5154 5155 Agree...................... T 5155
31297..................... Sinus endo w/balloon dil. T 5154 5155 Agree...................... T 5155
31515..................... Laryngoscopy for T 5152 5154 Disagree................... T 5152
aspiration.
31626..................... Bronchoscopy w/markers... T 5154 5155 Agree...................... T 5155
31628..................... Bronchoscopy/lung bx each T 5153 5154 Agree...................... T 5154
31652 *................... Bronch ebus samplng 1/2 T 5153 5154 Agree...................... T 5154
node.
31653 **.................. Bronch ebus samplng 3/> T 5153 5154 Agree...................... T 5154
node.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CPT code 31652 will be effective January 1, 2016. This code was listed as code 3160A (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of
the CY 2016 OPPS/ASC proposed rule.
** CPT code 31653 will be effective January 1, 2016. This code was listed as code 3160B (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of
the CY 2016 OPPS/ASC proposed rule.

Comment: One commenter requested that CMS assign status indicator
``T'' (instead of status indicator ``N'') to new CY 2016 CPT codes
0406T (Nasal endoscopy, surgical, ethmoid sinus, placement of drug
eluting implant) and 0407T (Nasal endoscopy, surgical, ethmoid sinus,
placement of drug eluting implant; with biopsy, polypectomy or
debridement). (We note that CPT codes 0406T and 0407T were listed as
040XF and 040XG, respectively, in Addendum B, O, and Q2 of the CY 2016
OPPS/ASC proposed rule.) The commenter suggested, as an alternative,
that these codes be assigned status indicator ``Q2'' (T-packaged). In
addition, the commenter recommended that CMS assign CPT code 0406T to
APC 5153 and CPT code 0407T to APC 5154. The commenter believed that
these procedures should be paid separately under the OPPS because they
are performed as standalone surgical procedures according to the code
descriptors.
Response: We disagree with the commenter that the procedures
described by CPT codes 0406T and 0407T are performed as standalone
procedures. We believe that procedures describing the placement of a
drug-eluting sinus implant under the OPPS are performed as part of
several more comprehensive and extensive endoscopic sinus surgical
procedures. Therefore, we are finalizing our proposal to package
payment for the procedures described by CPT codes 0406T and 0407T, and
to assign these procedures to status indicator ``N'' for CY 2016.
After consideration of the public comments we received, we are
finalizing the proposed structure of the airway endoscopy APCs with the
code reassignments shown in Table 22 above. Table 23 below lists the
final CY 2016 APCs that result from our consolidation and restructuring
of the current airway endoscopy procedure APCs into a single APC
grouping. The procedures assigned to each APC are listed in Addendum B
to this final rule with comment period, which is available via the
Internet on the CMS Web site.

Table 23--Final CY 2016 Airway Endoscopy APCs
------------------------------------------------------------------------
Final CY 2016 APC CY 2016 APC group title
------------------------------------------------------------------------
5151.............................. Level 1 Airway Endoscopy.
5152.............................. Level 2 Airway Endoscopy.
5153.............................. Level 3 Airway Endoscopy.
5154.............................. Level 4 Airway Endoscopy.
5155.............................. Level 5 Airway Endoscopy.
------------------------------------------------------------------------

2. Cardiovascular Procedures and Services
a. Cardiac Contractility Modulation (CCM) Therapy
In Addendum B to the CY 2016 OPPS/ASC proposed rule, we proposed to
assign 11 new CY 2016 cardiac contractility modulation (CCM) therapy
system CPT codes to various APCs, which are listed in Table 24 below.
We also assigned these codes to comment indicator ``NP'' in Addendum B
to the proposed rule to indicate that the codes are new for CY 2016
with a proposed APC assignment and that public comments would be
accepted on their proposed APC assignments. We note these codes will be
effective January 1, 2016. However, in the proposed rule, the codes
were listed as 04XX1 through 04XX (the 5-digit CMS placeholder code) in
Addendum B, O, and Q2 of the CY 2016 OPPS/ASC proposed rule.

[[Page 70382]]

Table 24--Proposed CY 2016 OPPS APCs and Status Indicators for the Cardiac Contractility Modulation CPT
Procedure Codes
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2016 OPPS/ASC proposed 2016 OPPS Proposed CY
rule 5-digit CMS CY 2016 CPT code Short descriptor status 2016 OPPS APC
placeholder code indicator
----------------------------------------------------------------------------------------------------------------
04XX1...................... 0408T...................... Insj/rplc cardiac J1 5223
modulj sys.
04XX2...................... 0409T...................... Insj/rplc cardiac J1 5223
modulj pls gn.
04XX3...................... 0410T...................... Insj/rplc car modulj J1 5222
atr elt.
04XX4...................... 0411T...................... Insj/rplc car modulj J1 5222
vnt elt.
04XX5...................... 0412T...................... Rmvl cardiac modulj J1 5222
pls gen.
04XX6...................... 0413T...................... Rmvl car modulj Q2 5221
tranvns elt.
04XX7...................... 0414T...................... Rmvl & rpl car modulj J1 5224
pls gn.
04XX8...................... 0415T...................... Repos car modulj T 5181
tranvns elt.
04XX9...................... 0416T...................... Reloc skin pocket pls T 5054
gen.
04X10...................... 0417T...................... Prgrmg eval cardiac Q1 5741
modulj.
04X11...................... 0418T...................... Interro eval cardiac Q1 5741
modulj.
----------------------------------------------------------------------------------------------------------------

Comment: One commenter disagreed with CMS' proposed APC assignments
for certain cardiac contractility modulation (CCM) Category III CPT
codes that are new in CY 2016 and therefore do not have associated
claims data available. Specifically, the commenter requested four CPT
codes be reassigned to the following APCs:
CPT code 408T (Insertion or replacement of permanent
cardiac contractility modulation system, including contractility
evaluation when performed, and programming of sensing and therapeutic
parameters; pulse generator with transvenous electrodes) to APC 5232
(Level 2 ICD and Similar Procedures);
CPT code 0409T (Insertion or replacement of permanent
cardiac contractility modulation system, including contractility
evaluation when performed, and programming of sensing and therapeutic
parameters; pulse generator only) to APC 5231 (Level 1 ICD and Similar
Procedures);
CPT code 0412T (Removal of permanent cardiac contractility
modulation system; pulse generator only) to APC 5221 (Level 1 Pacemaker
and Similar Procedures); and
CPT code 0414T (Removal and replacement of permanent
cardiac contractility modulation system pulse generator only) to APC
5231 (Level 1 ICD and Similar Procedures).
The commenter believed that the three codes for inserting or
replacing the system or pulse generator are more similar clinically and
in device complexity and resource use to implantable cardioverter-
defibrillators (ICD) procedures. In addition, the commenter stated that
the procedure time and device costs for CCM procedures exceed those for
pacemaker procedures. The commenter believed the recommended APC
assignment for removal of the CCM pulse generator codes better aligns
with other similar removal procedure codes.
Response: We agree with the commenter that there would be greater
homogeneity, both clinically and in terms of resource use, by
reassigning CCM procedures for insertion and/or replacement of the CCM
device (described by CPT code 0409T) from the pacemaker APCs to the ICD
APCs. We also agree with the commenter that procedures for removal of
the CCM device (described by CPT codes 0412T and 0414T) are more
homogenous clinically and in terms of resource use with pacemaker
procedures. Therefore, we are accepting the commenter's recommendation
to reassign the procedures described by CPT codes 0409T and 0414T to
APC 5231 and to reassign the procedures described by CPT code 0412T to
APC 5221. However, we disagree with the commenter's recommendation to
reassign the procedure described by CPT 0408T to APC 5232. Based on the
latest available hospital claims data used for this final rule with
comment period, we believe that the procedure described by CPT code
0408T should be assigned to APC 5231 because of its clinical and
resource homogeneity with other procedures assigned to APC 5231. Table
24 below summarizes the commenter's requested APC assignment for each
of the codes along with our decision and the final APC and status
indicator assignments.

Table 24--Cardiac Contractility Modulation Procedure Codes With Commenter's Recommended Specific APC Assigment, Final CMS Decision, and Final APC and
Status Indicator Assignment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY Proposed Commenter Final CY
CPT/HCPCS code Short descriptor 2016 status CY 2016 requested CMS decision 2016 status Final CY
indicator APC APC indicator 2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
0408T....................... Insj/rplc cardiac modulj J1 5223 5232 Disagree.................... J1 5231
sys.
0409T....................... Insj/rplc cardiac modulj J1 5223 5231 Agree....................... J1 5231
pls gn.
0412T....................... Rmvl cardiac modulj pls gen J1 5222 5221 Agree....................... Q2 5221
0414T....................... Rmvl & rpl car modulj pls J1 5224 5231 Agree....................... J1 5231
gn.
--------------------------------------------------------------------------------------------------------------------------------------------------------

The final status indicator, APC assignment, and payment rate for
these codes, where applicable, can be found in Addendum B to this final
rule with comment period (which is available via the Internet on the
CMS Web site).
b. Cardiac Rehabilitation
Currently, there are four established CPT/HCPCS codes that describe
cardiac rehabilitation services:

[[Page 70383]]

CPT code 93797 (Physician or other qualified health care
professional services for outpatient cardiac rehabilitation; without
continuous ECG monitoring (per session));
CPT code 93798 (Physician or other qualified health care
professional services for outpatient cardiac rehabilitation; with
continuous ECG monitoring (per session));
HCPCS code G0422 (Intensive cardiac rehabilitation; with
or without continuous ECG monitoring with exercise, per session); and
HCPCS code G0423 (Intensive cardiac rehabilitation; with
or without continuous ECG monitoring without exercise, per session).
In CY 2015, we assigned all four of these codes to APC 0095
(Cardiac Rehabilitation), which has a geometric mean cost of
approximately $107. In the CY OPPS/ASC 2016 proposed rule, we discussed
that the costs for the two intensive cardiac rehabilitation codes had
increased, such that the geometric mean costs for the four cardiac
rehabilitation codes that we calculated based on the CY 2014 hospital
claims data available for the proposed rule were as follows: For CPT
code 93797, the geometric mean cost was approximately $102. For CPT
code 93798, the geometric mean cost was approximately $111. For HCPCS
code G0422, the geometric mean cost was approximately $262). For HCPCS
code G0423, the geometric mean cost was approximately $493. In the
proposed rule, we stated that if we grouped all four of these codes
into a single APC, a 2 times rule violation would result. Therefore, we
proposed two levels of cardiac rehabilitation for CY 2016: APC 5771
(Level 1 Cardiac Rehabilitation), which contained the two standard
cardiac rehabilitation codes (CPT codes 93797 and 93798); and APC 5772
(Level 2 Cardiac Rehabilitation), which contained the two intensive
cardiac rehabilitation codes (HCPCS codes G0422 and G0423).
Our analysis of the latest CY 2014 hospital claims data available
for this final rule with comment period revealed that the geometric
mean costs of the intensive cardiac rehabilitation codes have decreased
to levels that are more consistent with the prior year's geometric mean
costs for these codes. The geometric mean costs for the four codes,
using the latest available final rule claims data, are as follows: For
CPT code 93797, the geometric mean cost is approximately $100. For CPT
code 93798, the geometric mean cost is approximately $109. For HCPCS
code G0422, the geometric mean cost is approximately $149. For HCPCS
code G0423, the geometric mean cost is approximately $158. Therefore,
because the geometric mean costs for all four codes based on the latest
available final rule data are relatively similar, we believe that the
current CY 2015 single APC configuration for cardiac rehabilitation is
more appropriate than the two levels we proposed for CY 2016 and
ensures that the procedures assigned to the APC do not cause a
violation of the 2 times rule. Analysis using the latest available
final rule claims data showed that the 2 time rule violation that
existed with the data for the proposed rule no longer exists.
Therefore, for CY 2016, we are assigning all four of the cardiac
rehabilitation codes (CPT codes 93797 and 93798 and HCPCS code G0422
and G0423) to new APC 5771 (Cardiac Rehabilitation), with a geometric
mean cost of approximately $109.
c. Cardiac Telemetry
For CY 2016, we proposed to reassign the procedure described by CPT
code 93229 (External mobile cardiovascular telemetry with
electrocardiographic recording, concurrent computerized real time data
analysis and greater than 24 hours of accessible ECG data storage
(retrievable with query) with ECG triggered and patient selected events
transmitted to a remote attended surveillance center for up to 30 days;
technical support for connection and patient instructions for use,
attended surveillance, analysis and transmission of daily and emergent
data reports as prescribed by a physician or other qualified health
care professional) from APC 0213 (Level 1 Extended EEG, sleep, and
Cardiovascular Studies) to proposed APC 5722 (Level 2 Diagnostic Tests
and Related Services), with a proposed payment rate of approximately
$220.
Comment: One commenter disagreed with the proposed APC assignment
for the procedure described by CPT code 93229 to proposed APC 5722. The
commenter stated that the proposed payment rate for APC 5722 does not
accurately reflect the full cost of providing the service described by
CPT code 93229. The commenter also stated that hospitals are miscoding
the service, and as a result, the proposed payment for this service is
significantly understated. The commenter noted that, based on its
internal analysis, several hospitals reported costs under $100 for
services described by CPT code 93229. The commenter stated that when
this service is provided under the MPFS, the payment is valued at
$680.05. The commenter believed that the true cost of providing this
service is closer to $795, and recommended that CMS reassign the
services described by CPT code 93229 to proposed APC 5724 (Level 4
Diagnostic Tests and Related Services), with a proposed payment rate of
approximately $880.
Response: As we stated in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66847), CPT code 93229 became effective January
1, 2009. We believe that 5 years is sufficient time for hospital coders
to understand the procedure described by CPT code 93229 and how to
appropriately report this service on hospital claims. Based on our
analysis of the CY 2014 hospital outpatient claims data used for this
final rule with comment period, we are unable to determine whether
hospitals are miscoding the service described by CPT code 93229. It is
generally not our policy to judge the accuracy of hospital coding and
charging for purposes of ratesetting (75 FR 71838). We rely on
hospitals to accurately report the use of HCPCS codes in accordance
with their code descriptors and CPT and CMS instructions, as
applicable, and to report services on claims and charges and costs for
the services on their Medicare hospital cost report appropriately.
However, we do not specify the methodologies that hospitals use to set
charges for this or any other service.
We acknowledge that payment under the MPFS is made separately for
the procedure described by CPT code 93229. However, the MPFS and the
OPPS are different payment systems with entirely different ratesetting
methodologies. Each is established under a different set of regulatory
and statutory principles and the policies established under the
physician fee schedule do not have bearing on the payment policies
under the OPPS. For example, the OPPS uses actual annual hospital
claims data to calculate payment rates, while the MPFS relies on
estimates of relative value units (RVUs) from the American Medical
Association/Specialty Society Relative Value Update Committee (RUC).
Furthermore, as has been our practice since the implementation of
the OPPS in 2000, we review, on an annual basis, the APC assignments
for the procedures and services paid under the OPPS. Based on the
latest hospital outpatient claims data used for this final rule with
comment period, our analysis does not support the assignment of the
procedure described by CPT code 93229 to APC 5724. We examined the
latest hospital outpatient claims data for CPT code 93229 for dates of
service between January 1, 2014, and December 31, 2014, that were
processed on or before June 30, 2014. Our analysis of the claims data

[[Page 70384]]

shows a geometric mean cost of approximately $170 for CPT code 93229
based on 2,153 single claims (out of 3,554 total claims). We do not
believe that it is appropriate to assign CPT code 93229 to APC 5724
because its geometric mean cost is approximately $896, which is
significantly higher than the geometric mean cost of approximately $170
for CPT code 93229, and assigning CPT code 93229 to APC 5724 would
result in an overpayment for the procedure. We believe that APC 5722 is
the most appropriate APC assignment for the procedure described by CPT
code 93229 based on its clinical and resource homogeneity to the other
diagnostic tests and procedures assigned to this APC.
After consideration of the public comment we received, we are
finalizing our proposal, without modification, to reassign the
procedure described by CPT code 93229 to APC 5722 for CY 2016. The
final payment rate for CPT code 93229 can be found in Addendum B to
this final rule with comment period, which is available via the
Internet on the CMS Web site.
3. Diagnostic Tests and Related Services
As a part of our CY 2016 comprehensive review of the structure of
the APCs and procedure code assignments, we examined the APCs that
contain diagnostic tests and related services. For CY 2016, we proposed
to restructure the OPPS APC groupings for diagnostic tests and related
services to more appropriately reflect the costs and clinical
characteristics of the services within each APC grouping in the context
of the OPPS. The current APCs for diagnostic tests and related services
are divided according to organ system or physiologic test type. After
reviewing these APCs, we believe that the current APC structure is
based on clinical categories that do not necessarily reflect the
significant differences in the delivery of these services in the HOPD.
The current level of granularity for these APCs results in groupings
that are unnecessarily narrow for the purposes of a prospective payment
system. Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39258),
for CY 2016, we proposed to restructure and consolidate the APCs that
include diagnostic tests and related services. We believe that this
proposed restructuring and consolidation of APCs into larger APC
groupings would more appropriately reflect a prospective payment system
that is based on payment groupings and not code-specific payment rates,
while maintaining clinical and resource homogeneity. Table 20 of the
proposed rule listed the current CY 2015 APCs that contain nonimaging
diagnostic tests, and Table 21 of the proposed rule listed the CY 2016
APCs that would result from our proposed consolidation and
restructuring of the current diagnostic test and related services APCs.
We invited public comments on this proposal.
Comment: A few commenters requested that CMS unpackage the payment
for cochlear implant procedures described by CPT codes 92601 through
92604, and the procedures for programming an auditory brainstem implant
described by CPT code 92640, and to assign these procedure codes to
status indicator ``S'' instead of status indicator ``Q1.'' The
commenters stated that these services are independent evaluations that
are generally not related to other diagnostic tests or therapeutic
services. Instead, according to these commenters, these procedures are
very specific services used in the treatment for a limited population
of patients with cochlear implants. One commenter provided a summary of
an analysis of the claims data that it believed supports the position
that payment for these services are often packaged with other unrelated
OPPS services. One commenter requested that CMS unpackage the payment
for procedures described by CPT code 92557 (Comprehensive audiometry
threshold evaluation and speech recognition (92553 and 92556)) because
payments for these procedures are packaged with payment for other
unrelated services a majority of the time.
Response: We agree with the commenters regarding the cochlear
implant procedures described by CPT codes 92601 through 92604 and CPT
code 92640. After further review of the clinical context in which these
services are performed in the HOPD, we believe that separate payment
(identified by status indicator ``S'') for these services is more
appropriate than a conditional packaged payment triggered by status
indicator ``Q1.'' Therefore, we are changing the status indicator
assignments for these five procedure codes from ``Q1'' to ``S'' for CY
2016.
With regard to the procedure described by CPT code 92557, we
disagree with the commenter. We believe that audiometry is an ancillary
diagnostic test that is appropriately conditionally packaged similar to
many other diagnostic tests. Hearing loss has multiple potential
etiologies and an evaluation of the auditory system is an important
part of various diagnostic tests. It is not relevant that this service
is performed by an audiologist because several different kinds of
services are performed in the HOPD by various health care
professionals, depending upon their area of expertise. In addition, the
professional that performs the service is not a prerequisite for
payment packaging determinations. We note that, under the hospital
OPPS, when a conditionally packaged service is performed on a different
date of service and separate from other services, it is paid
separately.
Comment: One commenter supported the proposed restructuring of the
diagnostic test APCs. However, the commenter suggested that, because
the procedures assigned to APC 5761 (Level 1 Audiometry) and APC 5762
(Level 2 Audiometry) are diagnostic tests, these procedures should be
assigned to either the newly reorganized diagnostic test APCs or to one
of the minor procedure APCs to which similar procedure are assigned.
Response: We agree, in principle, with the commenter that it would
be consistent with the new diagnostic test APCs structure, which
includes all forms of diagnostic tests except audiometry, to also
assign the audiometry procedure codes in the two audiometry APCs to one
of the diagnostic test APCs or, in some cases, to one of the minor
procedure APCs. Therefore, for CY 2016, we are reassigning all of the
procedures in APCs 5761 and 5762 as shown in Table 25 below. In
addition, we are deleting APCs 5761 and 5762. In Table 25 below, we
summarize the commenter's requested APC assignment for each of the
procedure codes along with our decision and the final APC assignment.

Table 25--Reassignment of Codes Currently Assigned to Level 1 and 2 Audiometry
----------------------------------------------------------------------------------------------------------------
Proposed CY Final CY 2016
CPT/HCPCS code 2016 APC Commenter/requested APC CMS decision APC
----------------------------------------------------------------------------------------------------------------
0208T..................... 5761 No Recommendation........ N/A...................... 5732
0209T..................... 5761 No Recommendation........ N/A...................... 5732

[[Page 70385]]

0210T..................... 5761 No Recommendation........ N/A...................... 5732
0211T..................... 5761 No Recommendation........ N/A...................... 5732
0212T..................... 5762 No Recommendation........ N/A...................... 5721
92550..................... 5762 5721..................... Agree.................... 5721
92552..................... 5762 5721..................... Disagree................. 5734
92553..................... 5762 No Recommendation........ N/A...................... 5721
92555..................... 5761 5732..................... Agree.................... 5732
92556..................... 5761 5732..................... Agree.................... 5732
92557..................... 5762 5721 or 5722............. Agree.................... 5721
92561..................... 5762 5734..................... Agree.................... 5734
92562..................... 5762 5721..................... Agree.................... 5721
92563..................... 5761 No Recommendation........ N/A...................... 5732
92564..................... 5761 No Recommendation........ N/A...................... 5732
92565..................... 5761 5732..................... Agree.................... 5732
92567..................... 5761 5732..................... Agree.................... 5732
92570..................... 5762 5721..................... Agree.................... 5721
92571..................... 5761 No Recommendation........ N/A...................... 5732
92572..................... 5762 No Recommendation........ N/A...................... 5721
92575..................... 5761 No Recommendation........ N/A...................... 5732
92576..................... 5761 5732..................... Agree.................... 5732
92577..................... 5762 5721..................... Disagree................. 5723
92579..................... 5762 5721..................... Agree.................... 5721
92582..................... 5762 5721..................... Agree.................... 5721
92583..................... 5761 5732..................... Agree.................... 5732
92596..................... 5761 5732..................... Agree.................... 5732
92601..................... 5762 5721 or 5722............. Agree.................... 5721
92602..................... 5762 5721 or 5722............. Agree.................... 5721
92603..................... 5762 5721 or 5722............. Agree.................... 5721
92604..................... 5762 5721 or 5722............. Agree.................... 5721
92620..................... 5762 5721..................... Agree.................... 5721
92625..................... 5762 5721..................... Agree.................... 5721
92626..................... 5762 5721..................... Agree.................... 5721
92640..................... 5762 5721or 5722.............. Agree.................... 5721
92700..................... 5761 5732..................... Disagree................. 5731
----------------------------------------------------------------------------------------------------------------

We note that, for each of the procedure codes with which we
disagree with the commenter's requested APC assignment, we believe that
the final APC assignment is more appropriate based on the greater
similarity of resource use.
Comment: One commenter requested that CMS reassign the procedures
described CPT codes 95909 (Nerve conduction studies; 5-6 studies) and
95910 (Nerve conduction studies; 7-8 studies) from APC 5722 to APC 5723
based on the procedures' similar resource use when compared to the
resource use for the procedure described by CPT code 95961 (Functional
cortical and subcortical mapping by stimulation and/or recording of
electrodes on brain surface, or of depth electrodes, to provoke
seizures or identify vital brain structures; initial hour of attendance
by a physician or other qualified health care professional).
Response: We disagree with the commenter. The procedure described
by CPT code 95909 has a geometric mean cost of approximately $221 and
the procedure described by CPT code 95910 has a geometric mean cost of
approximately $275. The procedure described by CPT code 95961 has a
geometric mean cost of approximately $2,143 based on 4 single claims.
Based on the latest hospital outpatient claims data used for this final
rule with comment period, the geometric mean costs of the procedures
described by CPT codes 95909 and 95910 are not comparably similar to
the geometric mean cost of the procedure described by CPT code 95961.
Therefore, we are not reassigning the procedures described by CPT codes
95909 and 95910 to APC 5723, as the commenter suggested.
Comment: One commenter requested that the procedures described by
CPT codes 95965 (Magnetoencephalography (MEG), recording and analysis;
for spontaneous brain magnetic activity (e.g., epileptic cerebral
cortex localization)) and 95966 (Magnetoencephalography (MEG),
recording and analysis; for evoked magnetic fields, single modality
(e.g., sensory, motor, language, or visual cortex localization)) be
reassigned to an APC other than the proposed APC 5724. Although the
commenter believed that MEG procedures are not clinically similar to
the other procedures assigned to APC 5724, the commenter did not
specify to which APC it believed these procedures should be assigned.
Response: We disagree with the commenter. MEG procedures are
neurological diagnostic tests and are assigned to an APC with other
neurological diagnostic tests with comparably similar geometric mean
costs. In addition, these procedures are currently assigned to the
highest level APC, specifically APC 5724 (Level 4 Diagnostic Tests and
Related Services), in the diagnostic tests APC series. We do not
believe that there is a more appropriate APC assignment for MEG
procedures. Therefore, we are finalizing our proposal to assign the MEG
CPT codes 95965 and 95966 to APC 5724 for CY 2016.
Comment: One commenter requested that CMS assign the procedures
described by CPT codes 95800 (Sleep study, unattended, simultaneous
recording; heart rate, oxygen saturation, respiratory analysis (e.g.,
by airflow or peripheral arterial tone), and sleep time) and 95806
(Sleep study, unattended, simultaneous recording of, heart rate, oxygen
saturation, respiratory airflow, and respiratory effort (e.g.,
thoracoabdominal movement) to APC

[[Page 70386]]

5722 (Level 2 Diagnostic Tests & Related Services), based on
similarities in clinical characteristics and resource use to other
procedures assigned to APC 5722. The commenter also requested that CMS
assign CPT code 95801 (Sleep study, unattended, simultaneous recording;
minimum of heart rate, oxygen saturation, and respiratory analysis
(e.g., by airflow or peripheral arterial tone)) to APC 5721 (Level 1
Diagnostic Tests & Related Services), based on similarity in clinical
characteristics and resource use to other procedures assigned to APC
5721. Other commenters requested that CMS assign the procedures
described by CPT codes 95805 (Multiple sleep latency or maintenance of
wakefulness testing, recording, analysis and interpretation of
physiological measurements of sleep during multiple trials to assess
sleepiness) and 95782 (Polysomnography; younger than 6 years, sleep
staging with 4 or more additional parameters of sleep, attended by a
technologist) to APC 5724 (Level 4 Diagnostic Tests & Related
Services), based on similarities in clinical characteristics and
resource use to the other procedures assigned to APC 5724.
Response: We agree with the commenters' recommendation on the APC
assignment of the procedures described by CPT codes 95805 and 95782. We
believe that APC 5724 is a more appropriate APC group assignment for
these codes based on similarities in clinical characteristics and
resource use to the other procedures assigned to APC 5724 (as opposed
to the proposed assignment to APC 5723). However, we disagree with the
commenters' recommendation for the APC assignment for CPT codes 95800,
95801, and 95806; we believe that the proposed APC assignments are most
appropriate based on similarities in clinical characteristics and
resource use.
After consideration of the public comments we received, we are
finalizing for CY 2016 the proposed APC structure for the diagnostic
tests APCs, which is displayed in Table 26 below. The procedures
assigned to each APC are listed in Addendum B to this final rule with
comment period, which is available via the Internet on the CMS Web
site.

Table 26--CY 2016 Diagnostic Tests and Related Services APCs
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5721.............................. Level 1 Diagnostic Tests and Related
Services.
5722.............................. Level 2 Diagnostic Tests and Related
Services.
5723.............................. Level 3 Diagnostic Tests and Related
Services.
5724.............................. Level 4 Diagnostic Tests and Related
Services.
------------------------------------------------------------------------

4. Excision/Biopsy and Incision and Drainage Procedures
As a part of our CY 2016 comprehensive review of the structure of
the APCs and procedure code assignments, we examined the APCs for
incision and drainage procedures as well as excision/biopsy procedures.
The current APC structure for these procedures is organized into two
series: Incision and drainage procedures; and excision/biopsy
procedures.
Based on our evaluation of the current APC structure and the latest
hospital outpatient claims data available for the CY 2016 OPPS/ASC
proposed rule, in the proposed rule (80 FR 39259), we proposed to
reconfigure the structure of these APCs by combining the incision and
drainage procedures with the excision/biopsy procedures to more
accurately reflect the resource costs and clinical characteristics of
the procedures within each APC. Many of the procedures assigned to
these two series are clinically similar. Therefore, we believe that a
single series encompassing incision and drainage procedures and
excision/biopsy procedures groups clinically similar procedures without
unnecessary granularity. We stated in the proposed rule that we believe
that the proposed consolidation and restructuring of these APCs would
more appropriately reflect a prospective payment system that is based
on payment for APC groupings with clinically similar procedures while
maintaining resource homogeneity. Moreover, we believe that the
proposed APC groupings would more accurately accommodate and align new
services paid under the hospital OPPS within clinical APCs that contain
services with similar clinical attributes and resource costs.
Therefore, for CY 2016, we proposed to consolidate and restructure the
APCs that describe incision and drainage procedures as well as the
excision/biopsy procedures by combining these procedures into a single
APC series. Table 22 of the proposed rule listed the current CY 2015
APCs that contain the incision and drainage procedures and the
excision/biopsy procedures, and Table 23 of the proposed rule listed
the CY 2016 APCs that would result from the consolidating and
restructuring of the APCs into a single APC series. We invited public
comments on this proposal.
Comment: Commenters generally supported the proposed APC
reconfiguration and consolidation for the incision and drainage and
excision/biopsy APCs. However, some commenters expressed concerns
regarding the APC assignment for the procedures described by the
following 19 CPT codes included in the proposed reconfiguration:
CPT code 10080 (Incision and drainage of pilonidal cyst;
simple);
CPT code 10081 (Drainage of pilonidal cyst; complicated);
CPT code 11603 (Excision, malignant lesion including
margins, trunk, arms, or legs; excised diameter 2.1 to 3.0 cm);
CPT code 11641 (Excision, malignant lesion including
margins, face, ears, eyelids, nose, lips; excised diameter 0.6 to 1.0
cm);
CPT code 11642 (Excision, malignant lesion including
margins, face, ears, eyelids, nose, lips; excised diameter 1.1 to 2.0
cm);
CPT code 11750 (Excision of nail and nail matrix, partial
or complete (e.g., ingrown or deformed nail), for permanent removal);
CPT code 15782 (Dermabrasion; regional, other than face;
CPT code 15999 (Unlisted procedure, excision pressure
ulcer);
CPT code 21725 (Division of sternocleidomastoid for
torticollis, open operation; with cast application);
CPT code 21930 (Excision, tumor, soft tissue of back or
flank, subcutaneous; less than 3 cm);
CPT code 23931 (Incision and drainage, upper arm or elbow
area; bursa);
CPT code 35206 (Repair blood vessel lesion);
CPT code 35226 (Repair blood vessel, direct; lower
extremity);
CPT code 38300 (Drainage of lymph node abscess or
lymphadenitis, simple);
CPT code 47399 (Unlisted procedure, liver);
CPT code 48999 (Unlisted procedure, pancreas);
CPT code 57022 (Incision and drainage of vaginal hematoma;
obstetrical/postpartum);
CPT code 62269 (Biopsy of spinal cord, percutaneous
needle);and
CPT code 69005 (Drain external ear, abscess or hematoma;
complicated).
The commenters recommended that CMS reassign these 19 procedure
codes to a higher level APC based on similarity in clinical
characteristics.

[[Page 70387]]

Response: Based on our analysis of the latest hospital outpatient
claims data used for this final rule with comment period, we agree with
the commenters' recommendations for APC assignment for the procedures
described by the following CPT codes: 11603; 21930; 23931; 57022; and
62269. However, we do not agree with the commenters' recommendations to
reassign the procedures described by the following CPT codes because
our final rule claims data show that the resource costs of these
procedures are not comparable to the resource costs of other procedures
in the APCs recommended: 10080; 11641; 11642; 11750; 15999; 21725;
35226; 47399; and 48999.
As indicated above, several of the CPT codes recommended by the
commenters describe unlisted procedures. We remind readers that, as a
matter of established OPPS policy described in the CY 2005 OPPS final
rule with comment period (69 FR 65724 through 65725), we assign all
unlisted CPT/HCPCS codes, such as CPT codes 15999, 47399, and 48999, to
the lowest level APC within the appropriate clinical category. By
definition, ``unlisted,'' ``unclassified,'' ``not otherwise
specified,'' or ``not otherwise classified'' codes do not describe the
services being performed, and the services coded using ``unlisted''
codes vary over time as new CPT and HCPCS codes are developed.
Therefore, it is impossible for any level of analysis of past hospital
claims data to support appropriate assignment of the service for the
upcoming year to an APC in which there is clinical and resource
integrity of the groupings and relative weights. We continue to believe
that the appropriate default APC assignment, in the absence of a code
that describes the service being furnished, is the lowest level APC
within the clinical category to which the unlisted code is assigned.
The assignment of the unlisted codes to the lowest level APC in the
clinical category provides a reasonable means for payment for the
service until there is a code that specifically describes the procedure
or service. In addition, we believe that this policy encourages the
creation of codes where appropriate and ensures that overpayment for
services that are not clearly identified on the claim does not occur.
Our assignment of CPT codes 15999, 47399, and 48999 to APC 5071 (Level
1 Excision/Biopsy/Incision and Drainage) is consistent with this
policy. The hospital cost data for unlisted CPT/HCPCS codes are not
used for ratesetting and, furthermore, the costs of unlisted CPT/HCPCS
codes are not subject to the 2 times rule. For further information on
the 2 times rule, we refer readers to sections III.B.2 and 3. of this
final rule with comment period.
Comment: One commenter specifically recommended that CMS assign the
following CPT codes from APC 5071 to APC 5073 (Level 3 Excision/Biopsy/
Incision and Drainage): 15782 (Dermabrasion; regional, other than
face); 38300 (Drainage of lymph node abscess or lymphadenitis; simple);
and 69005 (Drainage external ear, abscess or hematoma; complicated).
Response: As listed in the OPPS Addendum B of the proposed rule, we
proposed to reassign the procedure described by CPT code 15782 to APC
5072 (Level 2 Excision/Biopsy/Incision and Drainage), not to APC 5071
as the commenter stated. In addition, as listed in the OPPS Addendum B
of the proposed rule, we proposed to assign the procedures described by
CPT codes 38300 and 69005 to APC 5071.
Based on our analysis of the latest hospital outpatient claims data
used for this final rule with comment period, we disagree with the
commenter's suggested APC assignment. Our analysis of the latest
hospital outpatient claims data used for this final rule reveal that
these three procedures would be more appropriately reassigned to APC
5074 (Level 4 Excision/Biopsy/Incision and Drainage), rather than APC
5071, based on their clinical and resource homogeneity to the other
procedures assigned to APC 5074. We note that APC 5074 is the highest
level APC within this group. Consequently, we are finalizing our
proposal, with modification, to reassign the procedures described by
CPT codes 15782, 38300, and 69005 to APC 5074 for CY 2016.
Comment: Some commenters specifically agreed with the proposed APC
assignment for the excision/biopsy and incision and drainage procedures
described by CPT codes10081 (Incision and drainage of pilonidal cyst;
complicated) and 35206 (Repair blood vessel, direct; upper extremity),
and requested that CMS finalize them for CY 2016.
Response: We appreciate the commenters' support and are finalizing
our proposed APC assignments for CPT codes 10081 and 35206 for CY 2016
in this final rule with comment period.
After consideration of the public comments we received, we are
finalizing our proposed APC reconfiguration for the excision/biopsy and
incision and drainage APCs. In addition, we are finalizing the proposed
APC assignments for the procedures within the excision/biopsy and
incision and drainage APCs, with modifications to the APC assignment
for CPT codes 11603, 15782, 21930, 23931, 38300, 57022, 62269, and
69005. Table 27 below lists the 19 CPT codes, the commenters' requested
APC assignments, CMS' final decision, the final status indicators, and
the final APC assignments for CY 2016.

Table 27--Excision/Biopsy and Incision and Drainage Procedure Codes With Commenters' Specific APC Recommendations, Final CMS Decisions, Final Status
Indicators, and Final APC Assignment for CY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY Commenters' Final CY Final CY
CPT/HCPCS code Short descriptor 2016 SI 2016 APC requested APC CMS decision 2016 SI 2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
10080..................... Drainage of pilonidal T 5071 5072 Disagree................... T 5071
cyst.
10081..................... Drainage of pilonidal T 5072 5072 Agree...................... T 5072
cyst.
11603..................... Exc tr-ext mal+marg 2.1-3 T 5072 5073 Agree...................... T 5073
cm.
11641..................... Exc f/e/e/n/l mal+mrg 0.6- T 5072 5073 Disagree................... T 5072
1.
11642..................... Exc f/e/e/n/l mal+mrg 1.1- T 5072 5073 Disagree................... T 5072
2.
11750..................... Removal of nail bed...... T 5071 5072 Disagree................... T 5071
15782..................... Dermabrasion other than T 5072 5073 Disagree................... T 5074
face.
15999..................... Removal of pressure sore. T 5071 5074 Disagree................... T 5071
21725..................... Revision of neck muscle.. T 5071 5121 Disagree................... T 5071
21930..................... Exc back les sc <3 cm.... T 5073 5074 Agree...................... T 5074
23931..................... Drainage of arm bursa.... T 5071 5074 Agree...................... T 5074
35206..................... Repair blood vessel T 5182 5182 Agree...................... T 5182
lesion.
35226..................... Repair blood vessel T 5072 5182 Disagree................... T 5072
lesion.
38300..................... Drainage lymph node T 5071 5073 Disagree................... T 5074
lesion.

[[Page 70388]]

47399..................... Liver surgery procedure.. T 5071 5074 Disagree................... T 5071
48999..................... Pancreas surgery T 5071 5074 Disagree................... T 5071
procedure.
57022..................... I & d vaginal hematoma pp T 5071 5074 Agree...................... T 5074
62269..................... Needle biopsy spinal cord T 5071 5073 Agree...................... T 5073
69005..................... Drain external ear lesion T 5071 5073 Disagree................... T 5074
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 28 below lists the CY 2016 APCs that result from the
consolidating and restructuring of the APCs into a single APC series.
The final payment rates for the specific CPT codes for incision and
drainage procedures and excision/biopsy procedures are included in
Addendum B to this final rule with comment period. The final payment
rates for the specific APCs to which these procedures are assigned are
included in Addendum A to this final rule with comment period. Both
OPPS Addenda A and B are available via the Internet on the CMS Web
site.

Table 28--Final CY 2016 APCs for Excision/Biopsy/Incision and Drainage
Procedures
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC group title
------------------------------------------------------------------------
5071.............................. Level 1 Excision/Biopsy/Incision and
Drainage.
5072.............................. Level 2 Excision/Biopsy/Incision and
Drainage.
5073.............................. Level 3 Excision/Biopsy/Incision and
Drainage.
5074.............................. Level 4 Excision/Biopsy/Incision and
Drainage.
------------------------------------------------------------------------

5. Eye Surgery and Other Eye-Related Procedures
a. Implantable Miniature Telescope (CPT Code 0308T)
CPT code 0308T (Insertion of ocular telescope prosthesis including
removal of crystalline lens or intraocular lens prosthesis) is a
relatively new procedure. This code became effective in CY 2013. The
procedure is a cataract (or IOL) extraction with the implantation of a
special kind of IOL, the Implantable Miniature Telescope (IMT), which
has the appearance of an IOL with a thick central optic. The payment
rate for this procedure in CY 2014 was approximately $15,551, and in CY
2015, the payment rate for this procedure is approximately $23,084. The
proposed CY 2016 payment rate is approximately $11,680. CPT code 0308T
is the only code assigned to APC 5494 (Level 4 Intraocular Procedures),
which is a C-APC. In the latest final rule CY 2014 claims data, there
are 40 total claims and 39 single claims. This is a low volume
procedure, in part because most of the cases (like most cataract
surgery) are performed in an ASC.
Comment: One commenter believed that the significant payment rate
decrease from CY 2015 to the proposed 2016 rate is due to some
hospitals submitting miscoded claims that have relatively low
associated costs. The commenter asserted that some hospitals are
reporting CPT code 0308T for procedures other than IMT implantation,
and that these miscoded claims have costs that are much lower than the
cost of the procedure described by CPT code 0308T. The commenters
stated that the evidence to support its assertion is the presence of
non-macular degeneration diagnosis codes on these purportedly miscoded
claims (geographic atrophy from end-stage macular degeneration is the
indication for the IMT). The commenter also believed that the hospitals
that submitted the miscoded claims do not perform any IMT surgery. The
commenter requested that CMS exclude these miscoded claims from the
claims data in calculating the CY 2016 payment rate for the procedure
described by CPT code 0308T. Alternatively, the commenter requested
that CMS invoke the equitable adjustment authority under section
1833(t)(2)(E) of the Act and base the payment rate for the procedure
described by CPT code 0308T on the median cost for all of the claims
instead of the geometric mean cost. The commenter believed that,
because the median cost is less sensitive to extreme observations (such
as claims with very low cost or very high cost), the median cost should
be used to calculate the payment rate for the procedure described by
CPT code 0308T, which has a low total claims volume. The commenter
stated that using the median cost instead of the geometric mean cost
would dampen the negative effect of the claims with very low cost and
mitigate the payment reduction from CY 2015 for the procedure described
by CPT code 0308T.
Response: We understand that when there are a very low volume of
claims in the dataset, each claim has a greater effect on the geometric
mean cost, as compared to a medium or large volume of claims in the
dataset. Regarding the request that we exclude certain claims that the
commenter argued are miscoded and contain inaccurate cost information,
we reiterate our position on this matter in an earlier rule: ``Beyond
our standard OPPS trimming methodology . . . that we apply to those
claims that have passed various types of claims processing edits, it is
not our general policy to judge the accuracy of hospital coding and
charging for purposes of ratesetting'' (75 FR 71838). We generally do
not remove claims from the claims accounting when stakeholders believe
that hospitals included incorrect information on some claims.
Therefore, we are not excluding claims from the ratesetting calculation
for the procedure described by CPT code 0308T for CY 2016.
However, we agree with the commenter that, given the very low
volume of claims for this relatively high-cost device intensive
surgical procedure (that is the only procedure assigned to APC 5494),
the median cost would be a more appropriate measure of the central
tendency for purposes of calculating the cost and the payment rate for
the procedure described by CPT code 0308T. The median cost is impacted
to a lesser degree than the geometric mean cost by more extreme
observations. Therefore, for CY 2016, we are using our equitable
adjustment authority under section 1833(t)(2)(E) of the Act to use the
median cost to calculate the payment rate for the procedure described
by CPT code 0308T, which is the only code assigned to APC 5494. The
median cost of the procedure described by CPT code 0308Tis $18,365, and
the geometric mean cost is $13,833. Unlike the retinal prosthesis
procedure, the procedure

[[Page 70389]]

described by CPT code 0308T has a low volume of claims data upon which
to base a payment rate. This procedure also differs from other
procedures for which we have not taken further measures when
stakeholders believe that incorrect hospital coding negatively affected
payment rates, because it is not grouped to an APC with procedures that
have robust claims data upon which an APC geometric mean cost can be
calculated. In future rulemaking, we will consider proposing a general
policy for the payment rate calculation for very low-volume device-
intensive APCs similar to APC 5494.
b. Other Ocular Procedures
Comment: A few commenters were concerned that the current structure
of APC 5492 (Level 2 Intraocular Procedures) results in inadequate
payment for certain procedures assigned to APC 5492. In particular,
these commenters were primarily concerned about the procedure described
by CPT code 66180, which, beginning in CY 2015, represented an overall
procedure that was formerly represented by two separate codes, one code
for the shunt placement and one code for the graft placement. The
commenters requested that CMS reexamine the intraocular procedures
series of APCs and the code assignments and consider alternatives that
would provide a payment that was more reflective of the costs of the
higher cost procedures currently assigned to APC 5492. Two commenters
requested that CMS create a new APC with a mean cost between that of
APC 5492 and APC 5493, and assign the procedure described by CPT code
66180 to this new APC.
Response: We reexamined the procedure code assignments and latest
claims data for the intraocular procedures series of four APCs. We do
not agree that an additional APC level within this series is warranted.
However, we do believe that reassigning some of the codes that were
proposed to be assigned to APC 5492 into APC 5491 results in a more
balanced APC 5491 (Level 1 Intraocular Procedures) and (Level 2
Intraocular Procedures). Therefore, we are reassigning all procedures
that were proposed to be assigned to Level 2 with a mean cost of less
than $3,000 to Level 1. This reassignment of procedure codes results in
a higher mean cost range for APC 5492 ($3,538 versus $3,438 in the
proposed rule).
Comment: One commenter requested that CMS reassign CPT code 0207T
(Evacuation of meibomian glands, automated, using heat and intermittent
pressure, unilateral) from APC 5732 (Level 2 Minor Procedures) to APC
5502 (Level 2 Extraocular, Repair, and Plastic Eye Procedures). The
commenter stated that the procedure described by CPT code 0207T is used
for patients with meibomian gland dysfunction. The commenter pointed
out that, for CY 2016, CPT code 0207T has nine single claims (29 total
claims) with a mean cost of $82.20; APC 5732 has a mean cost of $31.93;
and APC 5502 has a mean cost of $728.78. The commenter asserted that
most of the small number of claims filed for the procedure described by
CPT code 0207T was filed in error by a hospital that performed a
different procedure with significantly lower costs than the procedure
described by CPT code 0207T. The commenter requested that CMS exclude
these claims in our ratesetting calculation because it believed that
these claims were miscoded. The commenter believed that if CMS excluded
these incorrectly coded claims, the mean cost of the procedure
described by CPT code 0207T would be similar to the mean cost of the
procedures assigned to APC 5502. The commenter also stated that the
procedure described by CPT code 0207T is more appropriately assigned to
APC 5502 because APC 5502 contains procedures that focus on the eyelids
and ocular adnexa (as does the procedure described by CPT code like
0207T), while APC 5732 contains a variety of minor procedures, many of
which are not eye-related.
Response: We agree in part with the commenter. We agree that APC
5732 is not the most appropriate APC for the assignment of the
procedure described by CPT code 0207T. However, we believe that, based
on the mean cost of the claims for the procedure described by CPT code
0207T, APC 5734 (Level 4 Minor Procedures) is more appropriate from a
resource perspective than APC 5502 (with a mean cost of $728.78), which
is what the commenter requested. APC 5734 has a mean cost of $95.47,
which is close to the $82.20 mean cost of the procedure described by
CPT code 0207T. Clinically, although APC 5502 does contain primarily
eyelid procedures, these are surgical procedures assigned to the APC.
The procedure described by CPT code 0207T is not a surgical procedure.
The Minor Procedure series of four APCs (5731 through 5734) is not
limited to a particular anatomical region of the body. This series
contains some eye-related procedures as well as many other types of
procedures. All of the procedures assigned to one of the Minor
Procedure APCs are minor in nature and are relatively low cost.
Regarding the request by the commenter that we not use a subset of
claims in the claims ratesetting calculation for the procedure
described by CPT code 0207T, we again reiterate our position: ``Beyond
our standard OPPS trimming methodology . . . that we apply to those
claims that have passed various types of claims processing edits, it is
not our general policy to judge the accuracy of hospital coding and
charging for purposes of ratesetting'' (75 FR 71838). Therefore, we are
not excluding claims from the ratesetting calculation the procedure
described by CPT code 0207T. For CY 2016, the procedure described by
CPT code 0207T is assigned to APC 5734 (Level 4 Minor Procedures).
6. Gastrointestinal (GI) Procedures
As a part of our comprehensive review of the structure of the APCs
and procedure code assignments for CY 2016, we examined the APCs that
contain gastrointestinal (GI) procedures. As explained below, as a
result of our findings from this review, for CY 2016, in the CY OPPS/
ASC proposed rule, we proposed to restructure the APC groupings for GI
procedures to more appropriately reflect the costs and the clinical
characteristics of the procedures within each APC grouping in the
context of the OPPS.
The current APCs for GI procedures are partially organized
according to location in the GI tract and type of surgery performed
(endoscopy versus incisional surgery). After reviewing these APCs for
GI procedures, we believe that the current APC construction is based on
clinical categories that do not appropriately represent a consistent
set of clinical categories throughout the entire spectrum of GI-related
procedures. The current level of granularity for some of the GI APCs
results in groupings that are unnecessarily narrow for the purposes of
a prospective payment system. Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39259 through 39260), for CY 2016, we proposed to
restructure and consolidate the APCs that contain GI procedures. In the
proposed rule, we stated that we believe that consolidating these
procedures under broader APC groupings primarily based on separating
upper and lower GI procedures into two series with additional APCs
containing abdominal and peritoneal procedures would more appropriately
reflect a prospective payment system that is based on payment for
clinically consistent APC groupings rather than code-specific

[[Page 70390]]

payment rates while maintaining resource homogeneity. Furthermore, we
believe that the proposed APC groupings would more accurately
accommodate and align new services within clinical APCs with similar
resource costs. Table 24 of the proposed rule listed the current CY
2015 APCs that contain GI procedures, and Table 25 of the proposed rule
listed the CY 2016 APCs that would result from the proposed
consolidation and restructuring of the current GI procedure APCs into a
single APC series. We invited public comments on this proposal.
Comment: Several commenters requested that CMS review the proposed
APC assignment for new CPT code 43210 (Esophagogastroduodenoscopy,
flexible, transoral; with esophagogastric fundoplasty, partial or
complete, includes duodenoscopy when performed) (whose predecessor code
was HCPCS code C9724). The commenters believed that the proposed
assignment of CPT code 43210 to APC 5302 (Level 2 Upper GI Procedures)
does not reflect the resources used to perform the procedure and that
the proposed payment rate is not adequate to cover the cost of the
equipment, ancillary supplies and other facility overhead to perform
the procedure. The commenters requested that CMS assign CPT code 43210
to one of the following APCs: (1) C-APC 5362 (Level 2 Laparoscopy),
because of the clinical similarity of the procedure to the procedure
described by HCPCS code 43280 (Laparoscopy, surgical, esophagogastric
fundoplasty (e.g., Nissen, Toupet procedures); (2) a New technology
APC; or (3) a new APC for transoral surgical procedures because of the
uniqueness of the procedure described by CPT code 43210.
Response: We agree in part with the commenters. We agree that APC
5302 is not the most appropriate APC assignment for the procedure
described by new CPT code 43210 or its predecessor code, HCPCS code
C9724. However, we do not agree with the commenters' request to
reassign CPT code 43210 to proposed C-APC 5362 (Level 2 Laparoscopy)
based on its similar clinical purpose to the procedure described by
HCPCS code 43280. While both of these procedures are surgical
procedures used in the treatment of gastroesophageal reflux disease,
unlike the procedures assigned to C-APC 5362, the procedure described
by CPT code 43210 is not a laparoscopy procedure, and C-APC 5362 is
limited to laparoscopy procedures. Therefore, the procedure described
by CPT code 43210 is not sufficiently clinically similar to the other
procedures assigned to C-APC 5362 to warrant reassignment to C-APC
5362. We also disagree with the commenters' requests for reassignment
to a new technology APC or the creation of a new APC for transoral
surgical procedures. The procedure described by CPT code 43210 (and its
predecessor HCPCS code C9724) is not new because HCPCS C9724 became
effective in CY 2005. In addition, as we discuss below, we believe that
there is an appropriate clinical APC to which CPT code 43210 can be
assigned. Therefore, it is not appropriate to assign the code to a New
Technology APC. Regarding the request for a new, dedicated APC for CPT
code 43210, the volume of available claims for the predecessor code
(HCPCS code C9724) is too low to warrant a separate, new APC for this
procedure. Because CPT code 43210 is new for CY 2016, there are no CY
2014 claims, and there is only one CY 2014 claim for HCPCS code C9724.
We believe that HCPCS code 43210 is sufficiently similar to the
procedures assigned to C-APC 5331 (Complex GI Procedures) in terms of
resource utilization and clinical complexity. Therefore, we are
assigning CPT code 43210 and its predecessor code, HCPCS code C9724, to
C-APC 5331 for CY 2016. Because C-APC 5331 is a comprehensive APC, we
are assigning CPT code 43210 to status indicator ``J1.''
Comment: Some of the commenters who supported the restructuring of
the gastrointestinal procedure APCs requested APC reassignments of
several codes, which are listed in Table 29 below.
Response: We agreed with some of the requests for reassignments of
the codes to different APCs and disagreed with other requests. Our
determinations for each code reassignment request are noted in Table 29
below.

Table 29--Gastrointestinal Procedure Codes With Specific Commenter APC Recommendations, Final CMS Decisions, and Final APC Assignments and Status
Indicators for CY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY Final CY
CPT/HCPCS code Short descriptor 2016 status Proposed CY Commenter CMS decision 2016 status Final CY
indicator 2016 APC requested APC indicator 2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
43240..................... Egd w/transmural drain T 5303 5331 Disagree................... T 5303
cyst.
44403..................... Colonoscopy w/resection.. T 5312 5313 Disagree................... T 5312
45349..................... Sigmoidoscopy w/resection T 5312 5313 Disagree................... T 5312
45390..................... Colonoscopy w/resection.. T 5312 5313 Disagree................... T 5312
46608..................... Anoscopy remove for body. T 5312 5313 Disagree................... T 5312
45303..................... Proctosigmoidoscopy T 5312 5313 Disagree................... T 5312
dilate.
45332..................... Sigmoidoscopy w/fb T 5312 5313 Disagree................... T 5312
removal.
45337..................... Sigmoidoscopy & T 5312 5313 Disagree................... T 5312
decompress.
45338..................... Sigmoidoscopy w/tumr T 5312 5313 Disagree................... T 5312
remove.
45346..................... Sigmoidoscopy w/ablation. T 5312 5313 Disagree................... T 5312
44390..................... Colonoscopy for foreign T 5312 5313 Disagree................... T 5312
body.
44394..................... Colonoscopy w/snare...... T 5312 5313 Disagree................... T 5312
44405..................... Colonoscopy w/dilation... T 5312 5313 Disagree................... T 5312
44408..................... Colonoscopy w/ T 5312 5313 Disagree................... T 5312
decompression.
45379..................... Colonoscopy w/fb removal. T 5312 5313 Disagree................... T 5312
45386..................... Colonoscopy w/balloon T 5312 5313 Disagree................... T 5312
dilat.
45388..................... Colonoscopy w/ablation... T 5312 5313 Disagree................... T 5312
45393..................... Colonoscopy w/ T 5312 5313 Disagree................... T 5312
decompression.
91110..................... GI tract capsule T 5301 5211/New APC Disagree................... T 5301
endoscopy.
91111..................... Esophageal capsule T 5301 5211/New APC Disagree................... T 5301
endoscopy.

[[Page 70391]]

91112..................... GI wireless capsule T 5301 5211/New APC Disagree................... T 5301
measure.
91022..................... Duodenal motility study.. S 5722 5723 Agree...................... S 5724
91037..................... Esoph imped function test S 5722 5723 Disagree................... S 5722
91038..................... Esoph imped funct test S 5722 5723 Agree...................... T 5723
>1hr.
43753..................... Tx gastro intub w/asp.... Q1 5734 5722 Agree...................... S 5722
43754..................... Dx gastr intub w/asp spec Q1 5734 5722 Agree...................... S 5722
43755..................... Dx gastr intub w/asp S 5721 5722 Disagree................... S 5721
specs.
43756..................... Dx duod intub w/asp spec. Q1 5522 5722 Disagree................... S 5522
C9724..................... Eps stomach plic......... D 5303 New APC/New Disagree................... D 5331
Tech
43210..................... Egd esophagogastrc T 5302 New APC/New Disagree................... J1 5331
fndoplsty. Tech
0336T..................... Lap ablat uterine J1 5362 5352 Disagree................... J1 5362
fibroids.
47370..................... Laparo ablate liver tumor J1 5362 5352 Disagree................... J1 5362
rf.
47371..................... Laparo ablate liver J1 5362 5352 Disagree................... J1 5362
cryosurg.
50542..................... Laparo ablate renal mass. J1 5362 5352 Disagree................... J1 5362
--------------------------------------------------------------------------------------------------------------------------------------------------------

We disagree with the commenters who requested that CPT code 43240
(Esophagogastroduodenoscopy, flexible, transoral; with transmural
drainage of pseudocyst (includes placement of transmural drainage
catheter[s]/stent[s], when performed, and endoscopic ultrasound, when
performed) be reassigned from proposed APC 5303 (Level 3 Upper GI
Procedures) to C-APC 5331 (Complex GI Procedures). The geometric mean
cost of the procedure described by CPT code 43240 is approximately
$1,818, and the geometric mean cost of APC 5303 is approximately
$2,072. The geometric mean cost of APC 5331 is approximately $3,781. We
believe that, given the geometric mean costs of APCs 5303 and 5331, APC
5303 is the more appropriate APC assignment for the procedure described
by CPT code 43240.
We also disagree with the commenters who requested that lower GI
endoscopic mucosal resection CPT codes (CPT codes 44403, 45349, and
45390) be reassigned from APC 5312 (Level 2 Lower GI Procedures) to APC
5313 (Level 3 Lower GI Procedures) based on resource and clinical
homogeneity. These three CPT codes became effective in CY 2015. We
believe that the current APC assignment for these codes is appropriate
based on similarity of clinical characteristics. Once we have claims
data for these CPT codes. we will reevaluate their APC assignment in
accordance with the yearly review of APC assignments and determine if a
reassignment is appropriate based on the claims data.
We also disagree with the commenters who requested reassignment of
the CPT codes listed in Table 29 above that represent foreign body
removal, ablation, and decompression of volvulus, colonoscopy through
stoma and flexible sigmoidoscopy, specifically CPT codes 44608, 45332,
45337, 45338, 45346, 44390, 44394, 44405, 44408, 45379, 45386, 45388,
and 45393 from APC 5312 (Level 2 Lower GI Procedures) to APC 5313
(Level 3 Lower GI Procedures). The commenters stated that the resource
utilization for these codes is similar to resource utilization for
procedures that employ similar techniques with proctoscopy that are
assigned to APC 5313. A majority of the procedures that were requested
to be reassigned to APC 5313 have geometric mean costs of approximately
$880 or lower, which is significantly lower than the geometric mean
cost of $1,739 for APC 5313. Therefore, we do not believe that
reassignment of these codes would be appropriate.
We do not agree with the commenters' request to reassign CPT codes
91110, 91111, and 91112 from APC 5301 (Level 1 Upper GI Procedures) to
APC 5211 (Level 1 Electrophysiologic Procedures) due to resource use
and clinical dissimilarities with procedures assigned to APC 5301,
which is limited to cardiac electrophysiology procedures. We also do
not agree that these procedures are clinically dissimilar enough from
other procedures in APC 5301 to require creation of a new APC dedicated
to these procedures.
We disagree with the commenters who requested that the procedure
described by CPT code 91037 be reassigned to APC 5723 (Level 3
Diagnostic Tests and Related Services) based on clinical and resource
similarity. The geometric mean cost of the procedure described by CPT
code 91037 is approximately $199, which is more similar to the
geometric mean cost of APC 5722 (approximately $231) than the geometric
mean cost of APC 5723 (approximately$415). In addition, assignment of
the procedure described by CPT code 91037 to APC 5723 would result in a
violation of the 2 times rule in APC 5723. However, we agree with the
commenters that CPT code 91022 is more appropriately assigned to APC
5724 (Level 4 Diagnostic Tests and Related Services) based on resource
similarity to other services assigned to APC 5724.
We disagree with the commenters who requested that CPT code 43755
be reassigned from APC 5721 (Level 1Diagnostic Tests and Related
Services) to APC 5722 (Level 2 Diagnostic Tests and Related Services).
The geometric mean cost of the services described by CPT code 43755 is
approximately $141, and the geometric mean cost of APC 5721 is
approximately $136. The geometric mean cost of APC 5722 is
approximately $231. We believe that, given the geometric mean cost of
APCs 5721 and 5722, APC 5721 is the more appropriate APC assignment for
the services described by CPT code 43755.
We disagree with the commenters who requested that CPT codes 0336T,
47370, 47371, and 50542 from C-APC 5362 (Level 2 Laparoscopy) be
reassigned to APC 5352 (Level 2 Percutaneous Abdominal/Biliary
Procedures and Related Procedures). These are laparoscopy procedures
and are assigned to an APC to which other

[[Page 70392]]

clinically similar procedures are assigned.
After consideration of the public comments we received, we are
finalizing the proposed structure of the gastrointestinal procedures
with the code reassignments shown in Table 29 above. Table 30 below
lists the CY 2016 APCs that result from the consolidation and
restructuring of the current GI procedure APCs into a single APC
series. The procedures assigned to each APC are listed in Addendum B to
this final rule with comment period, which is available via the
Internet on the CMS Web site.

Table 30--CY 2016 APCs for Gastrointestinal Procedures
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC group title
------------------------------------------------------------------------
5301.............................. Level 1 Upper GI Procedures.
5302.............................. Level 2 Upper GI Procedures.
5303.............................. Level 3 Upper GI Procedures.
5311.............................. Level 1 Lower GI Procedures.
5312.............................. Level 2 Lower GI Procedures.
5313.............................. Level 3 Lower GI Procedures.
5314.............................. Level 4 Lower GI Procedures.
5331.............................. Complex GI Procedures.
5341.............................. Peritoneal and Abdominal Procedures.
5351.............................. Level 1 Percutaneous Abdominal/
Biliary Procedures and Related
Procedures.
5352.............................. Level 2 Percutaneous Abdominal/
Biliary Procedures and Related
Procedures.
5391.............................. Level 1 Tube/Catheter Changes/
Thoracentesis/Lavage.
5392.............................. Level 2 Tube/Catheter Changes/
Thoracentesis/Lavage.
------------------------------------------------------------------------

In the CY 2016 OPPS/ASC proposed rule (80 FR 39260), we proposed to
accept the Panel's recommendation with regard to the APC assignment for
four lower endoscopy stent procedures described by HCPCS codes that
were established in CY 2015. The Panel recommended that the four CPT
codes listed in Table 26 of the proposed rule be moved from their
currently assigned APC to C-APC 0384 (GI Procedures with Stents) (CPT
codes 44384 (Ileoscopy, through stoma; with placement of endoscopic
stent (includes pre- and post-dilation and guide wire passage, when
performed), 44402 (Colonoscopy through stoma; with endoscopic stent
placement (including pre- and post-dilation and guide wire passage,
when performed), 45347 (Sigmoidoscopy, flexible; with placement of
endoscopic stent (includes pre- and post-dilation and guide wire
passage, when performed), and 45389 (Colonoscopy, flexible; with
endoscopic stent placement (includes pre- and post-dilation and guide
wire passage, when performed). The Panel's recommendation was based on
an analysis of the similarities in clinical characteristics and
resource utilization between the procedures described by these four CPT
codes and the procedures described by other CPT codes within existing
(CY 2015) APCs 0142, 0143 and 0147. (We note that, in section II.A.2.e.
of the preamble of the proposed rule, we proposed to renumber and
retitle C-APC 0384 as ``C-APC 5331 (Complex GI Procedures)'' for CY
2016.)
Comment: Commenters supported the proposal to assign CPT codes
44384, 44402, 45347, and 45389 to C-APC 5331 (Complex GI Procedures).
Response: We appreciate the commenters' support.
We are finalizing our proposal to reassign CPT codes 44384, 44402,
45347, and 45389 to C-APC 5331 (Complex GI Procedures).
7. Gynecologic Procedures and Services
As listed in Addendum A to the CY 2016 OPPS/ASC proposed rule, we
proposed to add another level to the existing gynecologic APCs,
specifically, a Level 6 Gynecologic Procedures APC, and designated it
as APC 5416.
Comment: One commenter applauded CMS for revisiting the gynecologic
procedure APCs and adding APC 5416 (Level 6 Gynecologic Procedures) for
CY 2016. The commenter believed that expanding the number of APCs for
the gynecologic procedures is a positive change and further suggested
that CMS be open to reassignment of CPT codes within and across APCs as
part of rulemaking in CY 2016 and in future years.
Response: We appreciate the commenter's support. We believe that
the addition of this new APC groups gynecologic procedures more
appropriately based on their resource costs and clinical
characteristics.
After consideration of the public comment we received, we are
finalizing our proposal, without modification, to add the Level 6 APC
5416 to the existing gynecologic APC groups. The final CY 2016 payment
rate for APC 5416 can be found in Addendum A to this final rule with
comment period (which is available via the Internet on the CMS Web
site).
The AMA Editorial Committee established new CPT code 0404T
(Transcervical uterine fibroid(s) ablation with ultrasound guidance,
radiofrequency), to be effective on January 1, 2016. In the CY 2016
OPPS/ASC proposed rule, we proposed to assign this new code (which we
listed as code 04XXD (the 5-digit CMS placeholder code) in Addendum B,
O, and Q2 to the proposed rule) to APC 5415 (Level 5 Gynecologic
Procedures), with a proposed payment rate of approximately $3,713. We
also proposed to assign CPT code 0404T to comment indicator ``NP'' in
Addendum B to the proposed rule to indicate that the code is new for CY
2016 with a proposed APC assignment and that public comments would be
accepted on the proposed APC assignment.
Comment: One commenter disagreed with the proposed APC assignment
for new CPT code 0404T for CY 2016, and requested that the procedure be
reassigned to one of the following APCs: 5362 (Level 2 Laparoscopy);
5192 (Level 2 Endovascular Procedures); or 5416 (Level 6 Gynecologic
Procedures). The commenter believed that the procedure described by CPT
code 0404T is similar, based on clinical characteristics and resource
costs, to other procedures that are assigned to APCs 5362, 5192, and
5416. In addition, the commenter stated that the facility cost to
perform this procedure is approximately $4,850, which includes the
$3,965 single-use kit.
Response: Under the OPPS, we generally assign a payment rate to a
new Category III CPT code based on input from a variety of sources,
including, but not limited to, review of resource costs and clinical
homogeneity of the service to existing procedures, input from our
medical advisors, and other information available to us. Based on our
understanding of the procedure, we agree with the commenter that CPT
code 0404T would be more appropriately assigned to APC 5416 because its
resource costs and clinical homogeneity is similar to the other
procedures in APC 5416. Therefore, we are not adopting our proposal to
assign CPT code 0404T to APC 5415 for CY 2016. Rather, we are assigning
CPT code 0404T to APC 5416. The final CY 2016 payment rate for CPT code
0404T can be found in Addendum B to this final rule with comment period
(which is available via the Internet on the CMS Web site).
8. Imaging Services
As a part of our CY 2016 comprehensive review of the structure of
the APCs and procedure code assignments, we examined the APCs that
contain imaging services. For CY 2016, we proposed to restructure the
OPPS APC groupings for imaging services to more appropriately reflect
the costs and clinical characteristics of the procedures within each
APC grouping in the context of the OPPS. The current APCs for imaging
services

[[Page 70393]]

are divided at the highest level between diagnostic radiology (for
example, x-ray, CT, MRI, and ultrasound) and nuclear medicine imaging.
After reviewing these APCs, we believe that the current APC structure
is based on clinical categories that do not necessarily reflect
significant differences in the delivery of these services in the HOPD.
The current level of granularity for these APCs results in groupings
that are unnecessarily narrow for the purposes of a prospective payment
system. This excessive granularity is especially apparent with the APCs
for x-ray based imaging services and nuclear medicine imaging services.
Many of these APCs are currently structured according to organ or
physiologic system that does not necessarily reflect either significant
differences in resources or how these services are delivered in the
HOPD.
Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39261), for
CY 2016, we proposed to restructure and consolidate the APCs that
include radiology and nuclear medicine services. We stated that we
believe that this proposed restructuring and consolidation would result
in APC groupings that would more appropriately reflect a prospective
payment system that is based on payment for clinically consistent APC
groupings and not code-specific payment rates, while maintaining
clinical and resource homogeneity. Furthermore, the proposed APC
groupings would more accurately accommodate and align new services into
clinical APCs with similar resource costs. Table 27 of the proposed
rule listed the current CY 2015 APCs that contain radiology and nuclear
medicine services, and Table 28 of the proposed rule listed the
proposed CY 2016 APCs that would result from the proposed consolidation
and restructuring of the current radiology and nuclear medicine
services APCs. We invited public comments on this proposal.
Comment: Many commenters generally supported the proposed
restructuring of the imaging-related APCs. However, several commenters
generally disagreed with the proposed restructuring of the nuclear
medicine and positron emission tomography (PET) APCs. The commenters
acknowledged that CMS has recognized the clinical differences between
the imaging modalities and maintained separate APCs for them since the
implementation of the OPPS. However, the commenters opposed collapsing
the current 17 nuclear medicine and PET APCs into three levels (Level 1
through Level 3 Nuclear Medicine and Related Services) for CY 2016, and
recommended that CMS maintain a distinct APC for all PET procedures.
Several other commenters, including nonhospital imaging centers and the
HOP Panel, recommended that CMS separate PET procedures from the non-
PET nuclear imaging tests in proposed APC 5593 (Level 3 Nuclear
Medicine and Related Services). Commenters believed that grouping PET
procedures with non-PET procedures (also referred to as SEPCT) would
reduce the payment for PET procedures below the cost of PET tests
because of the more significant capital equipment costs for PET.
Further, commenters stated that the proposed APC grouping of PET
procedures with non-PET procedures would result in underpayments, and
imaging centers that provide PET-only services will not be able to
offset the payment reduction by providing non-PET services, some of
which CMS proposed to increase the payment rate in CY 2016.
Response: We agree with the HOP Panel's and the commenters'
recommendation to separate PET tests into a separate APC because PET
imaging services involve higher resource costs and are of a clinically
distinct imaging modality from non-PET or SPECT imaging services.
Therefore, we are adding a fourth level to the nuclear medicine and
related services APC group (APC 5594 (Level 4 Nuclear Medicine and
Related Services), and are reassigning the PET procedures that were
proposed to be assigned to APC 5593 (Level 3 Nuclear Medicine and
Related Services) to APC 5594. While APC 5594 contains all of the PET
scan procedures, it is not necessarily limited only to PET scan
services. It is established as the fourth and highest level in the
nuclear medicine APC grouping, and non-PET scan nuclear medicine tests
may be assigned to this APC as appropriate.
Comment: Some commenters urged CMS to maintain the existing,
separately payable status indicators (that is, ``S'' or ``T'') for
several codes within the proposed nine reconfigured APC groupings
instead of assigning them to a conditional packaging status indicator
(that is, ``Q1'' or ``Q2''). One commenter provided a list of 70 codes,
and requested that CMS assign them to separately payable status
indicators. Among the 70 codes are 34 imaging services codes that, as a
result of the proposed APC restructuring, were proposed for CY 2016 to
be assigned to one of the following APCs, which are all three
conditionally packaged APCs: APC 5521 (Level 1 X-Ray and Related
Services); APC 5522 (Level 2 X-Ray and Related Services); or APC 5531
(Level 1 Ultrasound and Related Services).
Response: Prior to developing our proposal, we reviewed all of the
services associated with the proposed nine APC families. We believe
that the procedures and services that we proposed to assign to a
conditional packaging status indicator are ancillary and dependent in
relation to the other procedures within the same family groupings with
which they are most commonly furnished. Therefore, based on our review
and input from CMS clinical staff, we believe that the codes that we
proposed to conditionally package are appropriate. In addition, the
APCs to which the 34 codes listed by the commenter are proposed to be
assigned for CY 2016 are designated as conditionally packaged APCs. For
example, APC 5521 (Level 1 X-Ray and Related Services) is the successor
APC to CY 2015 APC 0260 (Level 1 X-Ray & Related Services), which was
designated in CY 2015 as a conditionally packaged APC; APC 5522 (Level
2 X-Ray and Related Services) is the successor APC to CY 2015 APC 0261
(Level 2 X-Ray & Related Services), which was designated in CY 2015 as
a conditionally packaged APC; and APC 5531 (Level 1 Ultrasound and
Related Services) is the successor APC to CY 2015 APC 0265 (Level 1
Ultrasound & Related Services), which was designated in CY 2015 as a
conditionally packaged APC. Therefore, we believe that these 34 imaging
services that are assigned to proposed new APCs 5521, 5522, and 5531
are appropriately assigned a conditionally packaged status indicator.
Further, based on the clinical nature of the services and our
understanding of the procedures, we believe that assigning these
services to a conditional packaging status indicator will create
incentives for hospitals and their physician partners to work together
to establish appropriate protocols that will eliminate unnecessary
services where they exist and institutionalize approaches to providing
necessary services more efficiently. Therefore, we are finalizing our
proposal to assign the 34 imaging services procedure codes identified
by the commenter status indicator ``Q1'' for CY 2016.
Comment: A few commenters who supported the restructuring of the
imaging-related procedure APCs requested APC reassignments of many
specific codes, which are listed in Table 31 below.
Response: We agree with some of the commenters' request for APC
reassignments and/or status indicator reassignments of procedure codes
describing imaging-related procedures.

[[Page 70394]]

Our decisions to accept or reject the recommended code assignments to
APCs also are indicated in Table 31 below.

Table 31--Imaging-Related Procedure Codes With Specific Commenters' Recommendations, Final CMS Decisions, Final APC Assignments, and Final APC Status
Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY Final CY
CPT/HCPCS code Short descriptor 2016 status Proposed CY Commenter CMS decision 2016 status Final CY
indicator 2016 APC requested APC indicator 2016 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
70370..................... Throat x-ray & Q1 5521 5522 Disagree................... Q1 5521
fluoroscopy.
71030..................... Chest x-ray 4/> views.... Q1 5521 5522 Disagree................... Q1 5521
72200..................... X-ray exam si joints..... Q1 5521 5522 Agree...................... Q1 5522
76496..................... Fluoroscopic procedure... Q1 5521 5522 Disagree................... Q1 5521
72050..................... X-ray exam neck spine 4/5 Q1 5522 5523 Disagree................... Q1 5522
vws.
72110..................... X-ray exam l-2 spine 4/> Q1 5522 5523 Disagree................... Q1 5522
vws.
72074..................... X-ray exam thorac spine 4/ Q1 5522 5523 Disagree................... Q1 5522
> vw.
77074..................... X-rays bone survey Q1 5522 5523 Disagree................... Q1 5522
limited.
74240..................... X-ray upper gi delay w/o Q1 5522 5523 Disagree................... Q1 5522
kub.
76010..................... X-ray nose to rectum..... Q1 5522 5523 Agree...................... Q1 5523
72052..................... X-ray exam neck spine 6/> Q1 5522 5523 Disagree................... Q1 5522
vws.
74246..................... Contrst x-ray uppr gi Q1 5522 5523 Disagree................... Q1 5522
tract.
76120..................... Cine/video x-rays........ Q1 5522 5523 Disagree................... Q1 5522
74270..................... Contrast x-ray exam of Q1 5522 5523 Disagree................... Q1 5522
colon.
74241..................... X-rayupper gi delay w/kub Q1 5522 5523 Disagree................... Q1 5522
70371..................... Speech evaluation complex Q1 5522 5523 Disagree................... Q1 5522
77075..................... X-rays bone survey Q1 5522 5523 Disagree................... Q1 5522
complete.
74247..................... Contrst x-ray uppr gi Q1 5522 5523 Disagree................... Q1 5522
tract.
49465..................... Fluoro exam of g/colon Q1 5522 5523 Disagree................... Q1 5522
tube.
73092..................... X-ray exam of arm infant. Q1 5522 5523 Disagree................... Q1 5522
70320..................... Full mouth x-ray of teeth Q1 5522 5523 Agree...................... Q1 5523
74260..................... X-ray exam of small bowel Q1 5522 5523 Agree...................... Q1 5523
70310..................... X-ray exam of teeth...... Q1 5522 5523 Agree...................... Q1 5523
74290..................... Contrast x-ray Q1 5522 5523 Agree...................... Q1 5523
gallbladder.
74430..................... Contrast x-ray bladder... Q2 5523 5524 Disagree................... Q2 5523
74450..................... X-ray urethra/bladder.... Q2 5523 5524 Disagree................... Q2 5523
74455..................... X-ray urethra/bladder.... Q2 5523 5524 Agree...................... Q2 5524
74740..................... X-ray female genital Q2 5523 5524 Agree...................... Q2 5524
tract.
C9733..................... Non-ophthalmic fva....... Q2 5523 5524 Agree...................... Q2 5524
G0120..................... Colon ca scrn; barium S 5524 5525 Disagree................... S 5524
enema.
74445..................... X-ray exam of penis...... Q2 5524 5525 Disagree................... Q2 5524
78457..................... Venous thrombosis imaging S 5524 5525 Disagree................... S 5592
78456..................... Acute venous thrombus S 5525 5526 Disagree................... S 5525
image.
75807..................... Lymph vessel x-ray trunk. Q2 5525 5526 Agree...................... Q2 5526
70190..................... X-ray exam of eye sockets Q1 5522 5521 Agree...................... Q1 5521
74210..................... Contrst x-ray exam of Q1 5522 5521 Disagree................... Q1 5522
throat.
72040..................... X-ray exam neck spine 2-3 Q1 5522 5521 Disagree................... Q1 5522
vw.
76101..................... Complex body section x- S 5523 5522 Agree...................... Q1 5522
ray.
78458..................... Ven thrombosis images S 5524 5523 Disagree................... S 5591
bilat.
74470..................... X-ray exam of kidney Q2 5525 5524 Agree...................... Q2 5524
lesion.
75898..................... Follow-up angiography.... Q2 5526 5525 Agree...................... Q2 5525
75827..................... Vein x-ray chest......... Q2 5526 5525 Agree...................... Q2 5525
75872..................... Vein x-ray skull epidural Q2 5526 5525 Disagree................... Q2 5526
70470..................... Ct head/brain w/o & w/dye Q3 5571 5572 Disagree................... Q3 5571
70482..................... Ct orbit/ear/fossa w/o & Q3 5571 5572 Disagree................... Q3 5571
w/dye.
70488..................... Ct maxillofacial w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
70492..................... Ct sft tsue nck w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
70496..................... Ct angiography head...... Q3 5571 5572 Disagree................... Q3 5571
70498..................... Ct angiography neck...... Q3 5571 5572 Disagree................... Q3 5571
71275..................... Ct angiography chest..... Q3 5571 5572 Disagree................... Q3 5571
72127..................... Ct neck spine w/o & w/dye Q3 5571 5572 Disagree................... Q3 5571
72130..................... Ct chest spine w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
72133..................... Ct lumbar spine w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
72191..................... Ct angiograph pelv w/o & Q3 5571 5572 Disagree................... Q3 5571
w/dye.
72194..................... Ct pelvis w/o & w/dye.... Q3 5571 5572 Disagree................... Q3 5571
73202..................... Ct uppr extremity w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
73206..................... Ct angio upr extrm w/o & Q3 5571 5572 Disagree................... Q3 5571
w/dye.
73702..................... Ct lwr extremity w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
73706..................... Ct angio lwr extr w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
74170..................... Ct abdomen w/o & w/dye... Q3 5571 5572 Disagree................... Q3 5571
74175..................... Ct angio abdom w/o & w/ Q3 5571 5572 Disagree................... Q3 5571
dye.
75574..................... Ct angio hrt w/3d image.. S 5571 5572 Disagree................... S 5571
75635..................... Ct angio abdominal Q2 5571 5572 Disagree................... Q2 5571
arteries.
72126..................... Ct neck spine w/dye...... Q3 5572 5571 Disagree................... Q3 5572
73201..................... Ct upper extremity w/dye. Q3 5572 5571 Disagree................... Q3 5572

[[Page 70395]]

74177..................... Ct abd & pelv w/contrast. Q3 5572 5571 Disagree................... Q3 5572
70544..................... Mr angiography head w/o Q3 5581 5583 Disagree................... Q3 5581
dye.
70547..................... Mr angiography neck w/o Q3 5581 5583 Disagree................... Q3 5581
dye.
70545..................... Mr angiography head w/dye Q3 5582 5583 Disagree................... Q3 5582
70546..................... Mr angiograph head w/o & Q3 5582 5583 Disagree................... Q3 5582
w/dye.
70548..................... Mr angiography neck w/dye Q3 5582 5583 Disagree................... Q3 5582
70549..................... Mr angiograph neck w/o & Q3 5582 5583 Disagree................... Q3 5582
w/dye.
C8902..................... Mra w/o fol w/cont, abd.. Q3 5582 5583 Disagree................... Q3 5582
C8911..................... Mra w/o fol w/cont, chest Q3 5582 5583 Disagree................... Q3 5582
C8914..................... Mra w/o fol w/cont, lwr Q3 5582 5583 Disagree................... Q3 5582
ext.
C8920..................... Mra w/o fol w/cont, Q3 5582 5583 Disagree................... Q3 5582
pelvis.
C8933..................... Mra, w/o & w/dye, spinal Q3 5582 5583 Disagree................... Q3 5582
canal.
C8936..................... Mra, w/o & w/dye, upper Q3 5582 5583 Disagree................... Q3 5582
extr.
93979..................... Vascular study........... Q1 5531 5532 Agree...................... Q1 5532
76513..................... Echo exam of eye water Q1 5531 5532 Agree...................... Q1 5532
bath.
76536..................... Us exam of head and neck. Q1 5531 5532 Agree...................... Q1 5532
76815..................... Ob us limited fetus(s)... Q1 5531 5532 Agree...................... Q1 5532
76775..................... Us exam abdo back wall Q1 5531 5532 Agree...................... Q1 5532
lim.
76870..................... Us exam scrotum.......... Q1 5531 5532 Agree...................... Q1 5532
76817..................... Transvaginal us obstetric Q1 5531 5532 Agree...................... Q1 5532
93890..................... Tcd vasoreactivity study. Q1 5531 5532 Agree...................... Q1 5532
76705..................... Echo exam of abdomen..... Q3 5532 5531 Disagree................... Q3 5532
76801..................... Ob us <14 wks single S 5532 5531 Disagree................... S 5532
fetus.
76830..................... Transvaginal us non-ob... S 5532 5531 Disagree................... S 5532
76872..................... Us transrectal........... S 5532 5531 Disagree................... S 5532
76881..................... Us xtr non-vasc complete. S 5532 5531 Disagree................... S 5532
93888..................... Intracranial limited S 5532 5531 Disagree................... S 5532
study.
93931..................... Upper extremity study.... S 5532 5531 Disagree................... S 5532
70559..................... Mri brain w/o & w/dye.... S 5582 5526 Agree...................... S 5526
74261..................... Ct colonography dx....... Q3 5521 5570 Agree...................... Q3 5570
75572..................... Ct hrt w/3d image........ S 5523 5571 Agree...................... S 5571
75559..................... Cardiac mri w/stress img. Q3 5581 5592 Agree...................... Q3 5592
75557..................... Cardiac mri for morph.... Q3 5581 5593 Disagree................... Q3 5581
50430..................... Njx px nfrosgrm &/urtrgrm Q2 5524 5373 Disagree................... Q2 5372
50431..................... Njx px nfrosgrm &/urtrgrm Q2 5524 5372 Agree...................... Q2 5372
50434..................... Convert nephrostomy T 5392 5372 Agree...................... T 5372
catheter.
50435..................... Exchange nephrostomy cath T 5392 5372 Agree...................... T 5372
73503..................... X-ray exam hip uni 4/> Q1 5521 5522 Agree...................... Q1 5522
views.
73522..................... X-ray exam hips bi 3-4 Q1 5522 5523 Disagree................... Q1 5522
views.
73523..................... X-ray exam hips bi 5/> S 5522 5523 Agree...................... S 5523
views.
72083..................... X-ray exam entire spi 4/5 S 5522 5523 Agree...................... S 5523
vw.
72084..................... X-ray exam entire spi 6/> S 5522 5524 Disagree................... S 5523
vw.
78266..................... Gastric emptying imag S 5591 5592 Agree...................... S 5592
study.
47532..................... Injection for Q2 5525 5351 Agree...................... Q2 5351
cholangiogram.
47535..................... Conversion ext bil drg T 5392 5351 Agree...................... T 5351
cath.
47536..................... Exchange biliary drg cath T 5392 5351 Agree...................... T 5351
47537..................... Removal biliary drg cath. Q2 5391 5351 Disagree................... Q2 5391
75563..................... Card mri w/stress img & S 5592 5593 Agree...................... S 5593
dye.
75571..................... Ct hrt w/o dye w/ca test. Q1 5731 5570 Disagree................... Q1 5731
--------------------------------------------------------------------------------------------------------------------------------------------------------

We disagree with the commenters who requested that the procedures
described by CPT codes 70370 (Radiologic examination; pharynx or
larynx, including fluoroscopy and/or magnification technique), 71030
(Radiologic examination, chest, complete, minimum of 4 views), and
76496 be elevated from proposed APC 5521 to APC 5522 based on resource
and clinical homogeneity. The procedure described by CPT code 70370 has
a geometric mean unit cost of approximately $81 and the geometric mean
cost of APC 5521 is approximately $64. Because the procedure described
by CPT code 70370 is a low-volume procedure (49 single claims out of 66
total claims) in APC 5521, it is unnecessary to reassign the procedure
describing CPT code 70370 to APC 5522, which has a geometric mean unit
cost of approximately $105. The procedure described by CPT code 71030
is appropriately assigned to APC 5521 because of the similarity of
clinical characteristics and resource use with other chest x-ray
procedures assigned to APC 5521. CPT code 76496 is an unlisted
fluoroscopic procedure code, and under our established policy, unlisted
codes are assigned to the lowest level APC within a clinical family.
We disagree with the commenters who requested that CPT codes 72050,
72110, 72074, 77074, 74240, 72052, 74246, 76120, 74270, 74241, 70371,
77075, 74247, 49465, and 73092 that were proposed to be assigned to
proposed APC 5522 (Level 2 X-Ray and Related Services) be reassigned to
APC

[[Page 70396]]

5523 (Level 3 X-Ray and Related Services) to improve resource
homogeneity. The geometric mean cost of these codes range from
approximately $129 to approximately $176, and the geometric mean cost
of APC 5522 is approximately $105. The geometric mean cost of APC 5523
is approximately $201. We believe that, given the geometric mean cost
of APC 5522 and the clinical similarity of the procedures described by
these codes compared to other procedures assigned to APC 5522, these
codes are appropriately assigned to APC 5522.
We disagree with the commenters who requested that CPT codes 74430
(Cystography, minimum of 3 views, radiological supervision and
interpretation) and 74450 (Urethrocystography, retrograde, radiological
supervision and interpretation) that were proposed to be assigned to
proposed APC 5523 (Level 3 X-Ray and Related Services) be reassigned to
APC 5524 (Level 4 X-Ray and related Services). The geometric mean cost
of CPT code 74430 is approximately $265. The geometric mean cost of CPT
code 74450 is approximately $277. The geometric mean cost of APC 5523
is approximately $201. The geometric mean cost of APC 5524 is
approximately $368. We believe that, given the geometric mean costs of
APC 5523 and APC 5524, APC 5523 is a more appropriate APC assignment
for the procedures described by CPT codes 74430 and 74450.
We disagree with the commenter who requested that the procedures
described by CPT codes G0120 (Colorectal cancer screening) and 74445
(X-Ray exam of penis) that were proposed to be assigned to proposed APC
5524 (Level 4 X-Ray and Related Services) be reassigned to APC 5525
(Level 5 X-Ray and Related Services). The geometric mean cost of the
procedure described by CPT code G0120 is approximately $330. The
geometric mean cost of the procedure described by CPT code 74445 is
approximately $532. The geometric mean cost of APC 5524 is
approximately $368. The geometric mean cost of APC 5525 is
approximately $700. We believe that, given the geometric mean costs of
APC 5524 and APC 5525, APC 5524 is the more appropriate APC assignment
for the procedures described by CPT codes G0120 and 74445.
We disagree with the commenter who requested that the procedure
described by CPT code 78456 (Acute venous thrombosis imaging, peptide)
that was proposed to be assigned to proposed APC 5525 (Level 5 X-Ray
and Related Services) be reassigned to APC 5526 (Level 6 X-Ray and
Related Services). Because the procedure described by CPT code 78456 is
a nuclear medicine test, we are assigning it to APC 5593. We also
disagree with the commenter who requested that CPT code 74210 and CPT
code 72040 that were proposed to be assigned to APC 5522 (Level 2 X-Ray
and Related Services) be reassigned to APC 5521 (Level 1 X-Ray and
Related Services). The geometric mean cost of each of the CPT codes is
approximately $90. The geometric mean cost of APC 5522 is approximately
$105. The geometric mean cost of APC 5521 is approximately $64. We
believe that, given the geometric mean cost of APCs 5521 and 5522, APC
5522 is the more appropriate assignment for the procedures described by
CPT codes 74210 and 72040, based on similarity in resource use in
relation to other procedures in these APCs.
We disagree with the commenters who requested that CPT code 75872
(Venography, epidural, radiological supervision and interpretation),
which was proposed to be assigned to APC 5526, be reassigned to APC
5525. This procedure is a very low volume procedure and is assigned to
APC 5526 based on similarity of the clinical test described by CPT code
75872 to other clinical tests assigned to the APC.
We disagree with the commenters who requested that CPT codes 70470;
70482; 70488; 70492; 70496; 70498; 71275; 72127; 72130; 72133; 72191;
72194; 73202; 73206; 73702; 73706; 74170; 74175; 75574; and 75635,
which were proposed to be assigned to APC 5571 (Level 1 Computed
Tomography with Contrast and Computed Tomography Angiography) be
reassigned to APC 5572 (Level 2 Computed Tomography with Contrast and
Computed Tomography Angiography). The geometric mean cost for these
codes ranges from approximately $250 to approximately $284. The
geometric mean cost of APC 5571 is approximately $248. The geometric
mean cost of APC 5572 is approximately $364. We believe that, given the
geometric mean cost of APC 5571 and 5572, APC 5571 is the more
appropriate APC assignment for the procedures described by these codes.
We disagree with the commenters who requested that CPT codes 72126,
73201, and 74177, which were proposed to be assigned to APC 5572, be
reassigned to APC 5571. The geometric mean cost for these codes range
from approximately $325 to approximately $353. The geometric mean cost
of APC 5572 is approximately $364. The geometric mean cost of APC 5571
is approximately $248. We believe that, given the geometric mean cost
of APCs 5571 and 5572, APC 5572 is the more appropriate assignment for
the procedures described by these codes.
We disagree with the commenters who requested that CPT codes 70544
(Magnetic resonance angiography) and 70547 (Magnetic resonance
angiography, neck; without contrast material(s)), which were proposed
to be assigned to APC 5581 (Magnetic Resonance Imaging and Magnetic
Resonance Angiography without Contrast), be reassigned to a requested
new APC 5583 (Magnetic Resonance Imaging and Magnetic Resonance
Angiography Without Contrast Followed by With Contrast). We do not
believe that there is sufficient clinical or resource dissimilarity in
the proposed APC groupings to warrant the creation of a third level.
We disagree with the commenters who requested that CPT codes 70545,
70546, 70548, 70549, C8902, C8911, C8914, C8920, C8933, and C8936,
which were proposed to be assigned to APC 5582, be reassigned to a
requested new APC 5583 (Magnetic Resonance Angiography [MRA] Without
Contrast Followed by With Contrast). We do not believe it is necessary
to separate MRA imaging services from MRI imaging services by creating
an additional APC within this clinical family. The aforementioned MRA
CPT codes do not represent clinically distinct imaging services from
MRI CPT codes assigned to APC 5582 because MRA scans are often included
with a MRI scan. Further, the resource costs of the aforementioned MRA
CPT codes are not significantly different, but are very much in line
with the resource costs of non-MRA imaging services.
We disagree with the commenters who requested that CPT codes 76705,
76801, 76830, 76872, 76881, 93888, and 93931, which were proposed to be
assigned to APC 5532 (Level 2 Ultrasound and Related Services), be
reassigned to APC 5531 (Level 1 Ultrasound and Related Services). The
geometric mean cost of the procedures described by these codes ranges
from approximately $122 to approximately $134. The geometric mean cost
of APC 5532 is approximately $161. The geometric mean cost of 5531 is
approximately $96. We believe that, given the geometric mean cost of
APC 5531 and APC 5532, APC 5532 is the more appropriate assignment for
the procedures described by these codes.
We disagree with the commenters who requested that CPT code 75557
(Cardiac magnetic resonance imaging for morphology and function without
contrast material), which was proposed to be assigned to APC 5581
(Magnetic

[[Page 70397]]

Resonance Imaging and Magnetic Resonance Angiography without Contrast),
be reassigned to APC 5592 (Level 2 Nuclear Medicine and Related
Services). The geometric mean cost for the procedure described by CPT
code 75557 is approximately $283. The geometric mean cost for APC 5581
is approximately $286. The geometric mean cost for APC 5592 is
approximately $462. Based on the geometric mean costs of APC 5581 and
APC 5592, we believe APC 5581 is the more appropriate assignment for
the procedure described by CPT code 75557. We also disagree with the
commenters regarding their requests for APC reassignment of CPT codes
78457 and 78458. These two codes describe nuclear medicine tests and
therefore are being assigned to APCs in that series.
We disagree with the commenters who requested that we reassign the
following new CY 2016 codes as indicated:
CPT code 50430, which was proposed to be assigned to APC
5524 and requested by the commenters to be reassigned to APC 5372;
CPT code 73522, which was proposed to be assigned to APC
5522 and requested by the commenters to be reassigned to APC 5523;
CPT code 72084, which was proposed to be assigned to APC
5522 and requested by the commenters to be reassigned to APC 5524; and
CPT code 47537, which was proposed to be assigned to APC
5391 and requested by the commenters to be reassigned to APC 5351.
Under our established policy, for new codes, we determine APC
assignment based on clinical and resource similarities to existing
codes. Because the procedures for these codes are not reflected in
available CY 2014 claims data because of their newness, we believe that
the proposed APCs are appropriate. We will consider reassignment of
these codes as claims data become available.
Comment: One commenter requested that CMS reassign the procedure
described by CPT code 91200 (Liver elastography, mechanically induced
shear wave (e.g., vibration), without imaging, with interpretation and
report) from proposed APC 5531 (Level 1 Ultrasound and Related
Services) to proposed APC 5532 (Level II Ultrasound and Related
Services). The commenter stated that the procedure described by this
code is assigned to APC 0266 (Level II Diagnostic and Screening
Ultrasound) for CY 2015. The commenter acknowledged that the CPT code
is new for CY 2015 and that cost information is not reflected in our CY
2014 claims data. Therefore, the commenter believed that, in the
absence of claims data for CPT code 91200, it is inappropriate for CMS
to propose assignment to a lower paying APC in CY 2016. In addition,
the commenter requested that CMS change the proposed assigned status
indicator of ``Q1'' to ``S'' because this procedure is not typically
performed with other procedures of status indicator ``S,'' ``T,'' or
``V'' and therefore should be a separately payable service.
Response: We agree with the commenter. Therefore, for CY 2016, we
are reassigning the procedure described by CPT code 91200 to APC 5532
(Level II Ultrasound and Related Services) with status indicator ``S.''
Comment: One commenter requested that CMS reassign CPT code 75571
(Computed tomography, heart, without contrast material, with
quantitative evaluation of coronary calcium) from proposed APC 5731
(Level 1 Minor Procedures) to proposed APC 5570 (Computed Tomography
without Contrast) because the commenter believed that the procedure
described by CPT code 75571 is similar to the procedure described by
CPT code 71250, which was proposed to be assigned to APC 5570.
Response: Based on the latest available CY 2014 hospital claims
data, the geometric mean cost of the procedure described by CPT code
75571 is approximately $13, based on 4,225 single claims. Therefore, we
believe that the procedure described by CPT code 75571 is appropriately
assigned to APC 5731.
After consideration of the public comments we received, we are
finalizing our proposal, with modification, to reconfigure the imaging-
related procedures into 26 APCs. Table 32 below lists the final CY 2016
APCs that result from the consolidation and restructuring of the
current radiology and nuclear medicine services APCs. The final payment
rates for the specific CPT imaging-related services are included in
Addendum B to this final rule with comment period. The final payment
rates for the specific APCs to which we are assigning the imaging-
related services are included in Addendum A to this final rule with
comment period. Both OPPS Addenda A and B are available via the
Internet on the CMS Web site.

Table 32--CY 2016 Imaging-Related Procedures APCs
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC group title
------------------------------------------------------------------------
5521........................... Level 1 X-Ray and Related Services.
5522........................... Level 2 X-Ray and Related Services.
5523........................... Level 3 X-Ray and Related Services.
5524........................... Level 4 X-Ray and Related Services.
5525........................... Level 5 X-Ray and Related Services.
5526........................... Level 6 X-Ray and Related Services.
5531........................... Level 1 Ultrasound and Related
Services.
5532........................... Level 2 Ultrasound and Related
Services.
5533........................... Level 3 Ultrasound and Related
Services.
5534........................... Level 4 Ultrasound and Related
Services.
5561........................... Level 1 Echocardiogram with Contrast.
5562........................... Level 2 Echocardiogram with Contrast.
5570........................... Computed Tomography without Contrast.
5571........................... Level 1 Computed Tomography with
Contrast and Computed Tomography
Angiography.
5572........................... Level 2 Computed Tomography with
Contrast and Computed Tomography
Angiography.
5581........................... Magnetic Resonance Imaging and Magnetic
Resonance Angiography without
Contrast.
5582........................... Magnetic Resonance Imaging and Magnetic
Resonance Angiography with Contrast.
5591........................... Level 1 Nuclear Medicine and Related
Services.
5592........................... Level 2 Nuclear Medicine and Related
Services.
5593........................... Level 3 Nuclear Medicine and Related
Services.
5594........................... Level 4 Nuclear Medicine and Related
Services.
8004........................... Ultrasound Composite.
8005........................... CT and CTA without Contrast Composite.
8006........................... CT and CTA with Contrast Composite.
8007........................... MRI and MRA without Contrast Composite.
8008........................... MRI and MRA with Contrast Composite.
------------------------------------------------------------------------

9. Orthopedic Procedures
As a part of our CY 2016 comprehensive review of the structure of
the APCs and procedure code assignments, we examined the APCs that
contain orthopedic-related procedures. For CY 2016, we proposed to
restructure the OPPS APC groupings for orthopedic surgery procedures to
more appropriately reflect similar costs and clinical characteristics
of the procedures within each APC grouping

[[Page 70398]]

in the context of the OPPS. The current APCs for orthopedic-related
procedures are primarily divided according to anatomy and the type of
musculoskeletal procedure. After reviewing these APCs, we believe that
the current APC structure is based on clinical categories that do not
necessarily reflect significant differences in the delivery of these
services in the HOPD. The current level of granularity for these APCs
results in groupings that are unnecessarily narrow for the purposes of
a prospective payment system. For example, we see no reason for
purposes of OPPS payment to continue to separate musculoskeletal
procedures that do not involve the hand or foot from procedures that do
include the hand or foot.
Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39262), for
CY 2016, we proposed to restructure and consolidate the APCs for
orthopedic surgery procedures. We stated in the proposed rule that we
believe that this proposed restructuring and consolidation would result
in APC groupings that would more appropriately reflect a prospective
payment system that is based on payment for clinically consistent APC
groupings and not code-specific payment rates while maintaining
clinical and resource homogeneity. Table 29 of the proposed rule listed
the current CY 2015 APCs that contain orthopedic-related procedures,
and Table 30 of the proposed rule listed the proposed CY 2016 APCs that
would result from the proposed restructuring and consolidation of the
current orthopedic-related procedures APCs. We invited public comments
on this proposal.
Comment: Some commenters generally concurred with the consolidation
and reconfiguration of the orthopedic-related procedures APCs. However,
many commenters expressed concern that the ranges of geometric mean
costs for procedures assigned to the proposed orthopedic-related
procedures APCs are too broad, resulting in payment misalignments for
certain procedures. Many other commenters opposed the proposed
restructuring of these APCs and asserted that the proposed revised
reconfiguration is neither clinically homogeneous nor resource use
homogeneous. Several of these commenters recommended that CMS either
delay reconfiguration of the orthopedic-related procedures or maintain
larger groupings based on anatomical region.
Response: In our effort to improve the similarity in resource use
and clinical characteristics within the orthopedic-related APC
groupings, we proposed to revise the existing orthopedic-related
procedures APCs for CY 2016. We believe that the proposed revised
orthopedic-related procedures APCs more appropriately reflect the
resource costs and clinical characteristics of the procedures within
each APC. We do not agree that creating orthopedic-related procedures
APCs based on the specific anatomical region treated by the procedure
is necessary or appropriate. For example, an orthopedic surgeon might
perform a 1-hour procedure on a patient's leg and then perform a 1-hour
procedure using similar instruments and supplies, among others, on a
different patient's arm, and the hospital resources consumed in both
cases would be very similar, which would support assignment of these
procedures in the same APC. There is no purpose to group the leg
procedure in an APC dedicated to leg procedures and the arm procedure
in an APC dedicated to arm procedures if they are both orthopedic
surgeries that consume similar hospital resources. Likewise, we do not
agree that it is either necessary or appropriate to create an APC for
high-cost, very low volume orthopedic-related procedures. We believe
that establishing more inclusive categories of the orthopedic-related
procedures is more appropriate for future ratesetting under the OPPS
because the restructured APCs have more clinically appropriate
groupings, while improving resource similarity. However, we agree with
the commenters who were concerned that the proposed four levels of
musculoskeletal APCs resulted in extremely wide geometric mean cost
ranges, and in response to their comments, we have added a fifth level
to the musculoskeletal APC grouping. Several procedures that were
proposed to be assigned to APC 5123 (Level 3 Musculoskeletal
Procedures) are now reassigned APC 5124 (Level 4 Musculoskeletal
Procedures) for CY 2016. Similarly, several procedures that were
proposed to be assigned to APC 5124 (Level 4 Musculoskeletal
Procedures) are now reassigned to new APC 5125 (Level 5 Musculoskeletal
Procedures) for CY 2016.
Comment: One commenter expressed concern with the proposed payment
for the services described by CPT code 27279 (Sacroiliac join
stabilization for arthrodesis, percutaneous or minimally invasive
(indirect visualization), includes obtaining and applying autograft or
allograft (structural or morselized) when performed, includes image
guidance when performed (e.g., CT or fluoroscopic), which the commenter
considered would result in an underpayment. The commenter stated that
CPT code 27279 became effective January 1, 2015 and is the successor
code to CPT code 0334T (Sacroiliac join stabilization for arthrodesis,
percutaneous or minimally invasive (indirect visualization), includes
obtaining and applying autograft or allograft (structural or
morselized) when performed, includes image guidance when performed
(e.g., CT or fluoroscopic)), and that the CY 2014 claims data for
services described by CPT code 0334T is appropriate to use to set the
CY 2016 payment rate for procedures described by CPT code 27279. The
commenter stated that the proposed payment rate for procedures assigned
to APC 5124 (Level 4 Musculoskeletal Procedures) is approximately
$9,266, which is a rate that does not cover the cost of the procedure
described by CPT code 27279, which had a proposed geometric mean cost
of approximately $16, 816. The commenter requested that CMS reassign
the procedure described by CPT code 27279 to an APC that has a payment
rate that is comparable to the actual cost of the procedure.
Response: As previously mentioned in response to commenters'
concerns regarding the wide range of costs associated with the
musculoskeletal procedures APC group, we revised the musculoskeletal
procedures APC grouping by adding a fifth level, APC 5125 (Level 5
Musculoskeletal Procedures). With the addition of APC 5125, we
reassigned certain procedures from Level 4 (APC 5124) in the proposed
rule to new Level 5 based on the geometric mean costs of the
procedures. Therefore, in this final rule with comment period, for CY
2015, we are revising the APC assignment for the procedure described by
CPT 27279 from APC 5124 to APC 5125. The geometric mean cost of APC
5125 is approximately $11,027, which is higher than the proposed
geometric mean cost of APC 5124 of approximately $9,789.
Comment: A few commenters disagreed with the proposed APC
assignment for kyphoplasty CPT code 22513 (Percutaneous vertebral
augmentation, including cavity creation (fracture reduction and bone
biopsy included when performed) using mechanical device (e.g.,
kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation,
inclusive of all imaging guidance; thoracic) and CPT code 22514
(Percutaneous vertebral augmentation, including cavity creation
(fracture reduction and bone biopsy included

[[Page 70399]]

when performed) using mechanical device (e.g., kyphoplasty), 1
vertebral body, unilateral or bilateral cannulation, inclusive of all
imaging guidance; lumbar) to APC 5123 (Level 3 Musculoskeletal
Procedures). Specifically, the commenters stated that these two
kyphoplasty procedure codes are not clinically homogenous with the
other procedures assigned to APC 5123 and that the proposed APC payment
would underpay facilities for these procedures, thus negatively
affecting beneficiary access.
Response: We appreciate the stakeholders' concern that the proposed
assignment of the procedures described by CPT codes 22513 and 22514 to
APC 5123 will cause outpatient facilities to stop offering minimally
invasive outpatient procedures for patients with vertebral compression
fractures, forcing these patients toward more expensive alternatives.
Because CPT codes 22513 and 22514 were established January 1, 2015, our
CY 2014 hospital claims data do not include costs for these procedures.
Therefore, we proposed the APC assignment for these two codes based on
similarities in resource cost to former kyphoplasty CPT codes 22523
through 22525. However, as discussed above, in this final rule with
comment period, we are adding a fifth level to the musculoskeletal APC
groupings (APC 5215) for CY 2016, and are reassigning the procedures
described by CPT codes 22513 and 22514 from proposed APC 5124 (Level 4
Musculoskeletal Procedures) to APC 5125. We believe that this
reassignment will improve resource and clinically homogeneity. However,
we will continue to monitor service utilization trends in the HOPD for
kyphoplasty and other minimally invasive procedures for patients with
vertebral compression and consider APC reassignment in future
rulemaking.
Comment: A few commenters believed that CMS used inaccurate CY 2014
claims data for the following auditory osseointegrated system implant
codes:
CPT code 69714 (Auditory osseointegrated device
implantation with attachment to sound processor, without
mastoidectomy);
CPT code 69715 (Auditory osseointegrated device
implantation with attachment to sound processor, with mastoidectomy);
CPT code 69717 (Removal and replacement of existing
osseointegrated implant, with attachment to sound processor, without
mastoidectomy); and
CPT code 69718 (Removal and replacement of existing
osseointegrated implant, with attachment to sound processor, with
mastoidectomy).
Specifically, the commenters expressed skepticism about the low
volume of claims that reported the above codes and the underreporting
of the device cost described by CPT code L8690 (Auditory
osseointegrated device). The commenters recommended that CMS not reduce
the APC payment for these procedures because of incorrectly coded
claims.
Response: As we described in section II.A. of this final rule with
comment period on the OPPS ratesetting methodology, ``Beyond our
standard OPPS trimming methodology . . . that we apply to those claims
that have passed various types of claims processing edits, it is not
our general policy to judge the accuracy of hospital coding and
charging for purposes of ratesetting'' (75 FR 71838). We use the latest
available hospital claims data for these procedures to assign these
procedures to APCs. Based on that data, we are assigning the procedure
described by CPT code 69714 (which has a geometric mean cost of
approximately $9,483) and by CPT code 69715 (which has a geometric mean
cost of approximately $11,337) to APC 5125 (which has a geometric mean
cost of approximately $11,027). We are assigning the procedure
described by CPT code 69717 (which has a geometric mean cost of
approximately $5,923) to APC 5123 (which has a geometric mean cost of
approximately $5,200). We are assigning the procedure described by CPT
code 69718 (which has a geometric mean cost of approximately $6,858) to
APC 5124 (which has a geometric mean cost of approximately $7,392).
Comment: One commenter requested the reassignment of the procedure
described by CPT code 23397 (Muscle transfer, any type, shoulder or
upper arm; multiple) from proposed APC 5122 (Level 2 Musculoskeletal
Procedures) to proposed APC 5123 (Level 3 Musculoskeletal Procedures)
because of clinical and resource use homogeneity with the procedure
described by CPT code 23395 (Muscle transfer, any type, shoulder or
upper arm; single) that is assigned to APC 5123.
Response: We believe that the procedure described by CPT code 23397
is appropriately assigned to APC 5122 based on clinical and resource
use homogeneity with other procedures in the APC. We disagree with the
commenter's recommendation to reassign CPT code 23397 from APC 5122 to
APC 5123. The geometric mean cost of the procedure described by CPT
code 22397 is approximately $3,598 based on only one single claim (out
of two total claims) and is higher than the APC geometric mean cost of
APC 5122, which is approximately $2,507. However, the APC geometric
mean cost for APC 5123 is approximately $5,200. Because of the very low
claims volume for CPT code 23397, it is not appropriate at this time to
reassign the procedure code to a higher paying APC.
Comment: Several commenters requested that CMS reassign the
services described by CPT codes 29580 (Strapping; Unna boot), 29581
(Application of multi-layer compression system; leg (below knee),
including ankle and foot), and 29450 (Application of clubfoot cast with
molding or manipulation, long or short leg from proposed APC 5102
(Level 2 Strapping and Cast Application) to proposed APC 5101 (Level 1
Strapping and Cast Application) because the services described by these
codes are neither clinically consistent nor similar in cost to other
procedures assigned to APC 5102.
Response: Based on our review of the clinical characteristics and
resource costs of the services described by CPT codes 29580, 29581, and
29450 that are reflected in the latest claims data, we agree with the
commenters that it would be more appropriate to group the procedures
described by these codes with similar procedures assigned to APC 5101.
Therefore, we are reassigning the services described by CPT codes
29580, 29581, and 29450 from proposed APC 5102 to APC 5101 for CY 2016.
After consideration of the public comments we received, we are
finalizing our proposal, with the modification of adding a Level 5
Musculoskeletal APC, to reconfigure the orthopedic-related procedures
into 10 APCs. Table 33 below lists the final CY 2016 APCs that result
from the restructuring and consolidation of the current orthopedic-
related procedures APCs. The final payment rates for the specific CPT
orthopedic-related procedure codes are included in Addendum B to this
final rule with comment period. The final payment rates for the
specific APCs to which we are assigning the orthopedic-related
procedures codes are included in Addendum A to this final rule with
comment period. Both OPPS Addenda A and B are available via the
Internet on the CMS Web site.

Table 33--CY 2016 Orthopedic-Related Procedures APCs
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC group title
------------------------------------------------------------------------
5101........................... Level 1 Strapping and Cast Application.

[[Page 70400]]

5102........................... Level 2 Strapping and Cast Application.
5111........................... Level 1 Closed Treatment Fracture and
Related Services.
5112........................... Level 2 Closed Treatment Fracture and
Related Services.
5113........................... Level 3 Closed Treatment Fracture and
Related Services.
5121........................... Level 1 Musculoskeletal Procedures.
5122........................... Level 2 Musculoskeletal Procedures.
5123........................... Level 3 Musculoskeletal Procedures.
5124........................... Level 4 Musculoskeletal Procedures.
5125........................... Level 5 Musculoskeletal Procedures.
------------------------------------------------------------------------

10. Pathology Services
For CY 2016, we proposed to assign pathology services to one of the
following APCs: APCs 5671, 5672, 5673, and 5674 (Levels 1 through 4
Pathology, respectively); APC 5681 (Transfusion Laboratory Procedures);
and APCs 5731, 5732, 5733, and 5734 (Levels 1 through 4 Minor
Procedures, respectively). The packaging of payment for pathology
services is discussed in section II.A.3. of this final rule with
comment period.
Comment: One commenter requested that CMS reassign the following
CPT codes (that were new in CY 2015 and currently do not have available
associated claims data) to APC 5673 (Level 3 Pathology):
CPT code 88344 (Immunohistochemistry or
immunocytochemistry, per specimen; each multiplex antibody stain
procedure);
CPT code 88366 (In situ hybridization (e.g., fish), per
specimen; each multiplex probe stain procedure);
CPT code 88374 (Morphometric analysis, in situ
hybridization (quantitative or semi-quantitative), using computer-
assisted technology, per specimen; each multiplex probe stain
procedure); and
CPT code 88377 (Morphometric analysis, in situ
hybridization (quantitative or semi-quantitative), manual, per
specimen; each multiplex probe stain procedure).
The commenter believed that these CPT codes should be assigned to
the Level 3 Pathology APC (APC 5673) because these are multiplex codes
and are inherently more resource intensive than the corresponding
single antibody/single probe procedures, for example, CPT code 88342,
which are currently assigned to APC 5673.
Response: We agree with the commenters. Therefore, for CY 2016, we
are reassigning CPT codes 88344, 88366, 88374, and 88377 to APC 5673.
Comment: One commenter requested that CMS reassign CPT code 88121
(Cytopathology, in situ hybridization (e.g., fish), urinary tract
specimen with morphometric analysis, 3-5 molecular probes, each
specimen; using computer-assisted technology) from APC 5672 to APC 5673
because related CPT code 88120 (Cytopathology, in situ hybridization
(e.g., fish), urinary tract specimen with morphometric analysis, 3-5
molecular probes, each specimen; manual) is assigned to APC 5673, the
Level 3 Pathology APC. The commenter asserted that, because the
resources used for services described by CPT code 88121 are similar to
the resources used for services described by CPT 88120, both of these
two CPT codes should be assigned to APC 5673.
Response: Analysis of the latest CY 2014 claims data used for this
final rule with comment period shows the geometric mean cost of
services described by CPT code 88121 is approximately $132, and the
geometric mean cost of services described by CPT code 88120 is
approximately $154. Calculation of the geometric mean costs for the
services described by these codes resulted in CPT code 88121 being
assigned to APC 5672 (Level 2 Pathology) and CPT code 88120 being
assigned to APC 5673 (Level 3 Pathology). The geometric cost of CPT
code 88121 is at the top of the range of costs services assigned to APC
5672, and the geometric cost of CPT code 88120 is at the bottom of the
range costs of services assigned to APC 5673. This situation sometimes
occurs even for somewhat similar services because APC groupings by
definition have boundaries that divide the levels within an APC series
such as the four levels for pathology services. We believe that the
services described by CPT code 88121 are appropriately assigned to APC
5672. Therefore, for CY 2016, we are not reassigning the services
described by CPT code 88121 from APC 5672 to APC 5673 as the commenter
requested.
Comment: Some commenters urged CMS to maintain the existing,
separately payable status indicators (that is, ``S'' or ``T'') for a
number of codes within the proposed nine reconfigured APC families
instead of assigning them to a conditional packaging status indicator
(that is, ``Q1'' or ``Q2''). One commenter provided a list of 70 codes
and requested that CMS assign them to separately payable status
indicators. Among the list of 70 codes provided by the commenter were
14 pathology services codes that, as a result of the APC restructuring
policy, were proposed for CY 2016 to be assigned to either APC 5681
(Transfusion Laboratory Procedures) or to APC 5732 (Level 2 Minor
Procedures) or APC 5733 (Level 3 Minor Procedures).
Response: Prior to our proposal, we reviewed all of the services
associated with the proposed nine families. We believe that the
procedures and services that we proposed to assign to a conditional
packaging status indicator are ancillary and dependent in relation to
the other procedures within the same family groupings with which they
are most commonly furnished. Based on our review and input from CMS
clinical staff, we believe that the codes that we proposed to
conditionally package are appropriate. In addition, the APC to which we
proposed to assign most of the 14 pathology services codes for CY 2016,
APC 5681 (Transfusion Laboratory Procedures), is the successor APC to
CY 2015 APC 0345 (Level I Transfusion Laboratory Procedures). APC 0345
was designated in CY 2015 as an APC for conditionally packaged
ancillary services (79 FR 66822). In the proposed rule, 3 of the 14
pathology codes in question were proposed to be assigned to either APC
5732 (Level 2 Minor Procedures) or APC 5733 (Level 3 Minor Procedures).
These APCs are the successor APCs to the CY 2015 APCs 0340 (Level II
Minor Procedures) and 0420 (Level III Minor Procedures), which were
also designated in CY 2015 as APCs for conditionally packaged ancillary
services (79 FR 66822). Therefore, we believe that the services
assigned to APCs 5681, 5732, and 5733 are appropriately assigned a
conditionally packaged status indicator. Further, based on the clinical
nature of the services and our understanding of the procedures, we
believe that assigning them to a conditional packaging status indicator
will create incentives for hospitals and their physician partners to
work together to establish appropriate protocols that will eliminate
unnecessary services where they exist and institutionalize approaches
to providing necessary services more efficiently. Therefore, after
consideration of the public comments we received, we are finalizing our
proposal to assign the 14 pathology services codes in question status
indicator ``Q1'' for CY 2016.

[[Page 70401]]

11. Radiology Oncology Procedures and Services
a. Therapeutic Radiation Treatment Preparation
(1) Teletherapy Planning
For CY 2016, we proposed the following four-level configuration for
the Therapeutic Radiation Treatment Preparation APCs:
APC 5611 (Level 1 Therapeutic Radiation Treatment
Preparation);
APC 5612 (Level 2 Therapeutic Radiation Treatment
Preparation);
APC 5613 (Level 3 Therapeutic Radiation Treatment
Preparation); and
APC 5614 (Level 4 Therapeutic Radiation Treatment
Preparation).
Procedures described by CPT codes 77306 (Teletherapy isodose plan;
simple (1 or 2 unmodified ports directed to a single area of interest),
includes basic dosimetry calculation(s)) and 77307 (Teletherapy isodose
plan; complex (multiple treatment areas, tangential ports, the use of
wedges, blocking, rotational beam, or special beam considerations),
includes basic dosimetry calculation(s)) were considered new codes for
CY 2015 and assigned to APC 0304 (Level I Therapeutic Radiation
Treatment Preparation) in the CY 2015 OPPS/ASC final rule with comment
period. In the CY 2016 OPPS/ASC proposed rule, we proposed to reassign
procedures described by CPT codes 77306 and 77307 to proposed new APC
5611.
Comment: One commenter who responded to the CY 2015 OPPS/ASC final
rule with comment period and the CY 2016 OPPS/ASC proposed rule
requested that CMS reassign procedures described by CPT codes 77306 and
77307 to a higher level APC within the group of Therapeutic Radiation
Treatment Preparation APCs. The commenter stated that the procedures
described by these new codes have greater resource intensity than their
predecessor codes because these procedures now include services that
were formerly separately reportable.
Response: We agree with the commenter. We also believe that it is
likely that the procedures described by the complex code, CPT code
77307, requires more resources than the procedures described by CPT
code 77306. Therefore, for CY 2016, we are modifying our proposal and
assigning the procedures described by CPT code 77306 to new APC 5612
and the procedures described by CPT code 77307 to new APC 5613 for CY
2016.
(2) Intensity Modulated Radiotherapy (IMRT) Planning
In the CY 2016 OPPS/ASC proposed rule, we proposed to assign
procedures described by CPT code 77301 (Intensity modulated
radiotherapy plan, including dose-volume histograms for target and
critical structure partial tolerance specifications) was assigned to
new APC 5614. We proposed new APC 5614 as the highest level APC in the
group of Therapeutic Radiation Treatment Preparation APCs.
Since 2008, CMS has provided coding guidance for claims reporting
CPT code 77301 in the Medicare Claims Processing Manual, Chapter 4,
Section 200.3.2, which states the following: ``Payment for the services
identified by CPT codes 77014, 77280-77295, 77305-77321, 77331, 77336,
and 77370 is included in the APC payment for IMRT planning when these
services are performed as part of developing an IMRT plan that is
reported using CPT code 77301. Under those circumstances, these codes
should not be billed in addition to CPT code 77301 for IMRT planning.''
In addition to this CMS Manual guidance, there is National Correct
Coding Initiative (NCCI) guidance in the NCCI Policy Manual for
Medicare Services, Chapter 9, page IX-17, which states the following:
``12. Intensity modulated radiotherapy (IMRT) plan (CPT code 77301)
includes therapeutic radiology simulation-aided field settings.
Simulation field settings for IMRT should not be reported separately
with CPT codes 77280 through 77295. Although procedure-to-procedure
edits based on this principle exist in NCCI for procedures performed on
the same date of service, these edits should not be circumvented by
performing the two procedures described by a code pair edit on
different dates of service.''
Comment: A few commenters requested that CMS clarify its coding
guidance on reporting services involving IMRT planning on claims.
Several commenters stated that the service described by CPT code 77290
(Therapeutic radiology simulation-aided field setting; complex) should
be separately reported from the services described by CPT code 77301
for patients receiving IMRT planning. These commenters believed that
the services described by CPT code 77290 are never performed as part of
IMRT planning services and, therefore, should be allowed to be reported
separately from the services described by CPT 77301. Another commenter
stated that recent coding guidance issued by the American Society for
Radiation Oncology (ASTRO) also has caused confusion for hospitals and
requested that CMS clarify its reporting guidance for IMRT planning in
light of the recent ASTRO coding guidance. The commenter referred to
the ASTRO Coding Guidance Articles, Process of Care: Treatment
Preparation, which is available on the ASTRO Web site at: https://
www.astro.org/Practice-Management/Radiation-Oncology-Coding/Coding-
Guidance/Articles/Process-of-Care_Treatment-Preparation.aspx. The
ASTRO guidance states in part that ``[I]f IMRT is the chosen modality
for treating the patient, a simulation code (e.g., CPT code 77290)
cannot be reported separately prior to completion of the IMRT treatment
plan, even if the two services are performed on separate days.'' The
commenter further believed that ASTRO's guidance should only apply to
physician billing and not to hospital outpatient billing.
Response: We disagree with these commenters. We believe that the
types of services included in IMRT treatment planning include
simulation. Although the commenter believed that simulation is never
included as part of IMRT planning services, we believe CMS'
longstanding Manual and coding guidance issued in CY 2008 has been
precise in conveying its policy and instructions regarding coding for
IMRT services and that, generally, IMRT services have been properly
reported by hospitals.
It is our policy that payments for the services identified by CPT
codes 77280 through 77295 are included in the APC payment for IMRT
planning services, and that the services described by these CPT codes
should not be reported separately from services described by CPT code
77301, regardless of when the various services that comprise CPT code
77301 are performed. If a hospital submits a claim that separately
reports services described by one of these simulation CPT codes in
addition to separately reporting IMRT planning services that are
performed, we would consider this reporting to constitute unbundling of
the APC payment, which is prohibited. We will revise and update the
Medicare Claims Processing Manual and coding guidance in the near
future to ensure that this policy is more directly stated. The
clarified coding guidance will state the following:
``Payment for the services identified by CPT codes 77014, 77280
through 77295, 77305 through 77321, 77331, and 77370 is included in the
APC payment for CPT code 77301 (IMRT planning). These codes should not
be reported in addition to CPT code 77301 (on either the same or a
different date of service)

[[Page 70402]]

unless these services are being performed in support of a separate and
distinct non-IMRT radiation therapy for a different tumor.''
Comment: One commenter requested that CMS reassign the services
described by CPT code 77301 to a higher level APC to reflect the
additional resource utilization involved with CT simulation, in
addition to the resource-intensive IMRT planning services included as
services described by CPT code 77301.
Response: We proposed to assign the service described by CPT code
77301 to new proposed APC 5614, which is the highest level APC in the
Therapeutic Radiation Treatment Preparation APC group. We believe that
the service described by CPT code 77301 is a therapeutic radiation
treatment preparation service and that it clinically aligns with other
services within in the Therapeutic Radiation Treatment Preparation APC
group. The final geometric mean cost of the services described by CPT
code 77301 is approximately $1,125 based on 51,301 single claims (out
of 52,016 total claims), which is comparable to the final geometric
mean cost of approximately $1,074 for new APC 5614. We also believe
that, given the close proximity of the geometric mean cost of services
described by CPT code 77301 to the geometric mean cost of new APC 5614,
this APC assignment is appropriate for CPT code 77301. As we do with
all codes annually, next year we will examine the cost information on
claims reporting services described by CPT code 77301 and determine if
a change to the APC assignment is warranted. In addition, if the
clarification of our coding guidance for IMRT planning services results
in a significant change in the geometric mean cost of services
described by CPT code 77301 in future years, we will consider an
alternative APC assignment for the code other than APC 5614.
b. Radiation Therapy (Including Brachytherapy)
In the CY 2016 OPPS/ASC proposed rule, we proposed the following
five levels for the Radiation Therapy APC group:
APC 5621 (Level 1 Radiation Therapy);
APC 5622 (Level 2 Radiation Therapy);
APC 5623 (Level 3 Radiation Therapy);
APC 5624 (Level 4 Radiation Therapy); and
APC 5625 (Level 5 Radiation Therapy).
We also proposed to create two new APCs for CY 2016: APC 5631
(Single Session Cranial Stereotactic Radiosurgery) and APC 5641
(Brachytherapy). All of these proposed APCs describe various types of
radiation therapy or radiation delivery.
Comment: One commenter requested that CMS reassign the procedure
described by CPT code 0394T (High dose rate electronic brachytherapy,
skin surface application, per fraction, includes basic dosimetry, when
Performed) from proposed APC 5622 to proposed APC 5623, and the
procedure described by CPT code 0395T (High dose rate electronic
brachytherapy, interstitial or intracavitary treatment, per fraction,
includes basic dosimetry, when performed) from proposed APC 5641 to
proposed APC 5624. The commenter believed that these codes should be
assigned to these higher paying APCs because the procedures described
by these new codes include procedures such as dosimetry that were
formerly separately payable under the OPPS.
Response: CPT codes 0394T and 0395T are new codes for CY 2016. The
procedures described by these new codes were mapped to new proposed
APCs 5622 and 5641 based on our best estimate of the likely resource
costs for these procedures. We anticipate that we will have claims data
for the procedures describing these new CPT codes for the CY 2018 OPPS
rulemaking. At this time, we do not believe that we have sufficient
information to support reassigning CPT codes 0394T and 0395T to the
next higher level radiation therapy APC. Therefore, we are finalizing,
as proposed, the APC assignments for procedures described by CPT codes
0394T and 0395T.
Comment: A few commenters requested that CMS reassign the procedure
described by CPT code 77762 (Intracavitary radiation source
application; intermediate) from proposed new APC 5622 to proposed new
5623 because related CPT codes 77761 (Intracavitary radiation source
application; simple) and 77763 (Intracavitary radiation source
application; complex) were both proposed to be assigned to new proposed
APC 5623 in the CY 2016 OPPS/ASC proposed rule. The commenters stated
that, although CMS may lack sufficient claims data for the procedure
described by CPT code 77762, the procedure (the intermediate level of
this code series) is similar in terms of clinical characteristics and
resource use to the procedures described by CPT codes 77761 and 77763
and, therefore, the procedure described by CPT code 77762 should be
assigned to the same APC as these other codes in the intracavitary
radiation source application APC group.
Response: We agree with the commenters that the procedure involving
intermediate intracavitary radiation source application should not be
assigned to a lower level APC than the simple version of this
procedure. After examining claims data for the CPT codes in this APC
group that reported intracavitary radiation source application, we
found that, although the number of claims is relatively small, the
geometric mean cost of the procedure described by CPT code 77763 is
more similar to the geometric mean costs of procedures assigned to new
APC 5624 than that of the procedures assigned to new APC 5623.
Therefore, we are modifying our proposal and reassigning the procedure
described by CPT code 77762 from proposed APC 5622 to APC 5623, and the
procedure described by CPT code 77763 (the complex code) from new APC
5623 to APC 5624 for CY 2016. We also believe that it is appropriate,
for consistency and easy comprehension, to revise the title of some of
the radiation therapy APCs. Depicted in Table 34 below is a listing of
the finalized titles of the radiation therapy APCs. The revisions to
the titles of these APCs do not affect the APC assignment of any of the
codes.

Table 34--Final Radiation Therapy APC Titles for CY 2016
----------------------------------------------------------------------------------------------------------------
Proposed CY 2016 Final CY 2016 APC
Proposed CY 2016 APC No. APC title No. Final CY 2016 APC title
----------------------------------------------------------------------------------------------------------------
5621........................... Level 1--Radiation 5621.............. Level 1--Radiation Therapy.
Therapy.
5622........................... Level 2--Radiation 5622.............. Level 2--Radiation Therapy.
Therapy.
5623........................... Level 3--Radiation 5623.............. Level 3--Radiation Therapy.
Therapy.
5641........................... Brachytherapy..... 5624.............. Level 4--Radiation Therapy.
5624........................... Level 4--Radiation 5625.............. Level 5--Radiation Therapy.
Therapy.
5625........................... Level 5--Radiation 5626.............. Level 6--Radiation Therapy.
Therapy.

[[Page 70403]]

5631........................... Single Session 5627.............. Level 7--Radiation Therapy.
Cranial
Stereotactic
Radiosurgery.
----------------------------------------------------------------------------------------------------------------

In summary, for CY 2016, the simple and intermediate intracavitary
radiation source application codes, CPT codes 77761 and 77762, are
assigned to new APC 5623, and the complex intracavitary radiation
source application code, CPT code 77763, is assigned to APC 5624.
Comment: Several commenters requested that CMS estimate costs for
the new CY 2016 high dose rate (HDR) brachytherapy codes (CPT codes
77767 through 77772) to include the cost of the dose calculation, which
is now a part of the services described by the HDR brachytherapy codes.
The commenters believed that if CMS included these additional costs,
the calculations would result in increased payment rates for the APCs
to which the HDR brachytherapy codes are assigned.
Response: We believe that these commenters may have misunderstood
our ratesetting methodology as it applies to new codes. We generally do
not model costs for new codes and incorporate modeled cost data into
our payment rate calculations. Instead, we make an initial APC
assignment for new codes based on predecessor code APC assignments and
other information that allows for a suitable APC assignment until
claims data is available for the new codes. We do not believe the
commenters' suggested approach is appropriate under our established
ratesetting methodology for new codes.
c. Fractionated Stereotactic Radiosurgery (SRS)
For CY 2016, we proposed to reassign the services described by CPT
code 77373 (Stereotactic body radiation therapy, treatment delivery,
per fraction to 1 or more lesions, including image guidance, entire
course not to exceed 5 fractions) from APC 0066 (Level V Radiation) to
APC 5625 (Level 5 Radiation Therapy), with a proposed payment rate of
approximately $1,699.
Comment: Several commenters disagreed with the proposed APC
assignment of the services described by CPT code 77373 to APC 5625. In
particular, the commenters were concerned that the proposed payment
rate for the services described by CPT code 77373 equates to a
reduction of 11 percent in payment when compared to the payment rate
for CY 2015. The commenters believed that the proposed payment is not
reflective of the actual costs of providing fractionated SRS services.
The commenters also expressed concerns about the accuracy of the
hospital cost data on fractionated SRS services used to set the
proposed payment rate. They believed that hospitals have miscoded the
service by reporting CPT code 77372 (Radiation treatment delivery,
stereotactic radiosurgery (SRS), complete course of treatment of
cranial lesion(s) consisting of 1 session; linear accelerator based)
for the first fraction, and instead have reported the services
described by CPT code 77373. Several commenters requested that CMS
increase the proposed payment rate of approximately $1,699 for APC 5625
by at least $630 to more accurately capture the costs of providing this
therapy, or alternatively, assign services described by CPT code 77373
to a stable APC, such as a new technology APC, for a period of 3 years
to allow for the reporting of appropriate claims data to use to
calculate a more appropriate payment. One commenter recommended that
CMS reassign CPT code 77373 to New Technology--Level 25 ($3,500-
$4,000), with a payment rate of approximately $3,750.
Response: We believe that we have adequate claims data for services
described by CPT code 77373 because fractionated/multi-session SRS is
not a new technology. For the CY 2016 ratesetting, there are 59,853
single claims (out of 64,629 total claims) for the services described
by CPT code 77373, which is an adequate volume for ratesetting
purposes. Although CPT code 77373 was not recognized under the OPPS
until January 1, 2014, the code has been in existence since January 1,
2007. Hospital outpatient facilities have been reporting the SRS CPT
codes to other payers since the codes were established in 2007. We
believe that hospital outpatient facilities have had sufficient time to
educate themselves on how to appropriately report the services
described by CPT code 77373. We do not agree that assigning the
services described by CPT code 77373 to a New Technology APC is
appropriate, given the robust claims data we have from CY 2014.
Miscoding of procedures and services by hospitals is generally not an
area that we investigate or attempt to remedy by substituting other
payment rates for the payment rate calculated from the claims data
according to our standard methodology.
We note that (as discussed above) the APC number and title for APC
5625, the APC to which the services described by CPT code 77373 are
assigned, have been changed to APC 5626 (Level 6 Radiation Therapy). In
addition, as discussed in section III.D.15.b. of this final rule with
comment period, because the procedure codes describing MRgFUS treatment
are being reassigned to other APCs, CPT code 77373 is the only
procedure code assigned to APC 5626.
In summary, after consideration of the public comments we received,
we are modifying our proposal and assigning the services described by
CPT code 77373 to APC 5626 for CY 2016. The final CY 2016 payment rate
for the services described by CPT code 77373 can be found in Addendum B
to this final rule with comment period (which is available via the
Internet on the CMS Web site).
12. Skin Procedures
As a part of our CY 2016 comprehensive review of the structure of
the APCs and procedure code assignments, we examined the APCs that
describe skin procedures. Based on our evaluation of the hospital
outpatient claims data available for the CY 2016 OPP/ASC proposed rule,
we proposed to restructure all of the APCs for skin-related procedures
by combining the debridement and skin procedures APCs to more
appropriately reflect the resource costs and clinical characteristics
of the procedures assigned to each APC. Clinically, the services
assigned to the current debridement APC grouping are similar to the
services assigned to the current skin procedures APCs. Therefore, we
believe that the services assigned to these two APC groupings would be
more appropriately represented by combining the services into a single
APC grouping described as skin procedures and related services. We
believe that the proposed consolidation and restructuring of these APCs
more appropriately categorizes all of the skin procedures and related
services with different resource use, such that the services within
each proposed newly configured APC are comparable based on the
homogeneity of clinical characteristics and resource costs.

[[Page 70404]]

Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39262 through
39263), for CY 2016, we proposed to consolidate and restructure the
skin and debridement APCs into a single APC grouping. Table 31 of the
proposed rule listed the current CY 2015 APCs that contain skin and
debridement procedures, and Table 32 of the proposed rule listed the
proposed CY 2016 APCs that would result from the proposed consolidation
and restructuring of the current skin procedures and related services
APCs into a single APC grouping. We invited public comments on this
proposal.
We received several public comments related to the proposed APC
assignments for certain skin-related services and procedures and one
comment specifically relating to the proposed restructuring of the skin
procedures APCs. A summary of the public comments and our responses are
below.
Comment: Some commenters expressed concern with CMS' proposal to
consolidate the skin substitute and skin debridement APCs, and stated
that the proposed reconfiguration reduces the clinical cohesiveness of
the procedures assigned to the APC grouping and could negatively impact
payments for these services. One commenter stated that the proposed
reconfigured APC 5051 (Level 1 Skin Procedures) and APC 5053 (Level 3
Skin Procedures) combine simple and complex procedures under the APCs
that make no distinctions in the clinical characteristics and resource
costs for certain procedures. The commenter requested that CMS
reconsider its proposal and work with clinical experts to refine the
structure of these APCs that reflects the clinical cohesiveness and
resource use associated with these services. Another commenter
disagreed with CMS' rationale that the proposed restructuring and
consolidation of these APCs would more appropriately reflect the
comparable costs and clinical characteristics of the procedures
assigned to each APC and stated that combining the debridement and skin
procedure APCs produces broad categories with wide payment variations,
which creates inappropriate resource distinctions for certain
procedures.
Response: We disagree with the commenters. We believe that the
reconfigured skin procedure APCs all include clinically similar
procedures with similar resource costs. We also believe that the range
of procedure costs in each of the skin procedure APCs is appropriate,
and there are no violations of the 2 times rule within these APCs. The
CY 2015 APC structure separated skin procedures from debridement and
destruction procedures, which resulted in procedures that were
otherwise similar skin procedures being assigned to different APCs (if
the procedures also were debridement and destruction procedures). The
CY 2015 structure resulted in similar procedures involving the skin
procedure being assigned to different APCs based on a procedure being
labelled either debridement/destruction or a skin procedure.
Debridement of skin is a skin procedure; therefore, assignment to a
skin procedure APC is appropriate. We do not believe this distinction
is the most appropriate way to distinguish procedures involving the
skin because debridement of skin is a skin procedure. Therefore, we
believe that the services assigned to these two APC groups are more
appropriately classified as skin procedures and related services in a
single APC group. We believe that the proposed consolidation and
restructuring of these APCs more appropriately categorizes all of the
similar skin procedures and related services with different resource
use, such that the services within each proposed newly configured APC
are comparable based on the homogeneity of clinical characteristics and
resource costs. We also believe that restructuring the APC groupings
decreases overlapping cost ranges among APCs in a series and,
consequently, allows CMS to pay for these procedures and services
through a skin procedures APC series that is more clinically
homogeneous and that contain procedures with similar costs.
Comment: One commenter stated that the proposed payment rate for
APC 5053 would result in substantial underpayment for procedures and
services involving the low-cost skin substitute products compared to
procedures and services involving the high-cost skin substitute
products. Specifically, the commenter indicated that facilities using
the low-cost skin substitute products would experience a reduction in
payment between approximately $274 and $290 per treatment session. The
commenter believed that the potential underpayment associated with the
use of low-cost skin substitute products would ultimately incentivize
the use of the high-cost skin products, and result in greater overall
expenditures to the Medicare program. Therefore, the commenter
recommended that CMS create a new APC level in addition to the APC
Level 3 and APC Level 4 for the skin procedures and related services
APC grouping to eliminate this perceived incentive and discrepancy.
Response: We again reviewed all of the skin procedures and related
services and the APC assignments for this final rule with comment
period. Based on our evaluation of the latest hospital outpatient
claims data used for this final rule with comment period, we are
revising the proposed APC assignments for several skin procedures
within the Skin Procedures APC grouping. Specifically, we are modifying
our proposal by reassigning certain procedures from proposed APC 5053
to APC 5052 (Level 2 Skin Procedures) to more appropriately reflect the
homogeneity of the resource costs associated with the other procedures
assigned to APC 5052. In light of this modification, we do not believe
that creating a new level within the skin procedures and related
services APC groupings is necessary. We believe that the reassignment
of certain procedures results in improved clinical homogeneity and
resource costs for all of the skin procedures within the skin
procedures groups.
Comment: Some commenters urged CMS to maintain the existing,
separately payable status indicator assignments (that is, status
indicators ``S'' or ``T'') for several procedure codes included within
the proposed nine reconfigured APC grouping, instead of assigning these
procedures to a status indicator that would generate a conditionally
packaged payment (that is, either status indicator ``Q1'' or ``Q2'').
One commenter provided a list of 70 procedure codes and requested that
CMS reassign the listed procedures to status indicators that would
generate separate payment for the services described by those procedure
codes. Among the listed 70 procedure codes in the commenter's request,
36 describe skin procedures that, as a result of the proposed APC
restructuring and consolidation, were proposed for CY 2016 to be
reassigned to APC 5051.
Response: Prior to developing our proposal, we reviewed all of the
procedures and services associated with the proposed reconfigured nine
APCs skin procedures and related services groupings. Based on our
review and input from CMS clinical staff, we believe that the proposed
assignment of the procedures and services to a status indicator that
indicates them as conditionally packaged is appropriate because these
services are considered ancillary and dependent in relation to the
other procedures with which they are most commonly furnished. In
addition, the APC to which the 36 procedure codes listed by the

[[Page 70405]]

commenter were proposed to be assigned for CY 2016, APC 5051, is the
successor APC to the CY 2015 APC 0012 (Level I Debridement &
Destruction). APC 0012 was designated in CY 2015 as an APC containing
procedures that are considered ancillary services for which payment is
conditionally packaged. Therefore, we believe that the procedures and
services proposed to be reassigned to APC 5051 also should be
appropriately assigned to a status indicator that conditionally
packages payment for these services. Further, based on the clinical
nature of the services and our understanding of the procedures, we
believe that the proposed assignments for these procedures and services
to a status indicator indicating conditional packaging will create
incentives for hospitals and their physician partners to work together
to establish appropriate protocols that will eliminate providing
unnecessary services where these instances exist and institutionalize
approaches to providing necessary services more efficiently. Therefore,
in this final rule with comment period, we are assigning status
indicator ``Q1'' to the 36 skin procedure codes identified by the
commenter in the nine reconfigured APC groupings for CY 2016.
After consideration of the public comments we received, we are
finalizing our proposal to restructure and consolidate the skin
procedures and related services APCs, with one modification. We are
revising the APC assignment for several procedures, which are listed in
Addendum B to this final rule with comment period, by reassigning them
from APC 5053 to APC 5052 to appropriately reflect the resource costs
associated with the procedures. We also are assigning the 36 procedure
codes describing skin procedure and related services identified by the
commenter to status indicator ``Q1'' for CY 2016.
a. Negative Pressure Wound Therapy (NPWT) Services
As listed in Addendum B to the CY 2016 OPPS/ASC proposed rule, we
proposed to reassign the NPWT services to two separate APCs.
Specifically, as listed in Table 35 below, we proposed to reassign the
durable medical equipment (DME)-related NPWT CPT codes 97605 and 97606
from APC 0012 (Level I Debridement & Destruction) and APC 0015 (Level
II Debridement & Destruction), respectively, to proposed APC 5051
(Level 1 Skin Procedures), with a proposed payment rate of
approximately $120, and the disposable NPWT CPT codes 97607 and 97608
from APC 0015 to proposed APC 5052 (Level 2 Skin Procedures), with a
proposed payment rate of approximately $166.

Table 35--Proposed APC Assignment for the NPWT Services for CY 2016
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2015 OPPS CY 2015 2016 OPPS Proposed CY
CY 2015 CPT/HCPCS code Long descriptor status OPPS APC status 2016 OPPS
indicator indicator APC
----------------------------------------------------------------------------------------------------------------
97605..................... Negative pressure wound Q1 0012 Q1 5051
therapy (e.g., vacuum
assisted drainage
collection), including
topical application(s), wound
assessment, and
instruction(s) for ongoing
care, per session; total
wound(s) surface area less
than or equal to 50 square
centimeters.
97606..................... Negative pressure wound T 0015 Q1 5051
therapy (e.g., vacuum
assisted drainage
collection), including
topical application(s), wound
assessment, and
instruction(s) for ongoing
care, per session; total
wound(s) surface area greater
than 50 square centimeters.
97607..................... Negative pressure wound T 0015 T 5052
therapy, (e.g., vacuum
assisted drainage
collection), utilizing
disposable, non-durable
medical equipment including
provision of exudate
management collection system,
topical application(s), wound
assessment, and instructions
for ongoing care, per
session; total wound(s)
surface area less than or
equal to 50 square
centimeters.
97608..................... Negative pressure wound T 0015 T 5052
therapy, (e.g., vacuum
assisted drainage
collection), utilizing
disposable, non-durable
medical equipment including
provision of exudate
management collection system,
topical application(s), wound
assessment, and instructions
for ongoing care, per
session; total wound(s)
surface area greater than 50
square centimeters.
----------------------------------------------------------------------------------------------------------------

We note that the DME-related NPWT CPT codes 97605 and 97606 were
effective January 1, 2005. The disposable NPWT CPT codes 97607 and
97608 were effective January 1, 2015. However, the predecessor codes
for the CY 2015 disposable NPWT procedure codes, specifically HCPCS
codes G0456 and G0457, became effective January 1, 2013, and were
deleted on December 31, 2014, when the NWPT replacement CPT codes
became effective.
Comment: Some commenters disagreed with CMS' proposal to assign the
procedures described by DME-related NPWT CPT codes 97605 and 97606 to
OPPS status indicator ``Q1.'' The commenters believed that these
procedures should be treated as independent clinical procedures and not
ancillary services, and requested that CMS not finalize its proposal to
assign these procedures to OPPS status indicator ``Q1.''
Response: We believe that the commenters may have misunderstood the
meaning of OPPS status indicator ``Q1.'' Assigning a procedure to OPPS
status indicator ``Q1'' indicates that payment for the service is
conditionally packaged under the OPPS. A criterion under the
conditional packaging policy is that payment for a service is packaged
when it is provided in combination with a significant procedure on the
same date of service, but the service is separately paid when it is
reported on the claim without a significant procedure. Below is an
excerpt from Addendum D1 to the CY 2016 OPPS/ASC proposed rule that
shows the definition of status indicator ``Q1.''

[[Page 70406]]

Addendum D1--Proposed OPPS Payment Status Indicators for CY 2016
------------------------------------------------------------------------
Status indicator Item/code/service OPPS payment status
------------------------------------------------------------------------
Q1.................... STV-Packaged Codes... Paid under OPPS; Addendum
B displays APC
assignments when
services are separately
payable.
(1) Packaged APC payment
if billed on the same
date of service as a
HCPCS code assigned
status indicator ``S,''
``T,'' or ``V.''
(2) In other
circumstances, payment
is made
through a separate APC
payment.
------------------------------------------------------------------------

In the case of the procedures described by CPT codes 97605 and
97606, payment for these procedures is included in the payment for the
significant procedure when these procedures are reported in combination
with HCPCS codes that are assigned to either status indicators ``S,''
``T,'' or ``V.'' Alternatively, the procedures are separately paid when
performed alone, or when they are reported in combination with HCPCS
codes that described procedures assigned to a status indicator other
than ``S,'' ``T,'' or ``V.'' We believe that ``Q1'' is the most
appropriate status indicator assignment for the DME-related NPWT CPT
codes 97605 and 97606 because the services described by these codes are
often provided in combination with other wound treatments and
procedures.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to assign DME-related
NPWT CPT codes 97605 and 97606 to OPPS status indicator ``Q1'' for CY
2016. The complete list of the OPPS payment status indicators and their
definitions for CY 2016 is displayed in Addendum D1 to this final rule
with comment period, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
In addition, we are finalizing our proposal, without modification, to
reassign the DME-related NWPT CPT codes 97605 and 97606 from CY 2015
APCs 0012 and 0015, respectively, to APC 5051 for CY 2016. The final CY
2016 payment rate for the procedures described by CPT codes 97605 and
97605 can be found in Addendum B to this final rule with comment period
(which is available via the Internet on the CMS Web site).
Comment: Several commenters opposed CMS' proposal to reassign the
disposable NWPT procedures, specifically the procedures described by
the disposable NWPT CPT codes 97607 and 97608 from CY 2015 APC 0015 to
APC 5052 for CY 2016. The commenters believed that the claims data used
to set the payment rates for these two procedures are flawed and do not
reflect the actual costs incurred by hospitals for providing this
treatment. The commenters opined that, because of the confusion related
to the accurate coding of the procedures described by the predecessor
HCPCS G-codes (HCPCS codes G0456 and G0457), hospitals have
continuously miscoded this service in CY 2013 and CY 2014 by reporting
charges for the DME-related NPWT CPT codes 97605 and 97606 instead of
charges for the disposable NWPT CPT codes 97607 and 97608 when these
services were actually provided. Some commenters stated that the
resource costs associated with the disposable NPWT procedures, which
require the use of disposable NPWT supplies, is significantly higher
than the resource costs associated with the DME-related NPWT service,
which requires the use of a device that is not paid for under the OPPS,
but rather is paid based on the DMEPOS fee schedule. One commenter
indicated that, based on its internal analysis, the costs of disposable
NPWT devices may be as low as $200 and as high as over $800. Another
commenter noted that if an average acquisition cost is approximately
$194 for a particular disposable NPWT device, a provider may incur
costs ranging from approximately $312 to $358 to provide this
treatment. The commenters believed that the proposed payment rate for
APC 5052 does not reflect the cost of the disposable NWPT supplies used
in furnishing the service. Therefore, the commenters urged CMS not to
finalize the proposed reassignment of these procedures to APC 5052 and,
instead, reassign the procedures to APC 5053 (Level 3 Skin Procedures),
which the commenters believed more appropriately compare to the actual
resource costs associated with providing the service. Another commenter
requested that CMS reassign the disposable NWPT CPT codes to an
appropriate APC based on an estimated payment rate of $305.10 for the
procedure. One commenter suggested that, if the alternative of
reassigning the disposable NWPT CPT codes to APC 5053 was not
achievable, CMS consider creating a sixth skin procedures APC that
would be comprised of clinically homogenous wound care services
proposed for reassignment to APCs 5052 and 5053. The commenter believed
that creating this new APC would eliminate any potential violations of
the 2 times rule within proposed APC 5052 or APC 5053.
Response: As reflected in Table 16 of the CY 2016 OPPS/ASC proposed
rule (80 FR 39258), there are no violations of the 2 times rule within
APC 5052. For CY 2016, our analysis of the CY 2014 claims data
available for the proposed rule did not show any violations of the 2
times rule within APC 5052 (which included the proposed reassigned
disposable NPWT procedures) because the lowest cost of a procedure
described by a CPT code with significant claims data assigned to APC
5052 was approximately $158 (for CPT code 36471), while the highest
cost of a procedure described by a CPT code with significant claims
data was approximately $277 (for CPT code 96913). We note that the
geometric mean cost for the procedure described by HCPCS code G0456
(which became CPT code 97607, effective January 1, 2015) was
approximately $176 based on 6,655 single claims (out of 8,826 total
claims) and approximately $203 for the procedure described by HCPCS
G0457 (which became CPT code 97608, effective January 1, 2015) based on
409 single claims (out of 779 total claims). The CY 2016 OPPS/ASC
proposed rule claims data was based on claims submitted between January
1, 2014, through December 31, 2014, and processed on or before December
31, 2014.
For this final rule with comment period, the claims data is based
on the same CY 2014 claims data updated to include those claims that
were processed on or before June 30, 2015. Our analysis of the final
rule claims data initially showed a violation of the 2 times rule
within APC 5053. To eliminate the violation of the 2 times rule, we
reassigned some of the

[[Page 70407]]

procedures at the lower end of the cost range of APC 5053 to APC 5052.
After modifying the proposed reassignment of a few codes from APC 5053
to 5052, the disposable NPWT procedures remain appropriately assigned
to APC 5052 based on the comparability of the geometric mean costs.
Specifically, our final rule claims data show a geometric mean cost of
approximately $174 for procedures described by HCPCS code G0456 based
on 7,301 single claims (out of 9,699 total claims) and approximately
$216 for procedures described by HCPCS code G0457 based on 449 single
claims (out of 858 total claims). The lowest cost of a procedure
described by a CPT code with significant claims data assigned to APC
5052 is approximately $163 (for CPT code 36471), while the highest cost
of a procedure described by a CPT code with significant claims data is
approximately $299 (for CPT code 10120). The geometric mean costs of
approximately $174 (for HCPCS code G0456) and $216 (for HCPCS code
G0457) fall within this range without creating any violations of the 2
times rule. However, if we modify our proposal and reassign the
procedures described by HCPCS codes G0456 and G0457 to APC 5053, a
violation of the 2 times rule would exist. In addition, we do not
believe that it is appropriate or necessary to create a sixth level
within the skin procedures APC groupings. The geometric mean cost of
APC 5052 is approximately $236 and the geometric mean cost of APC 5053
is approximately $449. We believe that these levels represent a
meaningful separation between geometric mean costs without creating a
wider range of costs between adjacent levels in an APC series.
Regarding the commenters' assertions that hospitals are miscoding
claims or are not appropriately charging for disposable NPWT services
and supplies and their requests that we disregard the claims data, we
repeat our general policy: ``Beyond our standard OPPS trimming
methodology . . . that we apply to those claims that have passed
various types of claims processing edits, it is not our general policy
to judge the accuracy of hospital coding and charging for purposes of
ratesetting'' (75 FR 71838). Therefore, because we do not judge the
accuracy of hospital coding and charging, we will not disregard any
claims data for services involving disposable NPWT procedures and
supplies in calculating the payment rate for these procedures. In
addition, it is not our policy to use any information (such as
invoices, statements from companies who sell the medical devices used
in the procedure, various reports from consultants, among others) other
than hospital claims data for determining payment rates. As we do every
year, we will reevaluate the APC assignment for the procedures
involving disposable NPWT services and supplies in preparation for the
CY 2017 rulemaking cycle. We remind hospitals that we review, on an
annual basis, the APC assignments for all services and items paid under
the OPPS.
After consideration of the public comments we received, we are
finalizing our proposal, without modification. Specifically, we are
reassigning the disposable NWPT CPT codes 97607 and 97608 to APC 5052
for CY 2016. Table 36 below lists the final OPPS status indicator and
APC assignments for CPT codes 97605, 97606, 97607, and 97608 for CY
2016. The final CY 2016 payment rates for these codes can be found in
Addendum B to this final rule with comment period (which is available
via the Internet on the CMS Web site).

Table 36--Final Apc Assignment for the NPWT Services for CY 2016
----------------------------------------------------------------------------------------------------------------
Proposed CY Final CY
2016 OPPS Proposed CY 2016 OPPS Final CY
CY 2016 CPT/HCPCS code Long descriptor status 2016 OPPS status 2016 OPPS
indicator APC indicator APC
----------------------------------------------------------------------------------------------------------------
97605..................... Negative pressure wound Q1 5051 Q1 5051
therapy (e.g., vacuum
assisted drainage
collection), including
topical application(s), wound
assessment, and
instruction(s) for ongoing
care, per session; total
wound(s) surface area less
than or equal to 50 square
centimeters.
97606..................... Negative pressure wound Q1 5051 Q1 5051
therapy (e.g., vacuum
assisted drainage
collection), including
topical application(s), wound
assessment, and
instruction(s) for ongoing
care, per session; total
wound(s) surface area greater
than 50 square centimeters.
97607..................... Negative pressure wound T 5052 T 5052
therapy, (e.g., vacuum
assisted drainage
collection), utilizing
disposable, non-durable
medical equipment including
provision of exudate
management collection system,
topical application(s), wound
assessment, and instructions
for ongoing care, per
session; total wound(s)
surface area less than or
equal to 50 square
centimeters.
97608..................... Negative pressure wound T 5052 T 5052
therapy, (e.g., vacuum
assisted drainage
collection), utilizing
disposable, non-durable
medical equipment including
provision of exudate
management collection system,
topical application(s), wound
assessment, and instructions
for ongoing care, per
session; total wound(s)
surface area greater than 50
square centimeters.
----------------------------------------------------------------------------------------------------------------

b. Platelet Rich Plasma (PRP)
As listed in Addendum B to the CY 2016 OPPS/ASC proposed rule, we
proposed to assign HCPCS code G0460 (Autologous platelet rich plasma
for chronic wounds/ulcers, including phlebotomy, centrifugation, and
all other preparatory procedures, administration and dressings, per
treatment) to APC 5053 (Level 3 Skin Procedure), with a proposed
payment rate of approximately $305.
Comment: Some commenters disagreed with CMS' proposed assignment of
HCPCS code G0460 to APC 5053 and recommended that CMS consider
assigning the code to either APC 1511 (New Technology--Level 11 ($900-
$1000)) or 1548 (New Technology--Level 11 ($900-$1000)), with a
proposed payment rate of approximately $950. One commenter stated that
the proposed payment rate for APC 5053 is inadequate and does not

[[Page 70408]]

take into account the full components of providing the service
described by HCPCS code G0460 and the Coverage with Evidence
Development (CED) complexity associated with HCPCS code G0460. In
addition, the commenter believed that a violation of the 2 times rule
exists within APC 5053 when HCPCS code G0460 is assigned to this APC
and, therefore, urged CMS to consider assigning HCPCS code G0460 to New
Technology APC 1511 rather than APC 5053. Further, the commenter opined
that the repeated payment adjustment for this service is causing
significant confusion in the market place and hampering the success of
Medicare's CED protocol. The commenter stated that assigning HCPCS code
G0460 to either APC 1511 or APC 1548 would provide participating
hospitals and sponsored sites predictability in payment levels for the
service described by HCPCS code G0460.
Response: Table 16 of the CY 2016 OPPS/ASC proposed rule (80 FR
39255) listed the three APCs that violated the 2 times rule for
ratesetting and which we proposed to except from the 2 times rule for
CY 2016. APC 5053 does not appear on that list. For CY 2016, our
analysis of the CY 2014 claims data available for the proposed rule
showed that no violations of the 2 times rule existed within APC 5053
because the geometric mean cost for the service described by HCPCS code
G0460 did not fall outside of the acceptable significant costs range.
For purposes of identifying significant HCPCS codes for examination
under the 2 times rule, we consider those codes that have more than
1,000 single major claims, or codes that have both greater than 99
single major claims and contribute at least 2 percent of the single
major claims used to establish the APC geometric mean cost to be
significant. This longstanding policy of when a HCPCS code is
considered significant for purposes of the 2 times rule was based on
the premise that we believe a subset of 1,000 claims is negligible
within the set of approximately 120 million single procedure or single
session claims we use for establishing geometric mean costs. Similarly,
procedures described by a HCPCS code for which there are fewer than 99
single claims or which comprises less than 2 percent of the single
major claims within an APC will have a negligible impact on the APC
geometric mean cost.
Based on our analysis of the claims data used for the proposed
rule, there was no violation of the 2 times rule within APC 5053 when
HCPCS code G0460 was assigned to this APC. Specifically, our data
revealed that the lowest cost procedure with significant claims data
($305 for CPT code 11042) and the highest cost procedure with
significant claims data ($595 for HCPCS code C5271) met the 2 times
rule for APC 5053 whose geometric mean cost was approximately $322.
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. Consistent with the
requirements set forth in section 1833(t)(9), we annually review all
the items and services within an APC group to determine, with respect
to comparability of the use of resources, if the geometric mean cost of
the highest cost item or service within an APC group is more than 2
times greater than the geometric mean cost of the lowest cost item or
service within that same group. In making this determination, we review
our claims data and determine whether we need to make changes to the
current APC assignments for the following year.
We acknowledge the commenters' concerns. However, based on our
analysis of the claims data available for this final rule with comment
period, we believe that the services described by HCPCS code G0460 more
appropriately align with the other services assigned to APC 5054 (Level
4 Skin Procedures) than services assigned either to APC 1511 or APC
1548. We note that the proposed rule claims data was based on claims
submitted between January 1, 2014, through December 31, 2014, and
processed on or before December 31, 2014. However, for this final rule
with comment period, the cost data also includes claims that were
processed on or before June 30, 2015. Specifically, our claims data
show a geometric mean cost of approximately $1,579 based on 35 single
claims (out of 52 total claims) for HCPCS code G0460. We believe that
the geometric mean cost of the service described by HCPCS code G0460
(approximately $1,579) is comparable to the geometric mean cost of APC
5054.
Therefore, after consideration of the public comments we received,
we are finalizing our proposal to assign the service described by HCPCS
code G0460 to one of the reconfigured skin procedure APCs, with one
modification. We are assigning the service described by HCPCS code
G0460 to APC 5054 (rather than proposed APC 5053) for CY 2016. The
final CY 2016 payment rate for HCPCS code G0460 can be found in
Addendum B to this final rule with comment period (which is available
via the Internet on the CMS Web site). We remind the commenters that,
as we do every year, we will again review the APC assignment for all
items, procedures, and services, for the CY 2017 rulemaking cycle.
In summary, after consideration of the public comments we received,
we are finalizing our proposed APC reconfiguration for the skin
procedures and related services APCs, with the modifications described
earlier. Table 37 below lists the final CY 2016 APCs that result from
the consolidation and restructuring of the current skin procedures and
related services APCs into a single APC grouping. The final payment
rates for the specific CPT or Level II HCPCS skin procedure codes can
be found in Addendum B to this final rule with comment period, while
the final payment rates for the specific APCs to which the skin
procedures and related services are assigned can be found in Addendum A
to this final rule with comment period. Both OPPS Addenda A and B are
available via the Internet on the CMS Web site.

Table 37--CY 2016 APCs Assignment for Skin Procedures
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5051.................................. Level 1 Skin Procedures.
5052.................................. Level 2 Skin Procedures.
5053.................................. Level 3 Skin Procedures.
5054.................................. Level 4 Skin Procedures.
5055.................................. Level 5 Skin Procedures.
------------------------------------------------------------------------

13. Urology and Related Services
In the CY 2016 OPPS/ASC proposed rule (80 FR 39263), for the CY
2016 OPPS update, based on our evaluation of the latest hospital
outpatient claims data used for the proposed rule, we proposed to
revise all of the APCs for urology and related services APCs to more
appropriately reflect the resource costs and clinical characteristics
of the procedures assigned to each APC. Currently, several of the
urology and related services APCs are differentiated based on resource
costs of the procedures and services rather than the clinical
similarity when compared to the other procedures and services assigned
to the APC. We believe that establishing more inclusive categories of
the urology and related services is more appropriate for future
ratesetting under the OPPS because the proposed restructured APCs have
a more clinically appropriate granularity, while improving the balance
of resource similarities for all of the procedures

[[Page 70409]]

assigned to these APCs. In addition, we believe that this proposed
revision and consolidation of APCs would more appropriately categorize
all of the urology and related services within an APC grouping such
that the services and procedures assigned to each proposed newly
configured APC are most appropriately comparable with respect to
clinical characteristics and resource use. Therefore, for CY 2016, we
proposed to restructure and consolidate the urology and related
services APCs into a single APC grouping. Table 33 of the proposed rule
listed the CY 2015 urology and related services APCs and status
indicator assignments, and Table 34 of the proposed rule listed the CY
2016 APCs that would result from the proposed consolidation and
restructuring of the current urology and related services APCs into a
single APC grouping. We invited public comments on this proposal.
Comment: Some commenters supported the proposed consolidation and
reconfiguration of the urology and related services APCs, but expressed
concern that the significant differences between the APC payment rates
for the procedures and related services assigned to the proposed APCs
are too broad, which could result in payment misalignments for certain
procedures and services that utilize expensive supplies and equipment.
Many other commenters disagreed with the proposed consolidation because
they believed that the proposed APC reconfigurations and procedure
reassignments are neither clinically or resource homogeneous. Several
commenters stated that, although the existing urology APC 0163 (Level
IV Cystourethroscopy and Other Genitourinary Procedures) is also
diverse, similar to the proposed revised urology APCs, the procedures
are based on expensive technology and single disease treatments. In
addition, several commenters expressed concern with the proposed
payment for the shockwave lithotripsy procedure described by CPT code
50590 (Lithotripsy, extracorporeal shock wave). The commenters stated
that shockwave lithotripsy is grouped in APC 5374 (Level 4 Urology and
Related Services) with other procedures that are non-lithotripsy
related and do not have the same capital expenditures. The commenters
believed that assigning the shockwave lithotripsy procedure to the
proposed reconfigured urology and related services APC 5374 would
significantly underpay providers for the cost of the procedure and
noted that the resources used to perform shockwave lithotripsy
procedures are significantly greater than the resources used to perform
many of the other procedures assigned to APC 5374. The commenters
explained that the shockwave lithotripsy procedure involves the use of
highly specialized capital equipment that cost approximately $50,000
with an additional $80,000 to $100,000 per year contract maintenance,
as well as the assistance of a certified technician. The commenters
suggested that CMS consider modifying its proposal for restructuring
and reconfiguring the urology and related services APCs by assigning
the shockwave lithotripsy procedure to its own APC, separating APC 5374
into two APCs and grouping the APCs based on disease process (for
example, BPH and stone extraction, among others). The commenters
believed that these changes would simplify the APC groupings and create
an APC structure that is more rational. Another commenter recommended
separating APC 5374 into two APCs: One APC that has lower cost/resource
use, with a payment rate of approximately $2,150; and the other APC
with higher cost/resource use, with a payment rate of approximately
$3,091. The commenter believed that such a change to the structure and
configuration of APC 5374 would improve the distribution of the urology
and related services procedures assigned to this APC and reduce
overpayments and underpayments for the services and procedures that are
currently proposed to be assigned to the proposed APCs.
Response: As part of our overall effort to improve the homogeneity
of resource costs and clinical characteristic within the APC groupings,
we proposed to revise the existing urology and related services APCs
for CY 2016. We believe that the proposed restructuring and
reconfiguration of the urology and related services APCs more
appropriately reflect the homogeneity of resource costs and clinical
characteristics of the procedures assigned within each APC.
Although we do not agree with the commenters' suggestion that
creating urology and related services APCs based on the specific
disease treated by the procedure is necessary or appropriate, we
understand some of the commenters' concerns. We continue to believe
that establishing more inclusive categories of urology and related
services is more appropriate for future ratesetting under the OPPS
because the restructured APCs are comprised of more clinically
appropriate groupings, while improving the balance of resource
similarities for all of the procedures assigned to these APCs. However,
in response to the concerns raised by the commenters, we are modifying
our proposal by reassigning some of the procedures to APC 5374 to APC
5373 (Level 3 Urology and Related Services) and APC 5375 (Level 5
Urology and Related Services) rather than reassigning them to APC 5374.
Specifically, the procedures that are being reassigned to APC 5375 are
assigned status indicator ``J1'' because APC 5375 is a C-APC, and one
of the procedures reassigned to APC 5375 is the shockwave lithotripsy
procedure (described by CPT code 50590).
Based on the commenters' feedback and our analysis of the latest
hospital outpatient claims data used for this final rule with comment
period, we believe that the procedure described by CPT code 50590 is
more appropriately assigned to APC 5375 than APC 5374. The geometric
mean cost for the procedure described by CPT code 50590 is
approximately $3,243 based on 44,088 single claims (out of 44,403 total
claims), which is comparable to the geometric mean cost of
approximately $3,551 for APC 5375. Because we have modified our
proposal and are reassigning certain procedures from APC 5374 to APCs
5373 and 5375, we do not believe that it is necessary or appropriate to
divide APC 5374 into two separate APCs. We believe that the
modifications to our proposal to restructure and reconfigure APCs 5373,
5374, and 5375 appropriately group the urology and related services
based on the homogeneity of the clinical characteristics and resource
use.
Comment: One commenter requested that CMS reassign the following
two laser vaporization procedures used to treat benign prostatic
hyperplasia from APC 5374 to APC 5375:
CPT code 52647 (Laser coagulation of prostate, including
control of postoperative bleeding, complete (vasectomy, meatotomy,
cystourethroscopy, urethral calibration and/or dilation, and internal
urethrotomy are included if performed); and
CPT code 52648 (Laser vaporization of prostate, including
control of postoperative bleeding, complete (vasectomy, meatotomy,
cystourethroscopy, urethral calibration and/or dilation, internal
urethrotomy and transurethral resection of prostate are included if
performed)).
The commenter believed that these two procedures are similar to the
procedure described by CPT code 52649 (Laser enucleation of the
prostate with morcellation, including control of postoperative
bleeding, complete (vasectomy, meatotomy, cystourethroscopy, urethral
calibration

[[Page 70410]]

and/or dilation, internal urethrotomy and transurethral resection of
prostate are included if performed)), which was proposed to be
reassigned to APC 5375.
Response: Based on input from our clinical advisors and analysis of
the latest hospital outpatient claims data used for this final rule
with comment period, we agree with the commenter that the procedures
described by CPT codes 52647 and 52648 would be more appropriately
reassigned to APC 5375. Our claims data show that the geometric mean
cost of the procedure described by CPT code 52647 is approximately
$3,296 based on 392 single claims (out of 393 total claims), and the
geometric mean cost of the procedure described by CPT code 52648 is
approximately $3,696 based on 20,813 single claims (out of 21,015 total
claims). Based on our latest review, we believe that the geometric mean
costs for procedures described by CPT codes 52647 and 52648 are similar
to the geometric mean cost of other procedures assigned to APC 5375,
whose geometric mean cost is approximately $3,551.
Therefore, after consideration of the public comments received, we
are finalizing our proposal, with modification, to reassign CPT codes
52647 and 52648 to APC 5375. The final CY 2016 payment rates for the
procedures described by CPT codes 52647, 52648, and 52649 can be found
in Addendum B to this final rule with comment period (which is
available via the Internet on the CMS Web site).
Comment: One commenter noted that, although the proposed
reconfiguration of the urology and related services APCs would increase
the payment rates for some services, the proposed reconfiguration would
also decrease the payment rates for other procedures. In particular,
the commenter expressed concern that the proposed reassignment would
result in underpayment for the following CPT codes:
51741 (Complex uroflowmetry (e.g., calibrated electronic
equipment));
55700 (Biopsy, prostate; needle or punch, single or
multiple, any approach); and
52000 (Cystourethroscopy (separate procedure)).
The commenter stated that the proposed restructuring would decrease
the payment rate for the procedure described by CPT code 51741 by 18
percent within a single year. The commenter added that, similarly,
payment rates for the procedures described by CPT codes 55700 and 52000
would experience a decrease of 8 percent and 5 percent, respectively.
The commenter expressed concern with the instability in payment rates,
which the commenter suggested would hinder a hospital's ability to
negotiate with suppliers and manufacturers on the purchase price of
certain devices and services. Specifically, the commenter stated that,
in order for hospitals to be able to forecast for the future and invest
in technologies that are essential for providing high quality care,
they need to be able to rely on stable and predictable payment rates.
Response: We appreciate the commenter's input. Based on our review
of the latest hospital outpatient claims data used for this final rule
with comment period, we believe that reassigning CPT code 51741 to APC
5721 (Level 1 Diagnostic Tests and Related Services) improves the
homogeneity of resource use and clinical characteristics of the
procedures in this APC. In addition, we believe that the proposed APC
assignments for the procedures described by CPT codes 55700 and 52000
are optimal. Our claims data reveal that CPT code 55700 has a geometric
mean cost of approximately $1,475, which is comparable to the geometric
mean cost of approximately $1,576 for APC 5373 (Level 3 Urology and
Related Services). We also believe that the procedure described by CPT
code 55700 is appropriately grouped in APC 5373 with clinically similar
procedures. Further, we believe that CPT code 52000, whose geometric
mean cost is approximately $574, is more appropriately assigned to APC
5372 (Level 2 Urology and Related Services), whose geometric mean cost
is approximately $549. We do not believe that we should assign CPT code
52000 to the next higher level in the urology and related services APC,
which is APC 5373 (Level 3 Urology and Related Services) and has a
geometric mean cost of approximately $1,576, as this would result in a
significant overpayment for the procedure. Moreover, reassigning CPT
code 52000 from APC 5372 to APC 5373 would create a violation of the 2
times rule within APC 5373.
Overall, we believe that the proposed restructuring and
reconfiguration of the urology and related services APCs appropriately
reflect the similar resource costs and clinical characteristics of the
procedures within each APC. We also believe that establishing broader
categories of urology and related services APCs (as compared to CY
2015) is more appropriate for future ratesetting under the OPPS because
the restructured APCs support greater similarities in clinical
characteristic and resource use of procedures assigned to APCs, while
improving the homogeneity of the APC structure.
In addition, 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. Consistent with the
requirements set forth in section 1833(t)(9) of the Act, we annually
review all the items and services within an APC group to determine,
with respect to comparability of the use of resources, if the geometric
mean cost of the highest cost item or service within an APC group is
more than 2 times greater than the geometric mean cost of the lowest
cost item or service within that same group. In making this
determination, we review our claims data and determine whether we need
to make changes to the current APC assignments for the following year.
Consequently, as we do every year for all services and procedures under
the OPPS, we will again review the claims data for the procedures
described by CPT codes 51741, 52000, and 55700 for the CY 2017
rulemaking cycle.
Therefore, after consideration of the public comments received, we
are finalizing our proposal for CPT codes 55700 and 52000 to APC 5373
and 5372, respectively. However, we are finalizing our proposal for CPT
code 51741 with modification by reassigning this procedure from APC
5734 to APC 5721 based on clinical and resource homogeneity within APC
5721. The final CY 2016 payment rate for CPT codes 51741, 55700, and
52000 can be found in Addendum B to this final rule with comment period
(which is available via the Internet on the CMS Web site).
Comment: One commenter expressed concern with the volume of
procedures proposed to be reassigned to proposed APC 5374. In addition,
the commenter was concerned that the proposed payment rates would
result in underpayments for the following three CPT codes:
50590 (Lithotripsy, extracorporeal shock wave);
52601 (Transurethral electrosurgical resection of
prostate, including control of postoperative bleeding, complete
(vasectomy, meatotomy, cystourethroscopy, urethral calibration and/or
dilation, and internal urethrotomy are included); and
52648 (Laser vaporization of prostate, including control
of

[[Page 70411]]

postoperative bleeding, complete (vasectomy, meatotomy,
cystourethroscopy, urethral calibration and/or dilation, internal
urethrotomy and transurethral resection of prostate are included if
performed).
Response: As we discussed above, we are modifying our proposed APC
assignments for the procedures described by CPT codes 50590 and 52648
by reassigning the procedures from APC 5374 to APC 5375 for CY 2016,
based on our evaluation of the latest hospital outpatient claims data
used for this final rule with comment period. Similarly, we examined
our latest claims data for CPT code 52601 and found that its geometric
mean cost is comparable to that of APC 5375. Specifically, our claims
data revealed that the procedure described by CPT code 52601 has a
geometric mean cost of approximately $3,529 based on 27,568 single
claims (out of 27,864 total claims), which is comparable to the
geometric mean cost of approximately $3,551 for APC 5375.
Therefore, after consideration of the public comments received, we
are finalizing our proposal, with modification, by reassigning the
procedures described by CPT codes 50590, 52601, and 52648 to APC 5375
for CY 2016. The final CY 2016 payment rate for CPT codes 50590, 52601,
and 52648 can be found in Addendum B to this final rule with comment
period (which is available via the Internet on the CMS Web site).
We are finalizing our proposal, with modification, to reconfigure
the urology and related services into seven APCs. Table 38 below lists
the final CY 2016 APCs that result from the consolidation and
restructuring of the current urology procedures APCs into a single APC
grouping. The final payment rates for the specific CPT or Level II
HCPCS urology and related services codes are included in Addendum B to
this final rule with comment period. The final payment rates for the
specific APCs to which we are reassigning the urology and related
services codes are included in Addendum A to this final rule with
comment period. Both OPPS Addenda A and B are available via the
Internet on the CMS Web site.

Table 38--CY 2016 APCs Assigned to Urology and Related Services
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5371................................ Level 1 Urology and Related
Services.
5372................................ Level 2 Urology and Related
Services.
5373................................ Level 3 Urology and Related
Services.
5374................................ Level 4 Urology and Related
Services.
5375................................ Level 5 Urology and Related
Services.
5376................................ Level 6 Urology and Related
Services.
5377................................ Level 7 Urology and Related
Services.
------------------------------------------------------------------------

14. Vascular Procedures (Excluding Endovascular Procedures)
In the CY 2016 OPPS/ASC proposed rule (80 FR 39263 through 39264),
for the CY 2016 OPPS update, based on our evaluation of the latest
hospital outpatient claims data available for the proposed rule, we
proposed to restructure all of the vascular procedure-related APCs
(excluding endovascular procedures) to more appropriately reflect the
costs and clinical characteristics of the procedures within each APC.
We stated in the proposed rule that we believe that this proposed
restructuring of APCs for vascular procedures more accurately
categorizes all of the vascular procedures within an APC group, such
that the services within each proposed newly configured APC are more
comparable clinically and with respect to resource use. Table 35 of the
CY 2016 OPPS/ASC proposed rule (80 FR 39263) lists the vascular
procedures APCs for CY 2015, and Table 36 of the CY 2016 OPPS proposed
rule (80 FR 39264) lists the proposed vascular procedures APCs for CY
2016. We invited public comments on this proposal.
Comment: One commenter noted that CPT code 93503 (Insertion and
placement of flow directed catheter (e.g., Swan-Ganz) for monitoring
purposes) and CPT code 93505 (Endomyocardial biopsy) are proposed to be
assigned to APC 5181 (Level 1 Vascular Procedures), and stated that the
codes are not clinically homogenous. The commenter believed that the
APC assignment for these two codes could destabilize the APC and
recommended a delay in implementation of these restructured APCs. In
addition, the commenter stated that the procedures described by CPT
codes 36818 (Arteriovenous anastomosis, open; by upper arm cephalic
vein transposition), 36821 (direct, any site (e.g., Cimino type)
(separate procedure)) and 36831 (Thrombectomy, open, arteriovenous
fistula without revision, autogenous or nonautogenous dialysis graft
(separate procedure)) are proposed to be assigned to APC 5182 (Level 2
Vascular Procedures) but all of the procedures described by these codes
have a significant volume of claims (that is, greater than 1,000) and
would be substantially underpaid under their APC assignment relative to
their geometric mean costs. For these codes, the commenter suggested a
delay in implementation or reassignment to APC 5183 (Level 3 Vascular
Procedures). Another commenter recommended that four cardiac procedures
that were proposed to be assigned to APC 5181, specifically CPT 33215
(Repositioning of previously implanted transvenous pacemaker or
implantable defibrillator (right atrial or right ventricular)
electrode), CPT 33226 (Repositioning of previously implanted cardiac
venous system (left ventricular) electrode (including removal,
insertion and/or replacement with existing generator)), CPT 93503, and
CPT 93505, instead be assigned to APC 5188 (Diagnostic Cardiac
Catheterization). The commenter also recommended the reassignment of
the following CPT codes to APC 5183: CPT code 36222 (Selective catheter
placement, common carotid or innominate artery, unilateral, any
approach, with angiography of the ipsilateral extracranial carotid
circulation and all associated radiological supervision and
interpretation, includes angiography of the cervicocerebral arch, when
performed); CPT code 36223 (Selective catheter placement, common
carotid or innominate artery, unilateral, any approach, with
angiography of the ipsilateral intracranial carotid circulation and all
associated radiological supervision and interpretation, includes
angiography of the extracranial carotid and cervicocerebral arch, when
performed); and CPT code 36225 (Selective catheter placement,
subclavian or innominate artery, unilateral, with angiography of the
ipsilateral vertebral circulation and all associated radiological
supervision and interpretation, includes angiography of the
cervicocerebral arch, when performed). The commenter believed that
these procedures, which were proposed to be assigned to APC 5526 (Level
6 X-Ray and Related Services), would better align with the procedures
assigned to APC 5183 because they are similar procedures with similar
clinical characteristics.
Another commenter suggested that the procedures described by CPT
37799

[[Page 70412]]

(Unlisted procedure, vascular surgery), and CPT 93505 be reassigned
from APC 5181 to 5182; that the procedure described by CPT 37501
(Unlisted vascular endoscopy procedure) be reassigned from APC 5181 to
APC 5183; and that the procedure described by CPT 36566 (Insertion of
tunneled centrally inserted central venous access device, requiring 2
catheters via 2 separate venous access sites; with subcutaneous
port(s)) and CPT 36861 (External cannula declotting (separate
procedure; with balloon catheter) be reassigned from APC 5182 to APC
5183. The commenter believed that these suggested revisions would be
more appropriate clinically and with respect to resource use.
Response: We agree with some of the comments on the APC assignment
change requests and disagree with others. Table 39 below lists all
codes that were commented on and our decision on the final APC
assignment.

Table 39--Vascular Procedures With Specific Commenter Recommendations, Final CMS Decisions, Final APC Assignment and Final Status Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY Final CY
2016 OPPS Proposed CY Commenter 2016 OPPS Final CY
CPT/HCPCS code Short descriptor status 2016 OPPS requested APC CMS decision status 2016 OPPS
indicator APC indicator APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
33215..................... Reposition pacing-defib T 5181 5188 Disagree................... T 5181
lead.
36222..................... Place cath carotid/inom Q2 5526 5183 Disagree................... Q2 5526
art.
33226..................... Reposition l ventric lead T 5181 5188 Disagree................... T 5182
36223..................... Place cath carotid/inom T 5526 5183 Agree...................... Q2 5183
art.
36225..................... Place cath subclavian art Q2 5526 5183 Disagree................... Q2 5526
36566..................... Insert tunneled cv cath.. T 5182 5183 Agree...................... T 5183
36818..................... Av fuse uppr arm cephalic T 5182 5183 Disagree................... T 5182
36821..................... Av fusion direct any site T 5182 5183 Disagree................... T 5182
36831..................... Open thrombect av fistula T 5182 5183 Disagree................... T 5182
36861..................... Cannula declotting....... T 5182 5183 Agree...................... T 5183
37501..................... Vascular endoscopy T 5181 5183 Disagree................... T 5181
procedure.
37799..................... Vascular surgery T 5181 5182 Disagree................... T 5181
procedure.
93503..................... Insert/place heart T 5181 5188 Disagree................... T 5181
catheter.
93505..................... Biopsy of heart lining... T 5181 5182 or 5188 Agree with 5182............ T 5182
--------------------------------------------------------------------------------------------------------------------------------------------------------

All of the APCs proposed for the codes listed in Table 39 above and
all of the APCs suggested by commenters contain procedures involving
the vascular system. For the codes with which we agree with the
commenters, there is greater resource similarity between the procedure
in question and the procedures in the APC requested by the commenter
than the procedures in the proposed APC. In most cases where we
disagree with the commenter in Table 39 above, the opposite is true,
and resource similarity is greater for the proposed APC. By greater
resource similarity, we mean that the geometric mean cost of the
procedure is closer to the geometric mean cost of the APC to which we
are assigning the code than it is to the APC to which the commenter
requested assignment of the code.
For CPT code 33215, we do not agree that the code should be
reassigned from APC 5181to 5188. The final geometric mean cost of the
procedure described by CPT code 33215 is approximately $1,575 and the
final geometric mean cost of APC 5181 is approximately $903. The final
geometric mean cost of APC 5188 is approximately $2,668. We believe
that, given the significant resource dissimilarity between CPT code
33215 and APC 5188, APC 5188 is not an appropriate APC assignment.
For the procedure described by CPT code 36222, we do not agree that
the procedure code should be reassigned from proposed APC 5526 to APC
5183. The final geometric mean cost of the procedure described by CPT
code 36222 is approximately $2,677, and the final geometric mean cost
of APC 5526 is approximately $2,845. The final geometric mean cost of
APC 5183 is approximately $3,971. We believe that, given the
significant resource dissimilarity between CPT code 36222 and APC 5183,
APC 5183 is not an appropriate APC assignment.
For the procedure described by CPT code 33226, we do not agree that
the procedure should be reassigned from proposed APC 5181 to APC 5188.
The final geometric mean cost of the procedure described by CPT code
33226 is approximately $2,190 and the final geometric mean cost of APC
5181 is approximately $903. The final geometric mean cost of APC 5188
is approximately $2,667. Upon further evaluation, based on resource use
and clinical similarity to other assigned procedures, we believe that
the appropriate APC assignment for CPT code 33226 is APC 5182, which
has a final geometric mean cost of approximately $2,352.
For the procedure described by CPT code 36225, we do not agree that
it should be reassigned from proposed APC 5526 to APC 5183. The final
geometric mean cost of the procedure described by CPT code 36225 is
approximately $2,717 and the final geometric mean cost of APC 5526 is
approximately $2,845. The final geometric mean cost of APC 5183 is
approximately $3,971. We believe that, given the significant resource
dissimilarity between the procedure described by CPT code 36225 and the
procedures assigned to APC 5183, APC 5183 is not an appropriate APC
assignment.
For the procedure described by CPT code 36818, we do not agree that
it should be reassigned from proposed APC 5182 to APC 5183. The final
geometric mean cost of the procedure described by CPT code 36818 is
approximately $2,960 and the final geometric mean cost of APC 5182 is
approximately $2,352. The final geometric mean cost of APC 5183 is
approximately $3,971. We believe that, given the significant resource
dissimilarity between the procedure described by CPT code 36818 and the
procedures assigned to APC 5183, APC 5183 is not an appropriate APC
assignment.
For the procedure described by CPT code 36821, we do not agree that
it should be reassigned from proposed APC 5182 to APC 5183. The final

[[Page 70413]]

geometric mean cost of the procedure described by CPT code 36821 is
approximately $2,880 and the final geometric mean cost of APC 5182 is
approximately $2,352. The final geometric mean cost of APC 5183 is
approximately $3,971. We believe that, given the significant resource
dissimilarity between the procedure described by CPT code 36821 and the
procedures assigned to APC 5183, APC 5183 is not an appropriate APC
assignment.
For the procedure described by CPT code 36831, we do not agree that
it should be reassigned from proposed APC 5182 to APC 5183. The final
geometric mean cost of the procedure described by CPT code 36831 is
approximately $2,961 and the final geometric mean cost of APC 5182 is
approximately $2,352. The final geometric mean cost of APC 5183 is
approximately $3,971. We believe that, given the significant resource
dissimilarity between the procedure described by CPT code 36831and the
procedures assigned to APC 5183, APC 5183 is not an appropriate APC
assignment.
Regarding CPT codes 37799 and 37501, these are unlisted procedure
codes, and according to our established policy, these codes are always
assigned to the lowest level APC within a group.
For the procedure described by CPT code 93503, we do not agree that
it should be reassigned from proposed APC 5181 to APC 5188. The final
geometric mean cost of the procedure described by CPT code 93503 is
approximately $1,460 and the final geometric mean cost of APC 5181 is
approximately $903. The final geometric mean cost of APC 5188 is
approximately $2,667. We believe that, given the significant resource
dissimilarity between the procedure described by CPT code 93503 and the
procedures assigned to APC 5188, APC 5188 is not an appropriate APC
assignment.
After considering the public comments we received on the
reorganization and restructuring of the vascular procedures APC family,
we are finalizing the proposed APC structure depicted in Table 40 below
and the proposed code assignments with the exception of those codes
noted in Table 40 for which we are finalizing APC assignments that
differ from the proposed rule in response to public comments. The final
payment rates for the vascular procedure codes are included in Addendum
B to this final rule with comment period (which is available via the
Internet on the CMS Web site).

Table 40--CY 2016 Vascular Procedures APCs
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC group title
------------------------------------------------------------------------
5181................................ Level 1 Vascular Procedures.
5182................................ Level 2 Vascular Procedures.
5183................................ Level 3 Vascular Procedures.
------------------------------------------------------------------------

15. Other Procedures and Services
a. Ear, Nose, Throat (ENT) Procedures
For CY 2016, as a part of our review, restructuring, and
reorganization of the OPPS APCs, we proposed to consolidate the APCs
for ear, nose, and throat (ENT) procedures from seven levels in CY 2015
to six levels for CY 2016.
Comment: One commenter believed that the proposed consolidation of
the ENT procedure APCs into six levels results in APC groups that
contain a volume of procedures that is too large. The commenter
requested that CMS add an APC grouping between proposed Level 4 and
Level 5. The commenter did not provide any discussion regarding any
problem caused by our proposed consolidation of the ENT APCs.
Response: We disagree with the commenter that the ENT APC groups
are too large. The cost ranges for the procedures within this APC
series are within the 2 times rule limit. Moreover, many of the
services assigned to these APC groups are low-volume services.
Therefore, we do not believe that it is necessary to create a seventh
level in the ENT procedures APC group for a small number of low-volume
procedures. We will continue to monitor this APC grouping, and we will
consider any adjustments as the need arises in the future.
b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)
In the CY 2016 OPPS/ASC proposed rule, we proposed to assign new CY
2016 CPT code 0398T (Magnetic resonance image guided high intensity
focused ultrasound (MRgFUS), stereotactic ablation lesion, intracranial
for movement disorder including stereotactic navigation and frame
placement when performed) to APC 5625 (Level 5 Radiation Therapy), with
a proposed payment of approximately $1,699. We also assigned CPT code
0398T to comment indicator ``NP'' in Addendum B to indicate that the
code is new for CY 2016 with a proposed APC assignment and that public
comments would be accepted on the proposed APC assignment for the new
code. The procedure described by CPT code 0398T involves treatment of
an essential tremor using an MRgFUS procedure. We note that CPT code
0398T will be effective January 1, 2016. However, this code was listed
as 03XXA (the 5-digit CMS placeholder code) in Addendum B, O, and Q2 of
the CY 2016 OPPS/ASC proposed rule. We invited public comments on our
proposed APC assignment for CY 2016.
In addition to proposing to assign the procedure described by CPT
code 0398T to APC 5625, we also proposed to reassign the existing
MRgFUS procedures to APC 5625, specifically the procedures described by
following CPT/HCPCS codes:
CPT code 0071T (Focused ultrasound ablation of uterine
leiomyomata, including mr guidance; total leiomyomata volume less than
200 cc of tissue);
CPT code 0072T (Focused ultrasound ablation of uterine
leiomyomata, including mr guidance; total leiomyomata volume greater or
equal to 200 cc of tissue); and
HCPCS code C9734 (Focused ultrasound ablation/therapeutic
intervention, other than uterine leiomyomata, with magnetic resonance
(mr) guidance).
Comment: Commenters disagreed with the proposed assignment of the
procedure described by CPT code 0398T to APC 5625, and requested that
CMS not finalize the proposed APC assignment. The commenters believed
that the resources associated with the procedure described by CPT code
0398T are significantly different from the resources associated with
MRgFUS procedures that are also being proposed for reassignment to APC
5625. Specifically, the commenters stated that the resource costs
associated with MRgFUS procedures for the treatment of essential tremor
are significantly greater than the resource costs for the treatment of
uterine fibroids (described by CPT codes 0071T and 0072T) or pain
palliation for metastatic bone cancer (described by HCPCS code C9734)
because procedures involving MRgFUS treatment for essential tremor
requires additional unique resources that are not required with either
uterine fibroids or pain palliation MRgFUS treatments. The commenters
further explained that, while MRgFUS has been approved by the FDA for
the treatment of uterine fibroids and pain palliation for metastatic
bone cancer, it has not been approved for the treatment of essential
tremor. The commenters also indicated that MRgFUS treatment for
essential tremor is still in the clinical trial stage. Therefore, the
commenters believed that it would be inappropriate to assign CPT code
0398T to APC 5626, which is the same APC that the existing MRgFUS

[[Page 70414]]

procedures are being proposed to be reassigned.
Furthermore, the commenters believed that CMS' proposal to assign
the procedure described by CPT code 0398T to an APC without any
available claims data could undervalue the payment for the procedure
and ultimately prevent hospitals from furnishing the procedure to
Medicare beneficiaries once it becomes FDA-approved. Another commenter
noted that approval of the equipment associated with the MRgFUS
procedure for the treatment of an essential tremor would not be
approved by the FDA until the end of 2016. Therefore, the commenter
stated that it would be unlikely that any Medicare beneficiaries would
be eligible for the MRgFUS treatment for essential tremor before CY
2017. To ensure an accurate APC assignment, the commenters requested
that CMS not finalize an APC assignment for the procedure described by
CPT code 0398T, and instead wait until additional data become available
for ratesetting purposes Another commenter stated that assigning the
procedure described by CPT code 0398T to APC 5625 is inappropriate
because the APC's title, ``Level 5 Radiation Therapy'' indicates that
procedures assigned to this APC describe procedures involving radiation
therapies, and that MRgFUS procedures, including the procedure
described by CPT code 0398T, do not involve the delivery of radiation
or radiation therapy and, therefore, cannot be considered ``radiation
therapies.''
Response: We acknowledge that the FDA-approved indication for use
and approval of the necessary equipment used in association with the
procedure described by CPT code 0398T may not be granted during CY
2016, and that there are no claims data available for ratesetting
purposes. Therefore, we agree with the commenters that it would be more
appropriate to not finalize the APC assignment for the procedure
described by CPT code 0398T at this time. As a result, this procedure
code will be assigned to OPPS status indicator ``E,'' effective January
1, 2016, to indicate that the service is not paid by Medicare under the
OPPS. Once the procedure and associated equipment involved with the
MRgFUS treatment for essential tremor has received FDA approval and we
have available claims data to use for ratesetting purposes, we will
reevaluate the APC assignment for CPT code 0398T.
Comment: One commenter believed that, based on the APC title, APC
5625 describes procedures involving the delivery of radiation or
radiation therapies, which does not adequately describe the procedures
described by CPT codes 0071T and 0072T and HCPCS code C9734.
Consequently, the commenter requested that CMS reassign CPT codes 0071T
and 0072T to C-APC 5376 (Level 6 Urology and Related Services) and
HCPCS code C9734 to C-APC 5124 (Level 4 Musculoskeletal Procedures).
The commenter indicated that it performed its own internal analysis of
the associated cost of providing these services and, based on its
findings, believed that the resource use associated with these
procedures (CPT codes 0071T and 0072T and HCPCS code C9734) is similar
to the resource use associated with the procedures assigned to APC 5376
and APC 5124.
Response: CPT codes 0071T and 0072T became effective January 1,
2005, and HCPCS code C9734 became effective April 1, 2013. Based on our
analysis of the latest hospital outpatient claims data used for this
final rule with comment period, which are claims submitted between
January 1, 2014, and December 31, 2014, and processed on or before June
30, 2015, we do not have any single claims that reported any of the
three MRgFUS procedures. Therefore, we agree with the commenter that
APC 5625 is not the most appropriate APC assignment for these three
MRgFUS procedures based on clinical characteristics because these three
MRgFUS procedures do not involve the delivery of radiation or radiation
therapy. In addition, given the lack of single claims data for the
procedures described by CPT codes 0071T and 0072T and HCPCS code C9734,
we do not agree with the commenters' suggested APC assignments for
these procedures. We believe that the clinical characteristics of the
three MRgFUS procedures are significantly similar to the clinical
characteristics of the procedures assigned to APCs 5414 (Level 4
Gynecologic Procedures) and 5122 (Level 2 Musculoskeletal Procedures).
Therefore, we are reassigning the procedures described by CPT codes
0071T and 0072T to APC 5414, and the procedures described by HCPCS code
C9734 to APC 5122.
After consideration of the public comments we received, we are
modifying our proposals and reassigning the procedures described by CPT
codes 0071T and 0072T to APC 5414 and the procedures described by HCPCS
code C9734 to APC 5122. In addition, we are not finalizing our proposed
APC assignment for the procedure described by CPT code 0398T because
the equipment associated with the performance of the procedure has not
received FDA approval. As we previously stated, CPT code 0398T is
assigned to OPPS status indicator ``E'' (Not paid by Medicare when
submitted on outpatient claims (any outpatient bill type), effective
January 1, 2016, to indicate that the service is not paid by Medicare
under the OPPS. Once the procedure involving MRgFUS treatment for
essential tremor receives FDA approval and we have available claims
data for ratesetting purposes, we will reevaluate the APC assignment
for CPT code 0398T. The final CY 2016 payment rate for CPT codes
0071Tand 0072T and HCPCS code C9734 can be found in Addendum B to this
final rule with comment period (which is available via the Internet on
the CMS Web site).
c. Stem Cell Transplant
For CY 2016, we proposed to continue to pay for stem cell
transplant procedures as we have done for many years through APCs 5271
(Blood Product Exchange) and 5281 (Apheresis and Stem Cell Procedures).
Specifically, we proposed to assign the procedure described by CPT code
38240 (Hematopoietic progenitor cell (HPC); allogenic transplantation
per donor) to APC 5281 (Apheresis/Stem Cell and Related Services), for
which we proposed a CY 2016 geometric mean cost of approximately
$3,217.
Comment: Commenters opposed the proposed payment rate for the
procedure described by CPT code 38240. The commenters stated that the
current CY 2015 outpatient payment rate does not provide adequate
payment for the total cost of an hematopoietic cell transplants (HCT),
particularly donor cell acquisition costs. Commenters asked that CMS
consider changing its payment methodology for donor cell acquisition
costs and made the following specific requests of CMS to: (1) Create a
separate, dedicated cost center line for HCT, similar to how it
established the cost center line for Implantable Devices, MRIs, CT
Scans, and Cardiac Catheterizations; (2) work with the NUBC to release
a new, dedicated revenue code for providers to use when reporting their
HCT donor search and cell acquisition charges; (3) create payment
parity for the donor search and cell acquisition component of HCT
between the inpatient and outpatient settings; (4) recognize the search
and procurement costs associated with HCT transplant and develop a
reasonable cost basis solution for HCT that mimics the acquisition cost
procedures for solid organ transplantation; (5) if CMS chooses not to
consider number (4) request, find a

[[Page 70415]]

way to incorporate the donor search and cell acquisition charges
reported through revenue code 819 into the overall outpatient
transplant APC rate (The commenters suggested that CMS could
incorporate this suggested change by creating a Composite APC whereby
it identifies the allogenic transplant CPT code and a revenue code 0819
and creates an appropriate payment rate, or that CMS could study
applying the C-APC concept to HCT.); (6) require transplant centers to
submit their actual cost information on the UB-04s for patients
receiving both allogeneic related and unrelated transplants; and (7)
instruct providers to report their actual cost on the revenue code 0819
claim line item in order for CMS to apply a default CCR of 1.0 for
claims reporting outpatient allogeneic HCT procedures (This would be
defined by the presence of an outpatient allogeneic CPT procedure
code.). In addition, one commenter asked that CMS describe clearly in
the preamble to the final rule that it is incumbent on hospitals to
report their entire donor search and cell acquisition charges on the
recipient's transplant claim.
Response: We continue to believe that the procedure described by
CPT code 38240 is appropriately assigned to APC 5281 because its
geometric mean cost and clinical characteristics are similar to other
procedures assigned to APC 5281. We note the commenters' concerns that
donor acquisition cost is not appropriately captured in the current
payment methodology for HCT procedures. As we have previously stated,
allogeneic harvesting procedures, which are performed not on the
beneficiary but on a donor, cannot be paid separately under the OPPS
because hospitals may bill and receive payment only for services
provided to the Medicare beneficiary who is the recipient of the HCT
procedure, and whose illness is being treated with the transplant. We
stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60575) and in section 231.11 of Chapter 4 of the Medicare Claims
Processing Manual (Pub. 100-04) that payment for allogeneic stem cell
acquisition services (such as harvesting procedures and donor
evaluation) is packaged into the payment for the transplant procedure
(either the Medicare Severity Diagnosis Related Group (MS-DRG) when the
transplant is performed on an inpatient basis, or the APC when the
transplant is performed on an outpatient basis). Hospitals should
report all allogeneic outpatient HCT procedure acquisition charges on
the recipient's outpatient claim as uncoded charges under revenue code
0819.
In response to comments concerning the creation of a dedicated cost
center and/or revenue code for HCT procedures, payment parity for the
donor search and cell acquisition component of HCT procedures between
the inpatient and outpatient settings, requiring transplant centers to
submit their actual cost information on the UB-04s for both allogeneic
related and unrelated transplant patients, and applying a default CCR
of 1.0 for outpatient allogeneic HCT claims, we note that we did not
make any such proposals in the CY 2016 OPPS/ASC proposed rule.
Therefore, we consider these comments outside the scope of the proposed
rule and are not responding to them in this final rule with comment
period. We will take these suggestions into consideration for future
rulemaking.
While converting the outpatient stem cell transplant APCs to
composite APCs or C-APCs would reduce to a small degree the
differential between the OPPS payment rate and the costs as represented
in the public comment we received, it would only provide a relatively
modest increase in payment, consistent with our previous data studies
on this issue. We believe that we need to further examine the costs
associated with outpatient stem cell transplant services and how their
costs could best be captured for ratesetting purposes in the OPPS.
These transplant services remain low-volume in the HOPD. However, we
will continue to monitor this issue and the volume of outpatient
allogeneic transplant services.
After consideration of the public comments we received, we are
finalizing our CY 2016 proposal, and continuing to assign the services
described by CPT code 38240 to APC 5281, for which the final CY 2016
geometric mean cost is approximately $3,155.

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
Section 1833(t)(6)(B)(iii) of the Act sets forth the period for
which a device category eligible for transitional pass-through payments
under the OPPS may be in effect. The implementing regulation at 42 CFR
419.66(g) provides that this pass-through payment eligibility period
begins on the date CMS establishes a particular transitional pass-
through category of devices. The eligibility period is for at least 2
years but no more than 3 years. We may establish a new device category
for pass-through payment in any quarter. Under our established policy,
we base the pass-through status expiration date for a device category
on the date on which pass-through payment is effective for the
category; that is, the date CMS establishes a particular category of
devices eligible for transitional pass-through payments. We propose and
finalize the dates for expiration of pass-through status for device
categories as part of the OPPS annual update.
We also have an established policy to package the costs of the
devices that are no longer eligible for pass-through payments into the
costs of the procedures with which the devices are reported in the
claims data used to set the payment rates (67 FR 66763). Brachytherapy
sources, which are now separately paid in accordance with section
1833(t)(2)(H) of the Act, are an exception to this established policy.
b. CY 2016 Policy
As stated earlier, section 1833(t)(6)(B)(iii) requires that, under
the OPPS, a category of devices be eligible for transitional pass-
through payments for at least 2 years, but not more than 3 years. There
currently are four device categories eligible for pass-through payment:
HCPCS code C1841 (Retinal prosthesis, includes all internal and
external components) was established effective October 1, 2013. HCPCS
code C2624 (Implantable wireless pulmonary artery pressure sensor with
delivery catheter, including all system components) was established
effective January 1, 2015. HCPCS code C2623 (Catheter, transluminal
angioplasty, drug-coated, non-laser) was established effective April 1,
2015. HCPCS code C2613 (Lung biopsy plug with delivery system) was
established effective July 1, 2015. The pass-through payment status of
the device category for HCPCS code C1841 will end on December 31, 2015.
Therefore, in accordance with our established policy, in the CY 2016
OPPS/ASC proposed rule (80 FR 39264), we proposed, beginning with CY
2016, to package the costs of the HCPCS code C1841 devices into the
costs related to the procedures with which the device is reported in
the hospital claims data.
We stated in the proposed rule that if we create any new device
categories for pass-through payment status during the remainder of CY
2015 or during CY 2016, we will propose future expiration dates in
accordance with Sec. 419.66(g).
We did not receive any public comments on this proposal. Therefore,

[[Page 70416]]

we are finalizing our proposal to expire device pass-through payments
for the device described by HCPCS code C1841, effective January 1,
2016.
2. Annual Rulemaking Process in Conjunction With Quarterly Review
Process for Device Pass-Through Payment Applications
a. Background
Section 1833(t)(6)(B) of the Act requires payment to be made on a
``pass-through'' basis for designated medical devices. As part of
implementing the statute through regulations, we have continued to
believe that it is important for hospitals to receive pass-through
payments for devices that offer substantial clinical improvement in the
treatment of Medicare beneficiaries to facilitate access by
beneficiaries to the advantages of the new technology. Conversely, we
have noted that the need for additional payments for devices that offer
little or no clinical improvement over previously existing devices is
less apparent. In such cases, these devices can still be used by
hospitals, and hospitals will be paid for them through appropriate APC
payment. Moreover, a goal is to target pass-through payments for those
devices where cost considerations might be most likely to interfere
with patient access (66 FR 55852; 67 FR 66782; and 70 FR 68629).
As specified in regulations at 42 CFR 419.66(b)(1) through (b)(3),
to be eligible for transitional pass-through payment under the OPPS, a
device must meet the following criteria: (1) If required by FDA, the
device must have received FDA approval or clearance (except for a
device that has received an FDA investigational device exemption (IDE)
and has been classified as a Category B device by the FDA), or another
appropriate FDA exemption; (2) the device must be determined reasonable
and necessary for the diagnosis or treatment of an illness or injury or
to improve the functioning of a malformed body part, as provided under
section 1862(a)(1)(A) of the Act; and (3) the device must be an
integral part of the service, is used for one patient only, comes in
contact with human tissue, and is surgically implanted or inserted,
whether or not it remains with the patient when the patient is released
from the hospital. A device is not eligible if it is any of the
following, as specified at Sec. 419.66(b)(4): Equipment, an
instrument, apparatus, implement, or item of this type for which
depreciation and financing expenses are recovered as depreciation
assets as defined in Chapter 1 of the Medicare Provider Reimbursement
Manual (CMS Pub. 15-1); or a material or supply furnished incident to a
service (for example, a suture, customized surgical kit, or clip, other
than a radiological site marker).
Separately, we use the following criteria, as set forth under Sec.
419.66(c), to determine whether a category of devices should be
established. The device to be included in the category must--
Not be appropriately described by an existing category or
by any category previously in effect established for transitional pass-
through payments, and was not being paid for as an outpatient service
as of December 31, 1996;
Have an average cost that is not ``insignificant''
relative to the payment amount for the procedure or service with which
the device is associated as determined under Sec. 416.66(d); and
Demonstrate a substantial clinical improvement, that is,
substantially improve the diagnosis or treatment of an illness or
injury or improve the functioning of a malformed body part compared to
the benefits of a device or devices in a previously established
category or other available treatment.
More details on the requirements for device pass-through payment
applications are included on the CMS Web site in the application form
itself at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the
``Downloads'' section.
The current OPPS process for applying for a new device category for
transitional pass-through payment is subregulatory; that is, device or
implantable biological or skin substitute manufacturers, hospitals, or
other interested parties may apply to the agency through an application
process available online. The application determination process is
handled outside of rulemaking. Applications are accepted by CMS on a
rolling basis and determinations are made on a quarterly basis.
Decisions by CMS to approve an application for a device for pass-
through payment under the OPPS are announced quarterly through a
subregulatory process via program transmittal and are communicated
directly to the applicant. Approvals are then referenced in our annual
rulemaking as a means to establish payment periods. Currently, denials
of applications for devices for pass-through payment status under the
OPPS are communicated directly to the applicant and not announced
publicly through rulemaking, program transmittal, or other public
forum. Applicants for pass-through payment for a device whose
application is denied may submit a reconsideration request to CMS. The
applicant must send a written letter that explains the reasons for the
request for reconsideration of CMS' decision, along with any additional
information or evidence that may not have been included with the
original application that may further support the reconsideration
request. Currently, reconsiderations of denials of devices for pass-
through payment under the OPPS are handled similarly to previous
denials through direct communication with the applicant.
Over the years, stakeholders have opined that the current OPPS
device pass-through payment application process lacks transparency and
consistent approval standards. That is, stakeholders have suggested
that the unavailability to the public of specific information about
application decisions makes it difficult to determine if there are
consistent approval standards because there is no public knowledge
regarding which applications are rejected and which criteria are not
met. Likewise, for approved applications, there is a lack of the
specific information available to the public that led to approval of
the application. Some stakeholders have requested that CMS increase
transparency in the device pass-through payment application process by
notifying the public, through rulemaking, of the number of applications
received each year in aggregate and, for each application, include in
rulemaking the preliminary decision, any additional details included in
follow-up with the applicant, and the final decision, including the
rationale for the approval or denial of the application. Stakeholders
also have requested that CMS consult with industry and other
stakeholders during the application review process.
We agree with stakeholders that the current OPPS device pass-
through payment application process could benefit from increased
transparency and stakeholder input. Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39265), for CY 2016, we proposed changes to the
OPPS device pass-through payment application process to help achieve
the goals of increased transparency and stakeholder input. We proposed
to align a portion of the OPPS device pass-through payment application
process with the already established Hospital Inpatient Prospective
Payment System (IPPS) application process for new medical services and
new technology add-on payments. (We refer readers to sections
1886(d)(5)(K) and (d)(5)(L) of the Act and 42 CFR 412.87 and 412.88 for
additional information on the IPPS process for approval of new medical

[[Page 70417]]

services and technologies for new technology add-on payment under the
IPPS.) Frequently, an applicant will apply for both device pass-through
payments under the OPPS and for new technology add-on payments under
the IPPS. Both the OPPS and the IPPS require that the applicant
demonstrate that the technology represents a substantial clinical
improvement relative to existing technologies. Approvals and denials of
applications for new technology add-on payments under the IPPS are
finalized through annual rulemaking. We discuss the specific changes
that we proposed for the transitional medical device pass-through
payment application process under the OPPS in the section below.
b. Revisions to the Application Process for Device Pass-Through
Payments
In the CY 2016 OPPS/ASC proposed rule (80 FR 39265), we proposed,
beginning in CY 2016, to add a rulemaking component to the current
quarterly device pass-through payment application process. That is, we
proposed to supplement the quarterly process by including a description
of applications received (whether they are approved or denied) as well
as our rationale for approving or denying the application in the next
applicable OPPS proposed rule. This proposed revised process would
include providing information related to the establishment of the new
device category, the cost thresholds, and the substantial clinical
improvement criterion. For applications that are approved during the
quarterly review process, based on public comments received in response
to proposed rulemaking, we proposed that we would either continue to
maintain device pass-through payment status or finalize a policy to
discontinue pass-through payment status. In the rare case in which an
applicant is approved during the quarterly process and then a decision
is made in rulemaking to reverse the approval, the applicant could
reapply with new information, in advance of the following year's
proposed rule, assuming that the device would still be considered new,
as described in the section below. A summary description of the
application would be included in the proposed rule, along with a
proposal to approve or deny device pass-through payment status and a
final decision would be provided in the final rule after consideration
of public comments. The information requested in the device pass-
through payment application itself would not change as a result of the
proposed process changes.
For applications that we deny during the quarterly review process,
we proposed to include the same type of information that we include for
approved devices in the next applicable OPPS proposed rule and, after
consideration of public comments received, could revisit our decision
and either uphold the original decision of denial or approve the
application based on additional evidence submitted through the
rulemaking process. The final decision would be published in the
appropriate final rule. In lieu of the informal reconsideration process
that has been in place prior to CY 2016 for denied applications, we
would only provide opportunity to reconsider applications that are
denied through the rulemaking process. We proposed to allow applicants
whose applications are denied through the quarterly review process to
withdraw their applications if they do not wish to go through the
rulemaking process. If such a decision is made, the quarterly review
decision to deny device pass-through payment for the application would
be considered final and there would be no further reconsideration
process available. By providing an opportunity for public comment, we
believe that we would not only make the device pass-through payment
application and review process more transparent, but also would assure
that applicants have the benefit of public input on the ultimate
decision to approve or deny an application for device pass-through
payments under the OPPS.
Currently, the deadline for device pass-through payment application
submission is the first business day in March, June, September, and
December of a year for consideration for the next quarter (at the
earliest) of the calendar year. For example, under our proposal, CMS'
decision on an application that is submitted by the first business day
in March would likely be presented in that calendar year's OPPS
proposed rule (assuming the application that is submitted is complete).
Decisions on applications received after the first business day in
March would be included in the OPPS proposed rule for the following
calendar year.
In response to requests for more transparency and public input on
the device pass-through payment application process, we considered
moving entirely to a yearly process through rulemaking and eliminating
quarterly submissions. However, in an effort to maintain flexibility
under the OPPS process for device pass-through payment applications, we
believe that maintaining the quarterly process in addition to adding
the annual rulemaking process may be beneficial because applications
approved on a quarterly basis would be granted access to pass-through
payments as soon as possible for approved devices. In addition, all
applications would be considered through the rulemaking process, which
would provide increased transparency and allow public input that would
be considered in making a final determination. We invited public
comments on this proposed approach as well as on whether moving to a
rulemaking process entirely would be more helpful to further increase
transparency and further align the review of applications submitted
under both the IPPS and the OPPS.
Comment: Commenters generally supported the addition of an annual
rulemaking process, while maintaining a quarterly submission process.
The commenters, in particular, supported the increased transparency and
stakeholder input that would occur with an annual rulemaking component
because it would increase both equity and predictability in the
process. In addition, the commenters supported providing the industry
with necessary information regarding approval standards and the
opportunity for Medicare beneficiaries to have access to this important
information.
Response: We appreciate the commenters' support. We agree that our
proposal to add a rulemaking element to the device pass-through process
will increase transparency and stakeholder input in the device pass-
through process. We also believe that seeking public comment through
rulemaking on pass-through applications will allow for a more rigorous
review of applications and will enable prospective applicants to gain
insights to help with the development of their applications.
Comment: Some commenters suggested that CMS publicize all final
decisions and their rationale on a quarterly basis, in addition to the
yearly rulemaking process.
Response: Under our current quarterly review process, we include
information about proper coding for applications that are approved for
pass-through payment in the quarterly transmittals called ``change
requests'' (CRs). We do not currently publish any information about
applications that are not approved. We do not believe it is necessary
to notify the public of submitted applications and our decisions
outside of the annual rulemaking process. That is, we believe that
notifying the public annually of applications under review for
rulemaking and, ultimately our decisions on pass-through payment

[[Page 70418]]

status in the final rule, provides sufficient transparency and is
consistent with most other payment determinations. However, we will
continue to publish coding information for applications approved on a
quarterly basis through our quarterly CRs. In addition, we are
finalizing in this final rule with comment period a policy that
applicants whose applications are not approved through the quarterly
review process may elect to withdraw their application from
consideration in the next applicable rulemaking cycle.
Comment: Several commenters expressed concern that, under the
proposed process with respect to applications that are denied upon
quarterly review, the ability of submitters to have their applications
reconsidered in a timely manner is limited. In addition, the commenters
believed that having a reconsideration process moved to annual
rulemaking (instead of having opportunity on a quarterly basis) would
lead to lengthy gaps between receipt of a denial and the ability to
submit additional documentation. The commenters were particularly
concerned about timeliness in light of the proposal to more strictly
define ``newness'' for device pass-through applications. One commenter
also believed that there was potential for a backlog of applications by
moving to an annual decision-making process. One commenter suggested
that CMS evaluate reconsiderations quarterly for cases in which new
data became available and allow for a 60-day public comment period
through a separate Federal Register publication process, outside of the
annual rulemaking process.
Response: We are sensitive to the commenters' concern about the
timeliness of review of denied quarterly applicants. However, we do not
believe that a quarterly reconsideration process with a 60-day comment
period in addition to notice-and-comment rulemaking is necessary. As
noted earlier, the public has been supportive of the benefits of having
device pass-through payment applications go through a public rulemaking
process. While we appreciate the comment about a potential backlog of
applications, we do not anticipate a backlog based on the prior and
current volume of applications received.
In response to the commenters' concerns about applications that are
denied upon quarterly review not having the ability to be reconsidered
on a quarterly basis, we note that, as described in the section below,
the proposed newness period only applies to the date upon which an
application must be submitted through the quarterly application
process. Therefore, a quarterly denial should not impact the ability of
an application from being considered through the next applicable annual
rulemaking cycle, so long as the quarterly application was submitted
within 3 years of the initial FDA approval or clearance. Nonetheless,
in response to comments articulating concerns about applications that
receive a denial upon quarterly review, we are modifying our proposal
in this final rule with comment period. Specifically, rather than
denying an application based on quarterly review, for applications that
we do not approve based upon the evidence available during the
quarterly review process, we will instead seek public comment on the
application in the next applicable rulemaking cycle. No special
reconsideration process would be necessary, as no decision would be
made until the rulemaking process is complete. Applicants could submit
new data, such as clinical trial results published in a peer-reviewed
journal, for consideration in advance of the following year's proposed
rule and during the public comment period under the rulemaking process.
Comment: Several commenters expressed concern about the possibility
of quarterly approvals being reversed through the rulemaking process.
The commenters emphasized that there should be a high bar to reversing
quarterly approved applications and believed that such a reversal would
cause disruption for Medicare beneficiaries who may anticipate
utilizing the device. One commenter suggested that, if a quarterly
approved device pass-through applicant is denied in the final rule, CMS
should consider any subsequent reapplication for that application on a
quarterly basis.
Response: As we stated in our proposed rule, we expect that it
would be a rare case where an application that was approved for device
pass-through payment under the quarterly review process is reversed in
the annual rulemaking process. However, we will consider all public
comments on each application, including clinical evidence that may not
have been available upon the quarterly review of the application.
Individuals, including the manufacturers of devices under review for
device pass-through payment, also would be able to submit public
comments demonstrating how the device meets the device pass-through
payment criteria. As stated previously in this section, we do not
believe that a quarterly reconsideration process in addition to notice-
and-comment rulemaking is necessary. We note that, in the case in which
an applicant is approved during the quarterly process and then a
decision is made in rulemaking to reverse the approval, the applicant
could reapply with a new quarterly application that provides new
information, in advance of the following year's proposed rule, assuming
that the device is still new, which would be the case if the new
quarterly application is submitted within 3 years of the initial FDA
approval or clearance.
After consideration of the public comments we received, we are
finalizing our proposal for processing applications for new device
pass-through payments with one modification. Specifically, beginning in
CY 2016, we are adopting a policy that all device pass-through payment
applications submitted through the quarterly subregulatory process will
be subject to notice-and-comment rulemaking in the next applicable OPPS
annual rulemaking cycle. However, rather than denying an application
based on quarterly review, for applications that we do not approve
based upon the evidence available during the quarterly review process,
we will instead seek public comment on the application in the next
applicable annual rulemaking cycle. Under this final policy, all
applications that are approved upon quarterly review will automatically
be included in the next applicable OPPS annual rulemaking cycle, while
submitters of applications that are not approved upon quarterly review
will have the option of being included in the next applicable OPPS
annual rulemaking cycle or withdrawing their application from
consideration entirely. No special reconsideration process would be
necessary, as no denial decision would be made except through the
annual rulemaking process. Applicants will be able to submit new data,
such as clinical trial results published in a peer-reviewed journal,
for consideration during the public comment process for the proposed
rule. This process allows those applications that we are able to
determine meet all the criteria for device pass-through payment under
the quarterly review process to receive timely pass-through payment
status, while still allowing for a transparent, public review process
for all applications.
c. Criterion for Newness
Since the inception of transitional pass-through payments for
medical devices on April 7, 2000, we have not had any specific criteria
to evaluate the newness of the device for purposes of determining
eligibility and receiving

[[Page 70419]]

device pass-through payment under the OPPS. We believe that one
consideration in determining whether a new category is warranted should
be whether or not the device seeking such new category status is itself
new. We believe that transitional pass-through payments for devices
under the OPPS are intended as an interim measure to allow for adequate
payment for new innovative technology while we collect the necessary
data to incorporate the costs for these devices into the base APC rate
(66 FR 55861). Typically, there is a lag of 2 to 3 years from the point
when a new device is first introduced on the U.S. market (generally on
the date that the device receives FDA approval) until it is reflected
in our claims data.
Existing regulations at Sec. 419.66(b)(1) specify that, if
required by the FDA, the device must have received FDA approval or
clearance (except for a device that has received an FDA investigational
device exemption (IDE) and has been classified as a Category B device
by the FDA in accordance with Sec. Sec. 405.203 through 405.207 and
405.211 through 405.215 of the regulations), or meet another
appropriate FDA exemption. This existing regulatory provision does not
address the issue of how dated these device approvals, clearances, or
exemptions may be. As a result, a device that has received FDA
approval, clearance, or exemption, and has been available on the U.S.
market for several years, could apply for and possibly be approved for
pass-through payments for a new device category if the device is not
described by any of the existing (either currently active or expired)
categories established for transitional device pass-through payments.
Over the years, we have received applications for device pass-through
payment for devices that have been on the U.S. market for several
years. We do not believe that this is consistent with the intent of the
regulation. Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR
39266), we proposed to modify the medical device eligibility
requirement at Sec. 419.66(b)(1) to provide that, not only must a
device, if required, receive FDA premarket approval or clearance
(except for a device that has received an FDA investigational device
exemption (IDE) and has been classified as a Category B device by the
FDA in accordance with Sec. Sec. 405.203 through 405.207 and 405.211
through 405.215 of the regulations) or meet another appropriate FDA
exemption from premarket approval or clearance, but also that,
beginning with applications submitted on or after January 1, 2016, CMS
will consider only applications for a medical device submitted within 3
years from the date of the initial FDA approval or clearance. That is,
we proposed to add a requirement to ensure that medical devices falling
under Sec. 419.66(b)(1) and seeking device pass-through payment must
be ``new.'' This proposed adjustment also would further align the OPPS
device pass-through process with the IPPS process for new medical
services and new technology add-on payments (42 CFR 412.87(b)(2) and 78
FR 50570) by adding the requirement that the device be new.
Specifically, we proposed to reflect in Sec. 419.66(b)(1) that,
beginning with applications submitted on or after January 1, 2016, a
device will only be eligible for transitional pass-through payment
under the OPPS if, in cases where the device requires FDA approval,
clearance, or exemption, the device meets the newness criterion; that
is, the date of original or initial FDA approval or clearance and U.S.
market availability is within 3 years from the date of the application
for transitional pass-through payment. We invited public comments on
this proposal.
Comment: Some commenters supported the proposed newness criterion.
They believed that the proposed newness criterion would provide greater
certainty for applicants and that it would more closely align with the
IPPS new technology add-on criteria.
Response: We appreciate the commenters' support. We agree that this
criterion will provide additional clarity for device pass-through
applicants.
Comment: Several commenters opposed the proposed addition of the
newness criterion. They believed that the criterion was unnecessary.
Other commenters offered alternative proposals for defining newness
that mirror the FDA approval processes. Specifically, some commenters
suggested that any application that was approved by the FDA under the
510(k) or PMA process should be considered new, and some commenters
suggested that any technology, for which the FDA establishes a new
product code, be considered ``new'' for purposes of device pass-through
payments. In addition, the commenters who opposed the newness criterion
stated that it may have unforeseen and unintended consequences that
could result in limiting beneficiary access to beneficial new
technologies, with specific concern about delay in availability on the
U.S. market or to limited sales that would prevent generation of
adequate claims data.
Response: We believe that the payment adjustment for transitional
pass-through payments for devices under the OPPS is intended as an
interim measure to allow for adequate payment of a new innovative
technology while we collect the necessary data to incorporate the costs
for these devices into the base APC rate (66 FR 55861). We believe that
instituting a newness criterion will help to ensure that only those
devices that are truly new and that could not have already been
sufficiently reflected in our claims data are eligible to receive these
enhanced payments. In our experience, we have received applications for
devices that received FDA approval several years prior to the
submission of the pass-through payment application. Sometimes these
devices have not been well-adopted by the medical community due to
issues such as changes in device ownership or difficulties with coding
and payment. However, we believe that the primary intent of
transitional pass-through payments is to address dissemination of new
technology. We believe that adopting a newness criterion will help
ensure that applications that represent devices newly available on the
market that have not had time to be incorporated into the OPPS claims
data will be considered for the additional pass-through payments.
In response to suggestions to use the FDA definitions for newness,
although FDA approval or clearance is required for a device pass-
through payment application to be considered (unless the device is
exempt, as described in Sec. 419.66(b)(1)), we do not believe that a
new product code from the FDA, which is used by FDA to classify and
track a medical device, is relevant in CMS' consideration of whether
the device is new for the purposes of device pass-through payment. A
new device, as designated by the FDA, may be substantially similar to
an existing technology. That is, even if a technology receives a new
FDA approval, it may not be necessarily considered ``new'' for purposes
of device pass-through payments under the OPPS because a substantially
similar product has been approved by the FDA and has been on the U.S.
market for more than 2 to 3 years. Given the length of time that a
substantially similar product has been on the U.S. market, its costs
would already be incorporated into the base APC rate. Lastly, we note
that the newness criterion only applies to the 3-year window in which
an applicant can apply for device pass-through payments and does not
affect the amount of time that a new device would be eligible for pass-
through payments should it be approved.

[[Page 70420]]

Comment: One commenter suggested that, similar to the IPPS new
technology add-on payment process, CMS should follow a timeline for FDA
approval of a device by a date that coincides with the ability to
include the application in the proposed rule. Specifically, the
commenter suggested that applicants be required to have received FDA
approval by no later than the first business day in June, in order to
be considered in that calendar year rulemaking process.
Response: We proposed to supplement the quarterly device pass-
through review process by adding a yearly rulemaking process. Under
this proposed policy, which we are finalizing in this final rule with
comment period, all applicants will have already undergone a quarterly
review process prior to consideration in the annual rulemaking. Under
existing policy, devices are already required to have FDA approval or
clearance, with exceptions as noted at Sec. 419.66(b)(1), before a
review can be completed. Therefore, we do not believe that FDA approval
or clearance by a June 1 date is necessary for the annual rulemaking
process.
We wish to clarify that we specified ``initial'' FDA clearance or
approval in Sec. 419.66(b)(1) because, in some cases, the FDA will
provide supplemental approvals or clearances for a device after the
initial approval or clearance. We intended to convey that the 3-year
timeframe for submitting a device pass-through payment application
would be triggered by the FDA initial approval or clearance, and not by
any subsequent FDA approvals or clearances.
Comment: Some commenters noted that new products frequently
experience delays in approval by FDA before these technologies are
available on the U.S. market and recommended that the period of newness
begin with the date of first sale. One commenter opposed the proposed
newness criterion but requested that, if the agency finalized the
proposal, CMS develop necessary exceptions to the newness criterion for
situations in which the 3-year newness window would be
``unreasonable.''
Response: We understand the commenters' concerns about delays in
approved devices being available on the U.S. market. We also note that
the IPPS new technology add-on process recognizes a date later than the
FDA approval as the appropriate starting date for ``newness'' if there
is a documented delay in market availability (69 FR 49002 through
49003). For the OPPS, we believe that the payment adjustment for
transitional pass-through payments for devices is intended as an
interim measure to allow for adequate payment of new innovative
technology while we collect the necessary data to incorporate the costs
for these devices into the base APC rate (66 FR 55861). Typically,
there is a lag of 2 to 3 years from the point when a new device is
first introduced on the U.S. market (generally on the date that the
device receives FDA approval) until it is reflected in our claims data.
However, we recognize that, in some cases, FDA approval or clearance
may not correspond to the date upon which the device becomes available
on the U.S. market. That is, we recognize that there may be cases where
the product initially is unavailable to Medicare beneficiaries
following FDA approval, such as in cases of a delay in bringing the
product to the U.S. market (for instance, manufacturing issues or other
Federal regulatory issues, such as a national coverage determination of
noncoverage in the Medicare population). Therefore, we are modifying
our proposal and will consider newness to begin on the later of initial
FDA approval or clearance date or U.S. market availability if there is
a documented, verifiable delay in market availability.
Comment: One commenter suggested that CMS delay the newness
criterion until CY 2017 rulemaking to allow for more information and
clarity.
Response: We believe that we have received useful stakeholder input
on this proposal, and we are modifying our proposal in response to
concerns raised by a number of commenters. We do not agree that there
is a need for delay in implementation.
After consideration of the public comments we received, we are
finalizing our proposal to add a newness criterion (under the
regulations at Sec. 419.66(b)(1)) for CY 2016 for approval of new
device pass-through payments, with a modification that newness will
begin on the later of the initial FDA approval or clearance date or
U.S. market availability if there is a documented, verifiable delay in
market availability.
3. Provisions for Reducing Transitional Pass-Through Payments To Offset
Costs Packaged Into APC Groups
a. Background
Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional
pass-through payment for an eligible device as the amount by which the
hospital's charges for a device, adjusted to cost (the cost of the
device), exceeds the portion of the otherwise applicable Medicare
outpatient department fee schedule amount (the APC payment amount)
associated with the device. We have an established policy to estimate
the portion of each APC payment rate that could reasonably be
attributed to the cost of the associated devices that are eligible for
pass-through payments (66 FR 59904) for purposes of estimating the
portion of the otherwise applicable APC payment amount associated with
pass-through devices. For eligible device categories, we deduct an
amount that reflects the portion of the APC payment amount that we
determine is associated with the cost of the device, defined as the
device APC offset amount, from the charges adjusted to cost for the
device, as provided by section 1833(t)(6)(D)(ii) of the Act, to
determine the pass-through payment amount for the eligible device. We
have consistently used 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. In the unusual case where the
device offset amount exceeds the device pass-through payment amount,
the regular APC rate would be paid.
We published a list of all procedural APCs with the CY 2015
portions (both percentages and dollar amounts) of the APC payment
amounts that we determined are associated with the cost of devices on
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The dollar amounts
are used as the device APC offset amounts. In addition, in accordance
with our established practice, the device APC offset amounts in a
related APC are used in order to evaluate whether the cost of a device
in an application for a new device category for pass-through payment is
not insignificant in relation to the APC payment amount for the service
related to the category of devices, as specified in our regulations at
Sec. 419.66(d).
Beginning January 1, 2010, we include packaged costs related to
implantable biologicals in the device offset calculations in accordance
with our policy that the pass-through evaluation process and payment
methodology for implantable biologicals that are surgically inserted or
implanted (through a surgical incision or a natural orifice) and that
are newly approved for pass-through status beginning on or after
January 1, 2010, be the device pass-

[[Page 70421]]

through process and payment methodology only (74 FR 60476). Beginning
January 1, 2015, skin substitutes are evaluated for pass-through status
and payment using the device pass-through evaluation process (79 FR
66888).
b. CY 2016 Policy
In the CY 2016 OPPS/ASC proposed rule (80 FR 39267), we proposed to
continue, for CY 2016, our established methodology to estimate the
portion of each APC payment rate that could reasonably be attributed to
(that is, reflect) the cost of an associated device eligible for pass-
through payment, using claims data from the period used for the most
recent recalibration of the APC payment rates. We also proposed to
continue our established policies for calculating and setting the
device APC offset amounts for each device category eligible for pass-
through payment. In addition, we proposed 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 that are packaged into the
existing APC structure are associated with the new category, we
proposed to deduct the device APC offset amount from the pass-through
payment for the device category. As stated earlier, these device APC
offset amounts also would be used in order to evaluate whether the cost
of a device in an application for a new device category for pass-
through payment is not insignificant in relation to the APC payment
amount for the service related to the category of devices (Sec.
419.66(d)).
In addition, we proposed to update the list of all procedural APCs
with the final CY 2016 portions of the APC payment amounts that we
determine are associated with the cost of devices on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html so that this information is available
for use by the public in developing potential CY 2016 device pass-
through payment applications and by CMS in reviewing those
applications.
In response to the CY 2016 OPPS/ASC proposed rule, we received a
few public comments that related to aspects of the pass-through device
policy on which we did not propose changes. The comments addressed
highly technical and operational matters and pertained to matters that
are addressed in subregulatory guidance. Therefore, we believe these
public comments are outside of the scope of the proposed rule, and we
are not addressing them in this final rule with comment period. We note
that the public may contact us via other means to discuss these types
of issues.
In this final rule with comment period, we are finalizing the
proposed pass-through device policy for reducing transitional pass-
through payments to offset costs packaged into APC groups, without
modification.

B. Device-Intensive Procedures

1. Background
Under the OPPS, device-intensive APCs are defined as those APCs
with a device offset greater than 40 percent (79 FR 66795). In
assigning device-intensive status to an APC, the device costs of all of
the procedures within the APC are calculated and the geometric mean
device offset of all of the procedures must exceed 40 percent. Almost
all of the procedures assigned to device-intensive APCs utilize
devices, and the device costs for the associated HCPCS codes exceed the
40-percent threshold. The no cost/full credit and partial credit device
policy (79 FR 66872 through 66873) applies to device-intensive APCs and
is discussed in detail in section IV.B.3. of this final rule with
comment period. A related device policy is the requirement that
procedures assigned to certain (formerly device-dependent) APCs require
the reporting of a device code on the claim (79 FR 66795).
2. Changes to the Device Edit Policy
In the CY 2015 OPPS/ASC final rule with comment period (79 FR
66795), we finalized a policy and implemented claims processing edits
that require any of the device codes used in the previous device-to-
procedure edits to be present on the claim whenever a procedure code
assigned to any of the APCs listed below in Table 41 (the formerly
device-dependent APCs) is reported on the claim.

Table 41--APCs That Require a Device Code To Be Reported on a Claim When
a Procedure Assigned to one of These APCs Is Reported for CY 2015
------------------------------------------------------------------------
CY 2015 APC CY 2015 APC title
------------------------------------------------------------------------
0039.............................. Level III Neurostimulator.
0061.............................. Level II Neurostimulator.
0083.............................. Level I Endovascular.
0084.............................. Level I EP.
0085.............................. Level II EP.
0086.............................. Level III EP.
0089.............................. Level III Pacemaker.
0090.............................. Level II Pacemaker.
0107.............................. Level I ICD.
0108.............................. Level II ICD.
0202.............................. Level V Gynecologic Procedures.
0227.............................. Implantation of Drug Infusion.
0229.............................. Level II Endovascular.
0259.............................. Level VII ENT Procedures.
0293.............................. Level IV Intraocular.
0318.............................. Level IV Neurostimulator.
0319.............................. Level III Endovascular.
0384.............................. GI Procedures with Stents.
0385.............................. Level I Urogenital.
0386.............................. Level II Urogenital.
0425.............................. Level V Musculoskeletal.
0427.............................. Level II Tube/Catheter.
0622.............................. Level II Vascular Access.
0648.............................. Level IV Breast Surgery.
0652.............................. Insertion of IP/Pl. Cath.
0655.............................. Level IV Pacemaker.
------------------------------------------------------------------------

There are 10 APCs listed in Table 41 that are not device-intensive
APCs; that is, their device offsets do not exceed 40 percent. As
discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39267), we do
not believe that we should continue to require device codes on claims
for procedures that are not assigned to device-intensive APCs because
the relative device costs do not exceed the device-intensive threshold
of 40 percent. Unlike with device-intensive APCs, we believe it is not
necessary to require the reporting of a device code for reporting
device charges on a claim because the relative device costs are much
less significant than those associated with device-intensive APCs. We
believe that device code reporting requirements should only apply to
the device-intensive APCs because these APCs have significant device
costs that are associated with particular devices. We noted that, in CY
2015 (79 FR 66794 through 66795), we applied the device code reporting
requirements to those formerly device-dependent APCs that also met the
device-intensive APC definition. However, as stated in the CY 2016
OPPS/ASC proposed rule (80 FR 39268), after further consideration, we
no longer believe it is appropriate to restrict the application of this
policy to only the subset of device-intensive APCs that were formerly
device-dependent and now believe the device code reporting requirements
should apply to all device-intensive APCs, regardless of whether or not
the APC was formerly device-dependent. We believe that the device
coding requirement should apply to

[[Page 70422]]

procedures assigned to all device-intensive APCs because these are the
APCs with significant device costs. Therefore, for CY 2016, we proposed
that only the procedures that require the implantation of a device that
are assigned to a device-intensive APC would require a device code on
the claim. The list of device-intensive APCs was listed in Table 38 of
the CY 2016 OPPS/ASC proposed rule (80 FR 39268).
In the CY 2016 OPPS/ASC proposed rule, we proposed that the claims
processing edits are such that any device code, when reported on a
claim with a procedure assigned to an APC listed in Table 38 of the
proposed rule (80 FR 39268), would satisfy the edit. Claims submitted
with a procedure code requiring a device assigned to an APC listed in
Table 38 of the proposed rule, but without any device code reported on
the claim, would be returned to the provider.
Comment: A number of commenters supported CMS' proposal to apply
device code reporting requirements to procedures that require the
implantation of a device and that are assigned to a device-intensive
APC. One commenter who supported the proposal recommended that CMS
continue to monitor claims to evaluate the need to reinstate all device
edits. Other commenters urged CMS to reinstate device-to-procedure
edits. One commenter expressed concern that removal of procedure-to-
device code edits could potentially cause device-to-procedure code
mismatches in the CY 2015 claims data, which, ultimately, could result
in incorrect APC payment rates. One commenter requested that CMS
require device coding for any procedure that has a device offset of
greater than 40 percent, regardless of whether the procedure is
assigned to a device-intensive APC. A few commenters requested that CMS
remove APC 5221 from the ``device intensive'' APC list because the
procedures described by the HCPCS codes assigned to APC 5221 represent
procedures for device removal, revision, and repair, which do not
require or include the device itself.
Response: We appreciate the commenters' support. We will continue
to monitor the claims data to ensure that hospitals continue reporting
appropriate device codes on the claims for device-intensive APCs. We
continue to believe that the elimination of device-to-procedure edits
and procedure-to-device edits is appropriate due to the experience
hospitals now have in coding and reporting these claims fully. For the
more costly devices, we believe the C-APCs will reliably reflect the
cost of the device if charges for the device are included anywhere on
the claim. We remind the commenters that, under our proposed policy,
hospitals would still be expected to adhere to the guidelines of
correct coding and append the correct device code to the claim when
applicable. We also remind the commenters that, as with all other items
and services recognized under the OPPS, we expect hospitals to code and
report their device costs appropriately, regardless of whether there
are claims processing edits in place. We do not believe that our
proposed policy will result in device-to-procedure code mismatches,
which would require miscoding by hospitals. We continue to expect
hospitals to use an appropriate device code consistent with correct
coding in order to ensure that device costs are always reported on the
claim and that costs are appropriately captured in claims that CMS uses
for ratesetting.
In response to the commenter's request that CMS require device
coding for any procedure that has a device offset of greater than 40
percent, regardless of whether the procedure is assigned to a device-
intensive APC, we note that we did not propose such a policy change.
However, we will take this comment into consideration for future
rulemaking. We also note that APC 5221 does not have a final device
offset of greater than 40 percent. Therefore, we are not finalizing it
as a device-intensive APC for CY 2016.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, that, beginning in CY
2016, only the procedures that require the implantation of a device
that are assigned to a device-intensive APC will require a device code
on the claim. We also are finalizing, without modification, our
proposal that the claims processing edits are such that any device
code, when reported on a claim with a procedure assigned to an APC
listed in Table 42 below will satisfy the edit.
Table 42 below lists the CY 2016 device-intensive APCs.

Table 42--CY 2016 Device-Intensive APCs
------------------------------------------------------------------------
Renumbered CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
1565.............................. New Technology--Level 28 ($5,000-
$5,500).
1599.............................. New Technology--Level 48 ($90,000-
$100,000).
5125.............................. Level 5 Musculoskeletal Procedures.
5166.............................. Level 6 ENT Procedures.
5192.............................. Level 2 Endovascular Procedures.
5193.............................. Level 3 Endovascular Procedures.
5222.............................. Level 2 Pacemaker and Similar
Procedures.
5223.............................. Level 3 Pacemaker and Similar
Procedures.
5224.............................. Level 4 Pacemaker and Similar
Procedures.
5231.............................. Level 1 ICD and Similar Procedures.
5232.............................. Level 2 ICD and Similar Procedures.
5377.............................. Level 7 Urology and Related
Services.
5462.............................. Level 2 Neurostimulator and Related
Procedures.
5463.............................. Level 3 Neurostimulator and Related
Procedures.
5464.............................. Level 4 Neurostimulator and Related
Procedures.
5471.............................. Implantation of Drug Infusion
Device.
5493.............................. Level 3 Intraocular Procedures.
5494.............................. Level 4 Intraocular Procedures.
------------------------------------------------------------------------

3. Adjustment to OPPS Payment for No Cost/Full Credit and Partial
Credit Devices
a. Background
To ensure equitable OPPS payment when a hospital receives a device
without cost or with full credit, in CY 2007, we implemented a policy
to reduce the payment for specified device-dependent APCs by the
estimated portion of the APC payment attributable to device costs (that
is, the device offset) when the hospital receives a specified device at
no cost or with full credit (71 FR 68071 through 68077). Hospitals were
instructed to report no cost/full credit device cases on the claim
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, hospitals are 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, hospitals are instructed to report as the device charge
the difference between the hospital's usual charge for the device being
implanted and the hospital's usual charge for the

[[Page 70423]]

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 were instructed to append the ``FC'' modifier to the
procedure code that reports the service provided to furnish the device
when they receive a partial credit of 50 percent or more of the cost of
the new device. We refer readers to the CY 2008 OPPS/ASC final rule
with comment period for more background information on the ``FB'' and
``FC'' modifiers payment adjustment policies (72 FR 66743 through
66749).
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005
through 75007), beginning in CY 2014, we modified our policy of
reducing OPPS payment for specified APCs when a hospital furnishes a
specified device without cost or with a full or partial credit. For CY
2013 and prior years, our policy had been to reduce OPPS payment 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. For CY 2014, we reduced OPPS payment, for the applicable APCs,
by the full or partial credit a hospital receives for a replaced
device. Specifically, under this modified policy, hospitals are
required to report on the claim the amount of the credit in the amount
portion for value code ``FD'' (Credit Received from the Manufacturer
for a Replaced Medical Device) when the hospital receives a credit for
a replaced device that is 50 percent or greater than the cost of the
device. For CY 2014, we also limited the OPPS payment deduction for the
applicable APCs to the total amount of the device offset when the
``FD'' value code appears on a claim. For CY 2015, we continued our
existing policy of reducing OPPS payment for specified APCs when a
hospital furnishes a specified device without cost or with a full or
partial credit and to use the three criteria established in the CY 2007
OPPS/ASC final rule with comment period (71 FR 68072 through 68077) for
determining the APCs to which our CY 2015 policy will apply (79 FR
66872 through 66873).
b. Policy for CY 2016
For CY 2016 and subsequent years, in the CY 2016 OPPS/ASC proposed
rule (80 FR 39268), we proposed to continue our existing policy of
reducing OPPS payment for specified APCs when a hospital furnishes a
specified device without cost or with a full or partial credit.
Specifically, for CY 2016, we proposed to continue to reduce the OPPS
payment, for the device-intensive APCs listed in Table 38 of the
proposed rule (80 FR 39268), by the full or partial credit a provider
receives for a replaced device. Under this proposed policy, hospitals
would continue to be required to report on the claim the amount of the
credit in the amount portion for value code ``FD'' when the hospital
receives a credit for a replaced device that is 50 percent or greater
than the cost of the device. In CY 2015 and prior years, we specified a
list of costly devices to which this APC payment adjustment would
apply. As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR
39269), upon further consideration of our existing value code ``FD''
APC payment adjustment policy and the ability to deduct the actual
amount of the device credit from the OPPS payment, regardless of the
cost of the individual device, instead of a percentage of the device
offset, we no longer believe it is necessary to restrict the
application of this policy to a specific list of costly devices (most
recently listed in Table 27 of the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66873)) as was necessary under the ``FB''/``FC''
modifier payment adjustment policy, which made APC payment adjustments
as a percentage of the applicable device offset amount. Under the CY
2015 policy, the actual amount of the device credit can be
appropriately reported in the amount portion of value code ``FD'' and
deducted from the OPPS payment for all no cost/full credit and partial
credit devices furnished in conjunction with a procedure assigned to a
device-intensive APC. Therefore, for CY 2016 and subsequent years, we
proposed to no longer specify a list of devices to which the OPPS
payment adjustment for no cost/full credit and partial credit devices
would apply. Instead, we proposed to apply this APC payment adjustment
to all replaced devices furnished in conjunction with a procedure
assigned to a device-intensive APC when the hospital receives a credit
for a replaced specified device that is 50 percent or greater than the
cost of the device.
For CY 2016 and subsequent years, in the CY 2016 OPPS/ASC proposed
rule (80 FR 39269), we also proposed to continue using the three
criteria established in the CY 2007 OPPS/ASC final rule with comment
period for determining the APCs to which our proposed CY 2016 policy
would apply (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 APC
must be device-intensive; that is, the device offset amount must be
significant, which is defined as exceeding 40 percent of the APC cost.
We continue to believe these criteria are appropriate because no-cost
devices and device credits are likely to be associated with particular
cases only when the device must be reported on the claim and is of a
type 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. As noted earlier in this section, APCs with a device
offset that exceed the 40-percent threshold are called device-intensive
APCs.
Comment: A number of commenters supported CMS' proposed policy. One
commenter recommended that CMS continue to provide lists of both the
device-intensive APCs and the device HCPCS codes for which a credit
would need to be reported.
Response: We appreciate the commenters' support. As stated in the
proposed rule (80 FR 39269), we no longer believe it is necessary to
restrict the application of this policy to a specific list of costly
devices as was necessary under the ``FB''/``FC'' modifier payment
adjustment policy. Therefore, we no longer believe it is necessary to
specify a list of devices to which the OPPS payment adjustment for no
cost/full credit and partial credit devices would apply.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to reduce
the OPPS payment, for the device-intensive APCs (listed in Table 42 of
this final rule with comment period), by the full or partial credit a
provider receives for a replaced device. We also are finalizing our
proposal, without modification, to no longer specify a list of devices
to which the OPPS payment adjustment for no cost/full credit and
partial credit devices would apply and instead, apply this APC payment
adjustment to all replaced devices furnished in conjunction with a
procedure assigned

[[Page 70424]]

to a device-intensive APC when the hospital receives a credit for a
replaced specified device that is 50 percent or greater than the cost
of the device. In addition, we are finalizing our proposal, without
modification, to continue using the three criteria established in the
CY 2007 OPPS/ASC final rule with comment period for determining the
APCs to which the CY 2016 device intensive policy will apply.
As discussed in the CY 2016 OPPS/ASC proposed rule (80 FR 39269),
we examined the offset amounts calculated from the CY 2016 claims data
and the clinical characteristics of the CY 2016 APCs to determine which
APCs meet the criteria for CY 2016. The full list of device-intensive
APCs to which the payment adjustment policy for no cost/full credit and
partial credit devices would apply in CY 2016 is included in Table 42
of this final rule with comment period.
4. Adjustment to OPPS Payment for Discontinued Device-Intensive
Procedures
It has been our longstanding policy to instruct hospitals to use an
appropriate modifier on a claim to report when a procedure is
discontinued, partially reduced, or canceled. Specifically, when
appropriate, hospitals are instructed to append modifiers ``73,''
``74,'' and ``52'' to report and be paid for expenses incurred in
preparing a patient for a procedure and scheduling a room for
performing the procedure where the service is subsequently discontinued
(Medicare Claims Processing Manual (Pub. 100-04, Chapter 4, Section
20.6.4). The circumstances identifying when it is appropriate to append
modifier ``73,'' ``74,'' or ``52'' to a claim are detailed below.
Modifier ``73'' is used by the hospital to indicate that a
procedure requiring anesthesia was terminated due to extenuating
circumstances or to circumstances that threatened the well-being of the
patient after the patient had been prepared for the procedure
(including procedural pre-medication when provided), and been taken to
the room where the procedure was to be performed, but prior to
administration of anesthesia. For purposes of billing for services
furnished in the HOPD, anesthesia is defined to include local, regional
block(s), moderate sedation/analgesia (``conscious sedation''), deep
sedation/analgesia, or general anesthesia. Modifier ``73'' was created
so that the costs incurred by the hospital to prepare the patient for
the procedure and the resources expended in the procedure room and
recovery room (if needed) could be recognized for payment even though
the procedure was discontinued. Modifier ``73'' results in a payment
rate of 50 percent of the full OPPS payment for the procedure.
Modifier ``74'' is used by the hospital to indicate that a
procedure requiring anesthesia was terminated after the induction of
anesthesia or after the procedure was started (for example, the
incision made, the intubation started, and the scope inserted) due to
extenuating circumstances or to circumstances that threatened the well-
being of the patient. This modifier may also be used to indicate that a
planned surgical or diagnostic procedure was discontinued, partially
reduced, or canceled at the physician's discretion after the
administration of anesthesia. For purposes of billing for services
furnished in the HOPD, anesthesia is defined to include local, regional
block(s), moderate sedation/analgesia (``conscious sedation''), deep
sedation/analgesia, or general anesthesia. Modifier ``74'' was created
so that the costs incurred by the hospital to initiate the procedure
(preparation of the patient, procedure room, and recovery room) could
be recognized for payment even though the procedure was discontinued
prior to completion. Modifier ``74'' results in a payment rate of 100
percent of the full OPPS payment for the procedure.
Modifier ``52'' was revised in CY 2012 and is used by the hospital
to indicate partial reduction, cancellation, or discontinuation of
services for which anesthesia is not planned. (We refer readers to the
January 2012 Update of the Hospital Outpatient Prospective Payment
System (OPPS), Transmittal 2386, Change Request 7672, dated January 13,
2012.) The modifier provides a means for reporting reduced services
without disturbing the identification of the basic service. Modifier
``52'' results in a payment rate of 50 percent of the full OPPS payment
for the procedure.
When a procedure assigned to a device-intensive APC is discontinued
either prior to administration of anesthesia or for a procedure that
does not require anesthesia, we presume that, in the majority of cases,
the device was not used and remains sterile such that it could be used
for another case. In these circumstances, under current policy,
hospitals could be paid twice by Medicare for the same device, once for
the initial procedure that was discontinued and again when the device
is actually used. Accordingly, for CY 2016, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39269 through 39270), we proposed that, for
procedures involving implantable devices that are assigned to a device-
intensive APC (defined as those APCs with a device offset greater than
40 percent), we would reduce the APC payment amount for discontinued
device-intensive procedures, where anesthesia has not been administered
to the patient or the procedure does not require anesthesia, by 100
percent of the device offset amount prior to applying the additional
payment adjustments that apply when the procedure is discontinued. We
proposed to restrict the policy to device-intensive APCs so that the
adjustment would not be triggered by the use of an inexpensive device
whose cost would not constitute a significant portion of the total
payment rate for an APC. We did not propose to deduct the device offset
amount from a procedure that was discontinued after anesthesia was
administered (modifier ``74'') because we believe that it may be more
likely that devices involved with such procedures may no longer be
sterile, such that they could be restocked and used for another case.
However, we solicited public comments on how often the device becomes
ineligible for use in a subsequent case and whether we should deduct
the device offset amount from claims with modifier ``74'' as well. In
addition, we proposed to amend the existing regulations at 42 CFR
419.44(b) accordingly.
Comment: Commenters generally opposed the proposal. The commenters
disagreed with CMS' assumption that devices involved in discontinued
procedures were able to be used for another case. One commenter noted,
for example, that a nurse may unpack and breach the sterility of
implantable devices and other sterile supplies prior to the decision to
proceed with the surgery and before the administration of anesthesia.
The commenters also noted that companies do not routinely provide
information on how to resterilize the devices after the packaging has
been opened. The commenters urged CMS not to finalize the proposals,
absent a study or evidence that showed that devices remain sterile in
discontinued procedures.
Response: We note that the commenters did not provide a clinical
reason for why an implantable device would need to be opened in advance
of a procedure. Although we acknowledge that some hospitals may choose
to open devices prior to the start of the surgery, we do not believe
that this practice is necessary. We continue to believe that, in the
majority of cases, supplies for a procedure can be arrayed in advance
of the procedure, and that implantable devices that are assigned to a
device-

[[Page 70425]]

intensive APC could be opened when ready for insertion. Further, in the
case of a device that became unsterile but was not ultimately used in a
procedure, in addition to information that is already available from
the FDA about resterilizing reusable medical devices, we note that the
manufacturer may provide information on how to ``resterilize'' such a
device. We would expect that the hospital would take necessary steps to
avoid having to throw away an unused device, especially in
circumstances involving expensive devices.
Comment: Some commenters supported CMS' existing policy to reduce
the APC payment for procedures that were discontinued, but requested
that CMS not reduce any of the device cost associated with the
procedure. Specifically, the commenters requested that CMS: (1) Reduce
the full APC payment amount by the device offset; (2) apply the
discontinued procedure reduction; and (3) add back to the full device
offset amount the reduced payment rate to arrive a payment rate that
incorporates the cost of the discarded device and supplies related to
the procedure.
Response: We continue to believe that device costs are not incurred
when the device remains unopened and sterile. While there may be some
scenarios under which a device is opened prior to the decision to
cancel the procedure, the OPPS is based on a system of averages, and we
believe that, overall, those instances will be balanced by those cases
where the device that would have been used is not opened prior to the
decision to cancel the procedure. As discussed later in this section,
we are not finalizing our proposal with respect to cases for which
anesthesia is not planned (modifier ``52''). Accordingly, the device
offset amount will not be deducted from device-intensive procedures
involving modifier ``52.''
Comment: Several commenters urged CMS to review the use of revenue
code 0278 for claims that included modifier ``52'' or ``73.'' One
commenter noted that, because the OPPS is a system based on averages,
if the number of discontinued procedures under Medicare is small,
payment for device costs associated with such procedures where the
device is opened but unused is likely to be balanced out by other cases
involving the device.
Another commenter stated that, in the absence of a study or other
evidence that demonstrated that devices remain sterile in procedures
with modifiers ``52'' and ``73'' appended to the claim, it is
inappropriate to implement the proposed payment reductions. Several
commenters cited to an external analysis of 1,500 claims that had a
device-intensive procedure code reporting either modifier ``52'' or
``73'' where approximately two-thirds of the time, these claims also
contained a charge using revenue code 0278. Some commenters requested
that CMS conduct a more detailed analysis of the proposed policy to
better understand whether devices can be used for another case. One
commenter requested that CMS provide information in the final rule on
the number of claims for device-intensive procedures on which modifier
``52'' or ``73'' is appended.
Another commenter suggested that a hospital could apply a token
charge for the device as a mechanism to note that the device was opened
on a canceled procedure because the use of modifier ``52'' or ``73''
does not provide specific information on whether or not the device was
opened. The commenter believed that the token charge would provide a
mechanism for gathering information that would inform whether the use
of these modifiers should reduce the overall APC payment by the full
offset amount and the 50-percent reduction in payment.
Some commenters noted that, because the APC payment is based on the
average cost of all cases, the APC weights should already reflect a
reduced cost for the unused device based on the mechanics of CMS'
costing methodology and, therefore, this policy may penalize the
hospital twice.
Response: In response to commenters' request, we analyzed Medicare
claims data from CY 2014. We found that, among those claims that
contained modifier ``52'' or ``73,'' charges under revenue code 0278
(Implantable Device) for device-intensive procedures were rare.
Specifically, we found that, for device-intensive procedures, there
were 597 claims on which modifier ``52'' was appended, and 116 claims
on which modifier ``73'' was appended. Based on a total of 527,138
device-intensive procedures performed in CY 2014, we determine that
approximately 0.14 percent of device-intensive procedures are canceled
prior to anesthesia or do not require anesthesia.
In response to the comments regarding use of revenue code 0278, we
remind the commenters that a charge under revenue code 0278 should only
be posted when the cost associated with an implantable device is
incurred. With respect to the suggestion to require a token charge for
devices that were compromised in canceled procedures, we note that we
are already able to gather information regarding canceled procedures
through the use of revenue code 0278 on claims that also contain
modifier ``52,'' ``73,'' or ``74.'' Therefore, we disagree that there
is a need to add a token charge for the purpose of identifying when a
device was opened on a canceled procedure.
With respect to the comment that the APC relative weights already
reflect the cost of canceled procedures, we note that, to the extent
that a device is unused for the canceled procedure and is instead used
on another case, the APC payment rate may be inappropriately inflated
because the cost of the unused device may be included in the canceled
procedure case (as evidenced by charges on the claim for the device).
Therefore, we continue to believe that it is appropriate to deduct the
device offset for discontinued procedures reported on claims to which
modifier ``73'' is appended. As discussed below, we are not finalizing
our proposal to deduct the device offset amount from the APC payment
amount for device procedures for which modifier ``52'' is appended to
the claim.
Comment: One commenter asked CMS to clarify the use of modifier
``52'' on claims for device-intensive procedures because the commenter
believed it would be a rare occurrence that an implantable device would
be used for a procedure for which anesthesia was not planned.
Response: Our analysis of CY 2014 Medicare claims data confirms
that modifier ``52,'' which is used for procedures for which anesthesia
was not planned, is rarely appended with a device-intensive procedure.
We agree with the commenter that it would be rare that an implantable
device would be used for procedures for which anesthesia was not
planned because anesthesia is commonly used in procedures that involve
surgically implanting a device. Accordingly, we are not finalizing our
proposal to deduct the device offset amount from device-intensive APC
payment amounts for discontinued procedures involving modifier ``52.''
Comment: Commenters supported CMS' decision not to include the use
of modifier ``74'' under the proposed policy. The commenters stated
that, in cases in which the device implantation is canceled after
receipt of anesthesia, it was likely that sterile devices would have
been opened and rendered useless for another patient and the facility
will have incurred the full cost of the device.
Response: We appreciate the insights offered in response to our
solicitation for comment on whether to deduct the device offset amount
when a device procedure case is canceled after

[[Page 70426]]

administration of anesthesia (modifier ``74'').
After consideration of the public comments we received, we are
finalizing our proposed policy, with modification, under the regulation
at Sec. 419.44(b). Specifically, for procedures involving implantable
devices that are assigned to a device-intensive APC (defined as those
APCs with a device offset greater than 40 percent), we will reduce the
APC payment amount for discontinued device-intensive procedures, where
anesthesia has not been administered to the patient (as evidenced by
the presence of modifier ``73''), by 100 percent of the device offset
amount prior to applying the additional payment adjustments that apply
when the procedure is discontinued. As discussed earlier in this
section, we are not finalizing this policy for procedures for which
anesthesia is not planned and the procedure is discontinued (as
evidenced by the presence of modifier ``52'').

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

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

1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biologicals. Throughout this final rule with comment period, the
term ``biological'' is used because this is the term that appears in
section 1861(t) of the Act. ``Biological'' as used in this final rule
with comment period includes (but is not necessarily limited to)
``biological product'' or ``biologic'' as defined in the Public Health
Service Act. As enacted by the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this provision
requires the Secretary to make additional payments to hospitals for:
Current orphan drugs, as designated under section 526 of the Federal
Food, Drug, and Cosmetic Act; current drugs and biologicals and
brachytherapy sources used in cancer therapy; and current
radiopharmaceutical drugs and biologicals. ``Current'' refers to drugs
or biologicals that are outpatient hospital services under Medicare
Part B for which payment was made on the first date the hospital OPPS
was implemented.
Transitional pass-through payments also are provided for certain
``new'' drugs and biologicals that were not being paid for as an HOPD
service as of December 31, 1996 and whose cost is ``not insignificant''
in relation to the OPPS payments for the procedures or services
associated with the new drug or biological. For pass-through payment
purposes, radiopharmaceuticals are included as ``drugs.'' As required
by statute, transitional pass-through payments for a drug or biological
described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a
period of at least 2 years, but not more than 3 years, after the
payment was first made for the product as a hospital outpatient service
under Medicare Part B. CY 2016 pass-through drugs and biologicals and
their designated APCs are assigned status indicator ``G'' in Addenda A
and B to this final rule with comment period, which are available via
the Internet on the CMS Web site.
Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through
payment amount, in the case of a drug or biological, is the amount by
which the amount determined under section 1842(o) of the Act for the
drug or biological exceeds the portion of the otherwise applicable
Medicare OPD fee schedule that the Secretary determines is associated
with the drug or biological. If the drug or biological is covered under
a competitive acquisition contract under section 1847B of the Act, the
pass-through payment amount is determined by the Secretary to be equal
to the average price for the drug or biological for all competitive
acquisition areas and the year established under such section as
calculated and adjusted by the Secretary. However, we note that the
Part B drug competitive acquisition program (CAP) has been postponed
since CY 2009, and such a program has not been reinstated for CY 2016.
This methodology for determining the pass-through payment amount is
set forth in regulations at 42 CFR 419.64. These regulations specify
that the pass-through payment equals the amount determined under
section 1842(o) of the Act minus the portion of the APC payment that
CMS determines is associated with the drug or biological. Section 1847A
of the Act establishes the average sales price (ASP) methodology, which
is used for payment for drugs and biologicals described in section
1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP
methodology, as applied under the OPPS, uses several sources of data as
a basis for payment, including the ASP, the wholesale acquisition cost
(WAC), and the average wholesale price (AWP). In this final rule with
comment period, the term ``ASP methodology'' and ``ASP-based'' are
inclusive of all data sources and methodologies described therein.
Additional information on the ASP methodology can be found on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
The pass-through application and review process for drugs and
biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Drugs and Biologicals With Expiring Pass-Through Payment Status in
CY 2015
In the CY 2016 OPPS/ASC proposed rule (80 FR 39270), we proposed
that the pass-through status of 12 drugs and biologicals would expire
on December 31, 2015, as listed in Table 39 of the proposed rule (80 FR
39271). 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, 2015. These drugs and biologicals were approved for pass-
through status on or before January 1, 2014. With the exception of
those groups of drugs and biologicals that are always packaged when
they do not have pass-through status (specifically, anesthesia drugs;
drugs, biologicals, and radiopharmaceuticals that function as supplies
when used in a diagnostic test or procedure (including diagnostic
radiopharmaceuticals, contrast agents, and stress agents); and drugs
and biologicals that function as supplies when used in a surgical
procedure), 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 $100 for CY 2016), as discussed further in section
V.B.2. of the proposed rule and this final rule with comment period. If
the estimated per day cost for the drug or biological is less than or
equal to the applicable OPPS drug packaging threshold, we proposed to
package payment for the drug or biological into the payment for the
associated procedure in the upcoming calendar year. If the estimated
per day cost of the drug or biological is greater than the OPPS drug
packaging threshold, we proposed to provide separate payment at the
applicable relative ASP-based payment amount (which is ASP+6 percent
for CY 2016, as discussed further in section V.B.3. of the proposed
rule and this final rule with comment period).
Comment: A few commenters recommended that CMS continue pass-

[[Page 70427]]

through payment status for new drugs, specifically diagnostic
radiopharmaceuticals and contrast agents, for a full 3 years. The
commenters asserted that providing pass-through payment status for 3
years would help provide a more current and accurate data set on which
to base payment amounts of the procedure when the diagnostic
radiopharmaceutical or contrast agent is subsequently packaged. The
commenters further recommended that CMS expire pass-through payment
status for drugs and biologicals on a quarterly as opposed to an annual
basis.
Response: We appreciate the commenters' recommendation that we
authorize OPPS pass-through payment for new drugs, including contrast
agents and diagnostic radiopharmaceuticals, for 3 full years and that
we expire pass-through status on a quarterly basis. While we are not
accepting this recommendation for CY 2016, we will take it under
consideration as we review our OPPS pass-through payment policy for CY
2017.
However, for CY 2016, as we stated in the CYs 2012 through 2015
OPPS/ASC final rules with comment period (76 FR 74287; 77 FR 68363; 78
FR 75010; and 79 FR 66875, respectively), and as described in section
V.A. of this final rule with comment period, section
1833(t)(6)(c)(i)(II) of the Act permits CMS to make pass-through
payments for a period of at least 2 years, but not more than 3 years,
after the product's first payment as a hospital outpatient service
under the OPPS. We continue to believe that this period of payment
appropriately facilitates dissemination of these new products into
clinical practice and facilitates the collection of sufficient hospital
claims data reflective of their costs for future OPPS ratesetting. Our
longstanding practice has been to provide pass-through payment for a
period of 2 to 3 years, with expiration of pass-through payment status
proposed and finalized through the annual rulemaking process. Each
year, when proposing to expire the pass-through payment status of
certain drugs and biologicals, we examine our claims data for these
products. We observe that hospitals typically have incorporated these
products into their chargemasters based on the utilization and costs
observed in our claims data. Under the existing pass-through payment
policy, we begin pass-through payment on a quarterly basis, depending
on when applications are submitted to us for consideration. We are
confident that the period of time for which drugs, biologicals,
contrast agents, and radiopharmaceuticals receive pass-through payment
status, which is at least 2 but no more than 3 years, is appropriate
for CMS to collect the sufficient amount of data to make a packaging
determination.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to expire the pass-
through payment status of the 12 drugs and biologicals listed in Table
43 below. Table 43 lists the drugs and biologicals for which pass-
through payment status will expire on December 31, 2015, the status
indicators, and the assigned APCs for CY 2016.

Table 43--Drugs and Biologicals for Which Pass-Through Payment Status
Expires December 31, 2015
------------------------------------------------------------------------
Final CY 2016
CY 2016 HCPCS code CY 2016 long status Final CY 2016
descriptor indicator APC
------------------------------------------------------------------------
A9520.............. Technetium Tc 99m N N/A
tilmanocept,
diagnostic, up to
0.5 millicuries.
C9132.............. Prothrombin K 9132
complex
concentrate
(human), Kcentra,
per i.u. of
Factor IX
activity.
J1556.............. Injection, immune K 9130
globulin
(Bivigam), 500 mg.
J3060.............. Injection, K 9294
taliglucerase
alfa, 10 units.
J7315.............. Mitomycin, N N/A
ophthalmic, 0.2
mg.
J7316.............. Injection, K 9298
Ocriplasmin,
0.125mg.
J9047.............. Injection, K 9295
carfilzomib, 1 mg.
J9262.............. Injection, K 9297
omacetaxine
mepesuccinate,
0.01 mg.
J9354.............. Injection, ado- K 9131
trastuzumab
emtansine, 1 mg.
J9400.............. Injection, Ziv- K 9296
Aflibercept, 1 mg.
Q4122.............. Dermacell, per N N/A
square centimeter.
Q4127.............. Talymed, per N N/A
square centimeter.
------------------------------------------------------------------------

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing
Pass-Through Payment Status in CY 2016
In the CY 2016 OPPS/ASC proposed rule (80 FR 39271), we proposed to
continue pass-through payment status in CY 2016 for 32 drugs and
biologicals. None of these drugs and biologicals will have received
OPPS pass-through payment for at least 2 years and no more than 3 years
by December 31, 2015. These drugs and biologicals, which were approved
for pass-through status between January 1, 2013, and July 1, 2015, were
listed in Table 40 of the proposed rule (80 FR 39272). The APCs and
HCPCS codes for these drugs and biologicals approved for pass-through
status through July 1, 2015 were assigned status indicator ``G'' in
Addenda A and B to the proposed rule. Addenda A and B to the proposed
rule are available via the Internet on the CMS Web site.
Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through
payment for pass-through drugs and biologicals (the pass-through
payment amount) as the difference between the amount authorized under
section 1842(o) of the Act and the portion of the otherwise applicable
OPD fee schedule that the Secretary determines is associated with the
drug or biological. Payment for drugs and biologicals with pass-through
status under the OPPS is currently made at the physician's office
payment rate of ASP+6 percent. We stated in the proposed rule that we
believe it is consistent with the statute to propose to continue to
provide payment for drugs and biologicals with pass-through status at a
proposed rate of ASP+6 percent in CY 2016, which is the amount that
drugs and biologicals receive under section 1842(o) of the Act.
Therefore, for CY 2016, we proposed 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
2016. We proposed that a $0.00 pass-through payment amount would be
paid for most pass-through drugs and biologicals under the CY 2016 OPPS
because the difference between the amount authorized under section
1842(o) of the Act, which was proposed at ASP+6 percent, and the
portion of the

[[Page 70428]]

otherwise applicable OPD fee schedule that the Secretary determines is
appropriate, which was proposed at ASP+6 percent, is $0.
In the case of policy-packaged drugs (which include the following:
Contrast agents; diagnostic radiopharmaceuticals; anesthesia drugs;
drugs, biologicals, and radiopharmaceuticals that function as supplies
when used in a diagnostic test or procedure; and drugs and biologicals
that function as supplies when used in a surgical procedure), we
proposed that their pass-through payment amount would be equal to ASP+6
percent for CY 2016 because, if not for their pass-through status,
payment for these products would be packaged into the associated
procedure.
In addition, we proposed to continue to update pass-through payment
rates on a quarterly basis on the CMS Web site during CY 2016 if later
quarter ASP submissions (or more recent WAC or AWP information, as
applicable) indicate that adjustments to the payment rates for these
pass-through drugs or biologicals are necessary. For a full description
of this policy, we refer readers to the CY 2006 OPPS/ASC final rule
with comment period (70 FR 68632 through 68635).
In CY 2016, as is consistent with our CY 2015 policy for diagnostic
and therapeutic radiopharmaceuticals, we proposed to provide payment
for both diagnostic and therapeutic radiopharmaceuticals that are
granted pass-through payment status based on the ASP methodology. As
stated above, for purposes of pass-through payment, we consider
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a
diagnostic or therapeutic radiopharmaceutical receives pass-through
payment status during CY 2016, we proposed to follow the standard ASP
methodology to determine the pass-through payment rate that drugs
receive under section 1842(o) of the Act, which was proposed at ASP+6
percent. If ASP data are not available for a radiopharmaceutical, we
proposed to provide pass-through payment at WAC+6 percent, the
equivalent payment provided to pass-through drugs and biologicals
without ASP information. If WAC information also is not available, we
proposed to provide payment for the pass-through radiopharmaceutical at
95 percent of its most recent AWP.
Comment: Several commenters supported CMS' proposal to provide
payment at ASP+6 percent for drugs, biologicals, contrast agents, and
radiopharmaceuticals that are granted pass-through payment status. A
few commenters requested that CMS provide an additional payment for
radiopharmaceuticals that are granted pass-through payment status.
Response: As discussed above, the statute provides that mandated
pass-through payment for pass-through drugs and biologicals for CY 2015
equals the amount determined under section 1842(o) of the Act minus the
portion of the otherwise applicable APC payment that CMS determines is
associated with the drug or biological. Therefore, the pass-through
payment is determined by subtracting the otherwise applicable payment
amount under the OPPS (ASP+6 percent for CY 2015) from the amount
determined under section 1842(o) of the Act (ASP+6 percent).
Regarding the commenters' request that CMS provide an additional
payment for radiopharmaceuticals that are granted pass-through payment
status, we note that, for CY 2016, consistent with our CY 2015 payment
policy for diagnostic and therapeutic radiopharmaceuticals, we proposed
to provide payment for both diagnostic and therapeutic
radiopharmaceuticals with pass-through payment status based on the ASP
methodology. As stated above, the ASP methodology, as applied under the
OPPS, uses several sources of data as a basis for payment, including
the ASP, the WAC if the ASP is unavailable, and 95 percent of the
radiopharmaceutical's most recent AWP if both the ASP and WAC are
unavailable. For purposes of pass-through payment, we consider
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a
diagnostic or therapeutic radiopharmaceutical receives pass-through
payment status during CY 2016, we proposed to follow the standard ASP
methodology to determine its pass-through payment rate under the OPPS
to account for the acquisition and pharmacy overhead costs, including
compounding costs. We continue to believe that a single payment is
appropriate for diagnostic radiopharmaceuticals with pass-through
payment status in CY 2016, and that the payment rate of ASP+6 percent
(or WAC or AWP if ASP is not available) is appropriate to provide
payment for both a radiopharmaceutical's acquisition cost and any
associated nuclear medicine handling and compounding costs. We refer
readers to section V.B.3. of this final rule with comment period for
further discussion of payment for therapeutic radiopharmaceuticals
based on ASP information submitted by manufacturers. We also refer
readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1633-P.html.
After consideration of the public comments we received, we are
finalizing our proposal to provide payment for drugs, biologicals,
diagnostic and therapeutic radiopharmaceuticals, and contrast agents
that are granted pass-through payment status based on the ASP
methodology. If a diagnostic or therapeutic radiopharmaceutical
receives pass-through payment status during CY 2016, we will follow the
standard ASP methodology to determine the pass-through payment rate
that drugs receive under section 1842(o) of the Act, which is ASP+6
percent. If ASP data are not available for a radiopharmaceutical, we
will provide pass-through payment at WAC+6 percent, the equivalent
payment provided to pass-through drugs and biologicals without ASP
information. If WAC information also is not available, we will provide
payment for the pass-through radiopharmaceutical at 95 percent of its
most recent AWP.
As discussed in more detail in section II.A.3. of the proposed rule
and this final rule with comment period, we implemented a policy
whereby payment for the following nonpass-through items is packaged
into payment for the associated procedure: Policy-packaged drugs that
include drugs, biologicals, and radiopharmaceuticals that function as
supplies when used in a diagnostic test or procedure (including but not
limited to contrast agents, stress agents, and diagnostic
radiopharmaceuticals), anesthesia drugs; and drugs and biologicals that
function as supplies when used in a surgical procedure (for example,
skin substitutes). As stated earlier, pass-through payment is the
difference between the amount authorized under section 1842(o) of the
Act and the portion of the otherwise applicable OPD fee schedule that
the Secretary determines is associated with the drug or biological.
Because payment for a drug that is policy-packaged would otherwise be
packaged if the product did not have pass-through payment status, we
believe the otherwise applicable OPPS payment amount would be equal to
the policy-packaged drug APC offset amount for the associated clinical
APC in which the drug or biological is utilized. The calculation of the
policy-packaged drug APC offset amounts is described in more detail in
section V.A.4. of this final rule with comment period. It follows that
the copayment for the nonpass-through payment portion (the otherwise
applicable fee schedule amount that we also would offset from payment
for the

[[Page 70429]]

drug or biological if a payment offset applies) of the total OPPS
payment for those drugs and biologicals, therefore, would be accounted
for in the copayment for the associated clinical APC in which the drug
or biological is used. Section 1833(t)(8)(E) of the Act provides that
the amount of copayment associated with pass-through items is equal to
the amount of copayment that would be applicable if the pass-through
adjustment was not applied. Therefore, as we did in CY 2015, we
proposed to continue to set the associated copayment amount to zero for
CY 2016 for pass-through drugs and biologicals that would otherwise be
packaged if the item did not have pass-through payment status. The 32
drugs and biologicals that we proposed to continue to have pass-through
payment status for CY 2016 or have been granted pass-through payment
status as of July 2015 were shown in Table 40 of the proposed rule (80
FR 39272).
Comment: Commenters supported the proposal to continue to set to
zero the associated copayment amounts for pass-through diagnostic
radiopharmaceuticals and contrast agents that would otherwise be
packaged if the product did not have pass-through payment status for CY
2016. The commenters noted that this policy is consistent with
statutory requirements and provides cost-saving benefits to Medicare
beneficiaries.
Response: We appreciate the commenters' support. As discussed in
the CY 2016 OPPS/ASC proposed rule (80 FR 39271 through 39272), we
believe that, for drugs and biologicals that are ``policy-packaged,''
the copayment for the nonpass-through payment portion of the total OPPS
payment for this subset of drugs and biologicals is accounted for in
the copayment of the associated clinical APC in which the drug or
biological is used. Section 1833(t)(8)(E) of the Act provides that 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, we believe that the copayment
amount should be zero for drugs and biologicals that are ``policy-
packaged,'' including diagnostic radiopharmaceuticals and contrast
agents. We also believe that the copayment amount should be zero for
pass-through anesthesia drugs that would otherwise be packaged if the
item did not have pass-through payment status.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to set the
associated copayment amount for pass-through diagnostic
radiopharmaceuticals, contrast agents, and anesthesia drugs that would
otherwise be packaged if the item did not have pass-through payment
status to zero for CY 2016 and for future years. The 38 drugs and
biologicals that continue pass-through payment status for CY 2016 or
have been granted pass-through payment status as of January 2016 are
shown in Table 44 below.

Table 44--Drugs and Biologicals With Pass-Through Payment Status in CY 2016
----------------------------------------------------------------------------------------------------------------
CY 2016 status
CY 2015 HCPCS code CY 2016 HCPCS code CY 2016 long descriptor indicator CY 2016 APC
----------------------------------------------------------------------------------------------------------------
A9586................... A9586................... Florbetapir f18, G 1664
diagnostic, per study
dose, up to 10 millicuries.
C9025................... J9035................... Injection, ramucirumab, 5 G 1488
mg.
C9026................... J3380................... Injection, vedolizumab, 1 G 1489
mg.
C9027................... C9027................... Injection, pembrolizumab, 1 G 1490
mg.
C9349................... C9349................... PuraPly, and PuraPly G 1657
Antimicrobial, any type,
per square centimeter.
C9442................... J9032................... Injection, belinostat, 10 G 1658
mg.
C9443................... J0875................... Injection, dalbavancin, 5 G 1659
mg.
C9444................... J2407................... Injection, oritavancin, 10 G 1660
mg.
C9445................... J0596................... Injection, c-1 esterase G 9445
inhibitor (human),
Ruconest, 10 units.
C9446................... J3090................... Injection, tedizolid G 1662
phosphate, 1 mg.
C9447................... C9447................... Injection, phenylephrine G 1663
and ketorolac, 4 ml vial.
C9449................... J9039................... Injection, blinatumomab, 1 G 9449
mcg.
C9450................... J7313................... Injection, fluocinolone G 9450
acetonide intravitreal
implant, 0.01 mg.
C9451................... J2547................... Injection, peramivir, 1 mg. G 9451
C9452................... J0695................... Injection, ceftolozane 50 G 9452
mg and tazobactam 25 mg.
C9453................... J9299................... Injection, nivolumab, 1 mg. G 9453
C9454................... J2502................... Injection, pasireotide long G 9454
acting, 1 mg.
C9455................... J2860................... Injection, siltuximab, 10 G 9455
mg.
C9497................... C9497................... Loxapine, inhalation G 9497
powder, 10 mg.
C9022................... J1322................... Injection, elosulfase alfa, G 1480
1mg.
Q9970................... J1439................... Injection, ferric G 9441
carboxymaltose, 1 mg.
J1446................... J1446................... Injection, TBO-Filgrastim, G 1477
5 micrograms.
C9023................... J3145................... Injection, testosterone G 1487
undecanoate, 1 mg.
C9134................... J7181................... Factor XIII (antihemophilic G 1746
factor, recombinant),
Tretten, per i.u.
C9133................... J7200................... Factor ix (antihemophilic G 1467
factor, recombinant),
Rixubus, per i.u.
C9135................... J7201................... Factor ix (antihemophilic G 1486
factor, recombinant),
Alprolix, per i.u.
J7508................... J7508................... Tacrolimus, Extended G 1465
Release, Oral, 0.1 mg.
C9021................... J9301................... Injection, obinutuzumab, 10 G 1476
mg.
J9371................... J9371................... Injection, Vincristine G 1466
Sulfate Liposome, 1 mg.
Q4121................... Q4121................... Theraskin, per square G 1479
centimeter.
Q9975................... J7205................... Injection, factor viii, fc G 1656
fusion protein,
(recombinant), per i.u.
Q9978................... J8655................... Netupitant (300mg) and G 9448
palonosetron (0.5 mg).
C9456................... J1833................... Injection, isavuconazonium G 9456
sulfate, 1 mg.
C9457................... Q9950................... Injection, sulfur G 9457
hexafluoride lipid
microsphere, per ml.
N/A..................... C9458................... Florbetaben F18, G 9458
diagnostic, per study
dose, up to 8.1
millicuries.
N/A..................... C9459................... Flutemetamol F18, G 9459
diagnostic, per study
dose, up to 5 millicuries.
N/A..................... C9460................... Injection, cangrelor, 1 mg. G 9460
Q5101................... Q5101................... Injection, Filgrastim (G- G 1822
CSF), Biosimilar, 1
microgram.
----------------------------------------------------------------------------------------------------------------

[[Page 70430]]

4. Provisions for Reducing Transitional Pass-Through Payments for
Policy-Packaged Drugs and Biologicals 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 and radiology procedures. Therefore, beginning in CY
2008, nonpass-through diagnostic radiopharmaceuticals and contrast
agents were not subject to the annual OPPS drug packaging threshold to
determine their packaged or separately payable payment status, and
instead all non-pass-through diagnostic radiopharmaceuticals and
contrast agents were packaged as a matter of policy.
Beginning in CY 2014, in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 74925), we finalized a policy to package nonpass-
through drugs, biologicals, and radiopharmaceuticals that function as
supplies when used in a diagnostic test or procedure. This category
includes diagnostic radiopharmaceuticals, contrast agents, stress
agents, and other diagnostic drugs. In addition, beginning in CY 2014,
we finalized the packaging of all drugs and biologicals that function
as supplies when used in a surgical procedure (including but not
limited to skin substitutes and implantable biologicals). These
packaging policies are codified at 42 CFR 419.2(b).
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) of the Act
and the otherwise applicable OPD fee schedule amount. Because a payment
offset is necessary in order to provide an appropriate transitional
pass-through payment, we deduct from the pass-through payment for
diagnostic radiopharmaceuticals an amount reflecting the portion of the
APC payment associated with predecessor radiopharmaceuticals in order
to ensure no duplicate radiopharmaceutical payment is made.
In CY 2009, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor diagnostic radiopharmaceuticals when considering a new
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638
through 68641). Specifically, we use the policy-packaged drug offset
fraction for APCs containing nuclear medicine procedures, calculated as
1 minus the following: The cost from single procedure claims in the APC
after removing the cost for policy-packaged drugs divided by the cost
from single procedure claims in the APC. 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. For CY 2016, as we did in CY 2015,
we proposed to continue to apply the diagnostic radiopharmaceutical
offset policy to payment for pass-through diagnostic
radiopharmaceuticals. In the proposed rule, we indicated that, for CY
2016, there will be three diagnostic radiopharmaceuticals with pass-
through payment status under the OPPS: (1) HCPCS code A9586
(Florbetapir f18, diagnostic, per study dose, up to 10 millicuries);
(2) HCPCS code C9458 (Florbetaben F18, diagnostic, per study dose, up
to 8.1 millicuries); and (3) HCPCS code C9459 (Flutemetamol F18,
diagnostic, per study dose, up to 5 millicuries). We currently apply
the established radiopharmaceutical payment offset policy to pass-
through payment for these products.
Table 41 of the proposed rule (80 FR 39273) displayed the proposed
APCs to which nuclear medicine procedures would be assigned in CY 2016
and for which we expect that an APC offset could be applicable in the
case of diagnostic radiopharmaceuticals with pass-through status.
We did not receive any public comments on our proposed policy.
Therefore, we are finalizing our proposal, without modification, to
continue to apply the diagnostic radiopharmaceutical offset policy to
payment for pass-through diagnostic radiopharmaceuticals. We will
continue to reduce the payment amount for procedures in the APCs listed
in Table 45 in this final rule with comment period by the full policy-
packaged offset amount appropriate for diagnostic radiopharmaceuticals.
Table 45 below displays the APCs to which nuclear medicine procedures
are assigned in CY 2016 and for which an APC offset may be applicable
in the case of diagnostic radiopharmaceuticals with pass-through
status.

Table 45--APCs to Which A Diagnostic Radiopharmaceutical Offset May Be
Applicable In CY 2016
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5591.............................. Level 1 Nuclear Medicine and Related
Services.
5592.............................. Level 2 Nuclear Medicine and Related
Services.
5593.............................. Level 3 Nuclear Medicine and Related
Services.
5594.............................. Level 4 Nuclear Medicine and Related
Services.
------------------------------------------------------------------------

c. Payment Offset Policy for Contrast Agents
Section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) of the Act
and the otherwise applicable OPD fee schedule amount. Because a payment
offset is necessary in order to provide an appropriate transitional
pass-through payment, we deduct from the pass-through payment for
contrast agents an amount reflecting the portion of the APC payment
associated with predecessor contrast agents in order to ensure no
duplicate contrast agent payment is made.
In CY 2010, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor contrast agents when considering new contrast agents for
pass-through payment (74 FR 60482 through 60484). Specifically, we use
the policy-packaged drug offset fraction for procedural APCs,
calculated as 1 minus the following: The cost from single procedure
claims in the APC after removing the cost for policy-packaged drugs
divided by the cost from single procedure claims in the APC. To
determine the actual APC offset amount for pass-through contrast agents
that takes into consideration the otherwise applicable OPPS payment
amount, in the CY 2016 OPPS/ASC proposed rule (80 FR 39273), we
proposed to multiply the policy packaged drug offset fraction

[[Page 70431]]

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. For CY
2016, as we did in CY 2015, we proposed to continue to apply our
standard contrast agents offset policy to payment for any pass-through
contrast agents (we refer readers to the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66879) for the final CY 2015 policy and the
CY 2016 OPPS/ASC proposed rule (80 FR 39273) for the proposed CY 2016
policy).
There is currently one contrast agent with pass-through payment
status under the OPPS. HCPCS code Q9950 (Injection, sulfur hexafluoride
lipid microsphere, per ml) was granted pass-through payment status
beginning October 1, 2015. We currently apply the established pass-
through payment offset policy to pass-through payment for this product.
For CY 2016, we proposed to identify procedural APCs for which we
expect a contrast offset could be applicable in the case of a pass-
through contrast agent as any procedural APC with a policy-packaged
drug amount greater than $20 that is not a nuclear medicine APC
identified in Table 41 of the proposed rule, and these APCs were
displayed in Table 42 of the proposed rule. The methodology used to
determine a proposed threshold cost for application of a contrast agent
offset policy is described in detail in the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60483 through 60484). For CY 2016 and
subsequent years, we proposed to continue to recognize that when a
contrast agent with pass-through status is billed with any procedural
APC listed in Table 42 of the proposed rule (80 FR 39273 through
39274), a specific offset based on the procedural APC would be applied
to payment for the contrast agent to ensure that duplicate payment is
not made for the contrast agent.
We did not receive any public comments on this proposal. Therefore,
we are finalizing our proposal for CY 2016 without modification. We
will continue to recognize that when a contrast agent with pass-through
payment status is billed with any procedural APC listed in Table 46
below, a specific offset based on the procedural APC will be applied to
the payment for the contrast agent to ensure that duplicate payment is
not made for the contrast agent.

Table 46--APCs to Which a Contrast Agent Payment Offset Are Applicable
for CY 2016
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5181.............................. Level 1 Vascular Procedures and
Related Services.
5182.............................. Level 2 Vascular Procedures and
Related Services.
5183.............................. Level 3 Vascular Procedures and
Related Services.
5188.............................. Diagnostic Cardiac Catheterization.
5191.............................. Level 1 Endovascular Procedures.
5192.............................. Level 2 Endovascular Procedures.
5193.............................. Level 3 Endovascular Procedures.
5351.............................. Level 1 Percutaneous Abdominal/
Biliary Procedures and Related
Services.
5352.............................. Level 2 Percutaneous Abdominal/
Biliary Procedures and Related
Services.
5523.............................. Level 3 X-Ray and Related Services.
5524.............................. Level 4 X-Ray and Related Services.
5525.............................. Level 5 X-Ray and Related Services.
5526.............................. Level 6 X-Ray and Related Services.
5561.............................. Level 1 Echocardiogram With
Contrast.
5562.............................. Level 2 Echocardiogram With
Contrast.
5571.............................. Computed Tomography With Contrast
and Computed Tomography
Angiography.
5582.............................. Magnetic Resonance Imaging and
Magnetic Resonance Angiography With
Contrast.
5881.............................. Ancillary Outpatient Service When
Patient Expires.
8006.............................. CT and CTA With Contrast Composite.
8008.............................. MRI and MRA With Contrast Composite.
------------------------------------------------------------------------

d. Payment Offset Policy for Drugs, Biologicals, and
Radiopharmaceuticals That Function as Supplies When Used in a
Diagnostic Test or Procedure (Other Than Diagnostic
Radiopharmaceuticals and Contrast Agents and Drugs and Biologicals That
Function as Supplies When Used in a Surgical Procedure)
Section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) of the Act
and the otherwise applicable OPD fee schedule amount. In the CY 2014
OPPS/ASC final rule with comment period (78 FR 74925), we finalized our
policy to package drugs, biologicals, and radiopharmaceuticals that
function as supplies when used in a diagnostic test or procedure and
drugs and biologicals that function as supplies when used in a surgical
procedure. As a part of this policy, we specifically finalized that
skin substitutes and stress agents used in myocardial perfusion imaging
(MPI) be policy packaged in CY 2014, in addition to diagnostic
radiopharmaceuticals, contrast agents, and anesthesia drugs (78 FR
75019). Because a payment offset is necessary in order to provide an
appropriate transitional pass-through payment, we finalized a policy
for CY 2014 to deduct from the pass-through payment for skin
substitutes and stress agents an amount reflecting the portion of the
APC payment associated with predecessor skin substitutes and stress
agents in order to ensure no duplicate skin substitute or stress agent
payment is made (78 FR 75019).
In CY 2014, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor skin substitutes or stress agents when considering a new
skin substitute or stress agent for pass-through payment (78 FR 75019).
Specifically, in the case of pass-through skin substitutes, we use the
policy-packaged drug offset fraction for skin substitute procedural
APCs, calculated as 1 minus the following: The cost from single
procedure claims in the APC after removing the cost for policy-packaged
drugs divided by the cost from single procedure claims in the APC.
Because policy-packaged radiopharmaceuticals also would be included in
the drug offset fraction for the APC to which MPI procedures are
assigned, in the case of pass-through stress agents, we use the policy-
packaged drug offset fraction for the procedural APC, calculated as 1
minus the following: The cost from single procedure claims in the APC
after removing the cost for policy-packaged drugs excluding policy-
packaged diagnostic radiopharmaceuticals divided by the cost from
single procedure claims in the APC. To determine the actual APC offset
amount for pass-through skin substitutes and pass-through stress agents
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 procedure with which the pass-through skin
substitute or pass-through stress agent is used and, accordingly,
reduce the separate OPPS payment for the pass-through skin substitute
or pass-through stress agent by this amount (78 FR 75019). In the CY
2016 OPPS/ASC

[[Page 70432]]

proposed rule (80 FR 39274), for CY 2016, as we did in CY 2015, we
proposed to continue to apply the skin substitute and stress agent
offset policy to payment for pass-through skin substitutes and stress
agents.
In the proposed rule, we indicated that, for 2016, there will be
two skin substitutes (HCPCS codes Q4121 and C9349) with pass-through
payment status under the OPPS. We will apply the skin substitute
payment offset policy to pass-through payment for these products. Table
43 of the CY 2016 OPPS/ASC proposed rule (80 FR 39274) displayed the
proposed APCs to which skin substitute procedures would be assigned in
CY 2016 and for which we expect that an APC offset could be applicable
in the case of skin substitutes with pass-through status.
Although there are currently no stress agents with pass-through
status under the OPPS, we believe that a payment offset is necessary in
the event that a new stress agent is approved for pass-through status
during CY 2016 in order to provide an appropriate transitional pass-
through payment for new stress agents. Table 44 of the CY 2016 OPPS/ASC
proposed rule (80 FR 39274) displayed the proposed APCs to which MPI
procedures would be assigned in CY 2016 and for which we expect that an
APC offset could be applicable in the case of a stress agent with pass-
through status.
We did not receive any public comments on these proposals.
Therefore, we are finalizing our proposal, without modification, to
recognize that when a skin substitute with pass-through payment status
is billed with any procedural APC listed in Table 47 below, a specific
offset based on the procedural APC will be applied to the payment for
the skin substitute to ensure that duplicate payment is not made for
the skin substitute. In addition, when a stress agent with pass-through
payment status is billed with any procedural APC listed in Table 48
below, a specific offset based on the procedural APC will be applied to
the payment for the stress agent to ensure that duplicate payment is
not made for the stress agent.

Table 47--APCs to Which a Skin Substitute Payment Offset Are Applicable
for CY 2016
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5054.............................. Level 4 Skin Procedures.
5055.............................. Level 5 Skin Procedures.
------------------------------------------------------------------------

Table 48--APCs to Which a Stress Agent Payment Offset Are Applicable for
CY 2016
------------------------------------------------------------------------
CY 2016 APC CY 2016 APC title
------------------------------------------------------------------------
5722.............................. Level 2 Diagnostic Tests and Related
Services.
5593.............................. Level 3 Nuclear Medicine and Related
Services.
------------------------------------------------------------------------

As we proposed, we will continue to post annually on the CMS Web
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset
amounts that will be used for that year for purposes of both evaluating
cost significance for candidate pass-through device categories and
drugs and biologicals and establishing any appropriate APC offset
amounts. Specifically, the file will continue to provide the amounts
and percentages of APC payment associated with packaged implantable
devices, policy-packaged drugs, and threshold packaged drugs and
biologicals for every OPPS clinical APC.

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

1. Background
Under the policies that we established for the CY 2013 OPPS, we
currently pay for drugs, biologicals, and radiopharmaceuticals that do
not have pass-through payment status in one of two ways: (1) As a
packaged payment included in the payment for the associated service, or
(2) as a separate payment (individual APCs). We explained in the April
7, 2000 OPPS final rule with comment period (65 FR 18450) that we
generally package the cost of drugs and radiopharmaceuticals into the
APC payment rate for the procedure or treatment with which the products
are usually furnished. Hospitals do not receive separate payment for
packaged items and supplies, and hospitals may not bill beneficiaries
separately for any packaged items and supplies whose costs are
recognized and paid within the national OPPS payment rate for the
associated procedure or service.
Packaging costs into a single aggregate payment for a service,
procedure, or episode-of-care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility.
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
As indicated in section V.B.1. of this final rule with comment
period, in accordance with section 1833(t)(16)(B) of the Act, the
threshold for establishing separate APCs for payment of drugs and
biologicals was set to $50 per administration during CYs 2005 and 2006.
In CY 2007, we used the four quarter moving average Producer Price
Index (PPI) levels for Pharmaceutical Preparations (Prescription) to
trend the $50 threshold forward from the third quarter of CY 2005 (when
the Pub. L. 108-173 mandated threshold became effective) to the third
quarter of CY 2007. We then rounded the resulting dollar amount to the
nearest $5 increment in order to determine the CY 2007 threshold amount
of $55. Using the same methodology as that used in CY 2007 (which is
discussed in more detail in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68085 through 68086)), we set the packaging
threshold for establishing separate APCs for drugs and biologicals at
$95 for CY 2015 (79 FR 66882).
Following the CY 2007 methodology, for the CY 2016 OPPS/ASC
proposed rule (80 FR 39275), we used the most recently available four
quarter moving average PPI levels to trend the $50 threshold forward
from the third quarter of CY 2005 to the third quarter of CY 2016 and
rounded the resulting dollar amount ($100.22) to the nearest $5
increment, which yielded a figure of $100. In performing this
calculation, we used the most recent forecast of the quarterly index
levels for the PPI for Pharmaceuticals for Human Use (Prescription)
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS'
Office of the Actuary (OACT). We refer below to this series generally
as the PPI for Prescription Drugs.
Based on the calculations described above, we proposed a packaging
threshold for CY 2016 of $100. 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).
Following the CY 2007 methodology, for this CY 2016 OPPS/ASC final
rule with comment period, we used the most recently available four
quarter moving averaging PPI levels to trend the $50

[[Page 70433]]

threshold forward from the third quarter of CY 2005 to the third
quarter of CY 2015 and rounded the resulting dollar amount ($97.22) to
the nearest $5 increment, which yielded a figure of $100. In performing
this calculation, we used the most recent forecast of the quarterly
index levels for the PPI for Pharmaceuticals for Human Use
(Prescription) (Bureau of Labor Statistics) series code WPUSI07003)
from CMS' Office of the Actuary (OACT). Therefore, for this CY 2016
OPPS/ASC final rule with comment period, using the CY 2007 OPPS
methodology, we are establishing a packaging threshold for CY 2016 of
$100.
b. Cost Threshold for Packaging of Payment for HCPCS Codes That
Describe Certain Drugs, Certain Biologicals, and Therapeutic
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
In the CY 2016 OPPS/ASC proposed rule (80 FR 39275), to determine
the proposed CY 2016 packaging status for all nonpass-through drugs and
biologicals that are not policy packaged, we calculated, on a HCPCS
code-specific basis, the per day cost of all drugs, biologicals, and
therapeutic radiopharmaceuticals (collectively called ``threshold-
packaged'' drugs) that had a HCPCS code in CY 2014 and were paid (via
packaged or separate payment) under the OPPS. We used data from CY 2014
claims processed before January 1, 2015 for this calculation. However,
we did not perform this calculation for those drugs and biologicals
with multiple HCPCS codes that include different dosages, as described
in section V.B.2.c. of the proposed rule, or for the following policy-
packaged items that we proposed to continue to package in CY 2016:
Anesthesia drugs; contrast agents; stress agents; diagnostic
radiopharmaceuticals; drugs, biologicals, and radiopharmaceuticals that
function as supplies when used in a diagnostic test or procedure; and
drugs and biologicals that function as supplies when used in a surgical
procedure.
In order to calculate the per day costs for drugs, biologicals, and
therapeutic radiopharmaceuticals to determine their proposed packaging
status in CY 2016, 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 68638). For each drug and biological HCPCS code, we used
an estimated payment rate of ASP+6 percent (which is the payment rate
we proposed for separately payable drugs and biologicals for CY 2016,
as discussed in more detail in section V.B.3.b. of the proposed rule)
to calculate the CY 2016 proposed rule per day costs. We used the
manufacturer submitted ASP data from the fourth quarter of CY 2014
(data that were used for payment purposes in the physician's office
setting, effective April 1, 2015) to determine the proposed rule per
day cost.
As is our standard methodology, for CY 2016, we proposed to use
payment rates based on the ASP data from the fourth quarter of CY 2014
for budget neutrality estimates, packaging determinations, impact
analyses, and completion of Addenda A and B to the proposed rule (which
are available via the Internet on the CMS Web site) because these were
the most recent data available for use at the time of development of
the proposed rule. These data also were the basis for drug payments in
the physician's office setting, effective April 1, 2015. For items that
did not have an ASP-based payment rate, such as some therapeutic
radiopharmaceuticals, we used their mean unit cost derived from the CY
2014 hospital claims data to determine their per day cost.
We proposed to package items with a per day cost less than or equal
to $100, and identify items with a per day cost greater than $100 as
separately payable. Consistent with our past practice, we cross-walked
historical OPPS claims data from the CY 2014 HCPCS codes that were
reported to the CY 2015 HCPCS codes that we displayed in Addendum B to
the proposed rule (which is available via the Internet on the CMS Web
site) for proposed payment in CY 2016.
Comment: The majority of the commenters opposed the continuation of
the OPPS packaging threshold of $100 for CY 2016. The commenters
believed that, over several years, CMS has rapidly increased the
packaging threshold, which contradicts congressional intent. As such,
the commenters recommended that CMS eliminate the packaging threshold
and provide separate payment for all drugs with HCPCS codes or freeze
the packaging threshold at the current level ($95).
Response: The commenters did not specify how they believed our
policy is inconsistent with congressional intent. However, as we stated
in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086),
we believe that packaging certain items is a fundamental component of a
prospective payment system, that updating the packaging threshold of
$50 for the CY 2005 OPPS is consistent with industry and government
practices, and that the PPI for Prescription Drugs is an appropriate
mechanism to gauge Part B drug inflation. Therefore, because packaging
is a fundamental component of a prospective payment system that
continues to provide important flexibility and efficiency in the
delivery of high quality hospital outpatient services, we are not
adopting commenters' recommendations to pay separately for all drugs,
biologicals, and radiopharmaceuticals for CY 2016, or to eliminate the
packaging threshold, or to freeze the packaging threshold at $95.
After consideration of the public comments we received, and
consistent with our methodology for establishing the packaging
threshold using the most recent PPI forecast data, we are adopting a CY
2016 packaging threshold of $100.
Our policy during previous cycles of the OPPS has been to use
updated ASP and claims data to make final determinations of the
packaging status of HCPCS codes for drugs, biologicals, and therapeutic
radiopharmaceuticals for the OPPS/ASC final rule with comment period.
We note that it is also our policy to make an annual packaging
determination for a HCPCS code only when we develop the OPPS/ASC final
rule with comment period for the update year. Only HCPCS codes that are
identified as separately payable in the final rule with comment period
are subject to quarterly updates. For our calculation of per day costs
of HCPCS codes for drugs and biologicals in this CY 2016 OPPS/ASC final
rule with comment period, we used ASP data from the first quarter of CY
2015, 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, 2015, along with updated hospital claims
data from CY 2014. We note that we also used these data for budget
neutrality estimates and impact analyses for this CY 2016 OPPS/ASC
final rule with comment period.
Payment rates for HCPCS codes for separately payable drugs and
biologicals included in Addenda A and B to this final rule with comment
period are based on ASP data from the third quarter of CY 2015. These
data are the basis for calculating payment rates for drugs and
biologicals in the physician's office setting using the ASP
methodology, effective July 1, 2015. These payment rates will then be
updated in the January 2016 OPPS update, based on the most recent ASP
data to be used for physician's office and OPPS payment as of January
1, 2016. For items that do not currently

[[Page 70434]]

have an ASP-based payment rate, we recalculated their mean unit cost
from all of the CY 2014 claims data and updated cost report information
available for this CY 2016 final rule with comment period to determine
their final per day cost.
Consequently, the packaging status of some HCPCS codes for drugs,
biologicals, and therapeutic radiopharmaceuticals in the CY 2016 OPPS/
ASC proposed rule may be different from the same drug HCPCS code's
packaging status determined based on the data used for this CY 2016
OPPS/ASC final rule with comment period. Under such circumstances, we
proposed to continue to follow the established policies initially
adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably
pay for those drugs whose cost fluctuates relative to the proposed CY
2016 OPPS drug packaging threshold and the drug's payment status
(packaged or separately payable) in CY 2015. Specifically, for CY 2016,
consistent with our historical practice, we proposed to apply the
following policies to these HCPCS codes for drugs, biologicals, and
therapeutic radiopharmaceuticals whose relationship to the drug
packaging threshold changes based on the updated drug packaging
threshold and on the final updated data:
HCPCS codes for drugs and biologicals that were paid
separately in CY 2015 and that were proposed for separate payment in CY
2016, and that then have per day costs equal to or less than the CY
2016 final rule drug packaging threshold, based on the updated ASPs and
hospital claims data used for the CY 2016 final rule, would continue to
receive separate payment in CY 2016.
HCPCS codes for drugs and biologicals that were packaged
in CY 2015 and that were proposed for separate payment in CY 2016, and
that then have per day costs equal to or less than the CY 2016 final
rule drug packaging threshold, based on the updated ASPs and hospital
claims data used for the CY 2016 final rule, would remain packaged in
CY 2016.
HCPCS codes for drugs and biologicals for which we
proposed packaged payment in CY 2016 but then have per day costs
greater than the CY 2016 final rule drug packaging threshold, based on
the updated ASPs and hospital claims data used for the CY 2016 final
rule, would receive separate payment in CY 2016.
We did not receive any public comments on our proposed policy to
apply the established policies initially adopted for the CY 2005 OPPS
(69 FR 65780) in order to more equitably pay for those drugs whose cost
fluctuates relative to the CY 2016 OPPS drug packaging threshold and
the drug's payment status (packaged or separately payable) in CY 2016.
Therefore, we are finalizing our proposal, without modification, for CY
2016.
c. High Cost/Low Cost Threshold for Packaged Skin Substitutes
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
74938), we unconditionally packaged skin substitute products into their
associated surgical procedures as part of a broader policy to package
all drugs and biologicals that function as supplies when used in a
surgical procedure. As part of the policy to finalize the packaging of
skin substitutes, we also finalized a methodology that divides the skin
substitutes into a high cost group and a low cost group, in order to
ensure adequate resource homogeneity among APC assignments for the skin
substitute application procedures (78 FR 74933). For the CY 2014
update, assignment to the high cost or low cost skin substitute group
depended upon a comparison of the July 2013 ASP+6 percent payment
amount for each skin substitute to the weighted average payment per
unit for all skin substitutes. The weighted average was calculated
using the skin substitute utilization from the CY 2012 claims data and
the July 2013 ASP+6 percent payment amounts. The high cost/low cost
skin substitute threshold for CY 2014 was $32 per cm\2\. Skin
substitutes that had a July 2013 ASP+6 percent amount above $32 per
cm\2\ were classified in the high cost group, and skin substitutes that
had a July 2013 ASP+6 percent amount at or below $32 per cm\2\ were
classified in the low cost group. Any new skin substitutes without
pricing information were assigned to the low cost category until
pricing information was available to compare to the $32 per cm\2\
threshold for CY 2014. Skin substitutes with pass-through payment
status were assigned to the high cost category, with an offset applied
as described in section V.A.4.d. of the CY 2015 OPPS/ASC proposed rule
(79 FR 40996).
As discussed in the CY 2015 OPPS/ASC proposed rule (79 FR 40998
through 40999) and final rule with comment period (79 FR 66882 through
66885), after the effective date of the CY 2014 packaging policy, some
skin substitute manufacturers brought the following issues to our
attention regarding the CY 2014 methodology for determining the high
cost/low cost threshold:
Using ASP to determine a product's placement in the high
or low cost category may unfairly disadvantage the limited number of
skin substitute products that are sold in large sizes (that is, above
150 cm\2\). Large size skin substitute products are primarily used for
burns that are treated on an inpatient basis. These manufacturers
contended that nonlinear pricing for skin substitute products sold in
both large and small sizes results in lower per cm\2\ prices for large
sizes. Therefore, the use of ASP data to categorize products into high
and low cost categories can result in placement of products that have
significant inpatient use of the large, lower-priced (per cm\2\) sizes
into the low cost category, even though these large size products are
not often used in the hospital outpatient department.
Using a weighted average ASP to establish the high/low
cost categories, combined with the drug pass-through policy, will lead
to unstable high/low cost skin substitute categories in the future.
According to one manufacturer, under our CY 2014 policy, manufacturers
with products on pass-through payment status have an incentive to set a
very high price because hospitals are price-insensitive to products
paid with pass-through payments. As these new high priced pass-through
skin substitutes capture more market share, the weighted average ASP
high cost/low cost threshold could escalate rapidly, resulting in a
shift in the assignment of many skin substitutes from the high cost
category to the low cost category.
We agreed with stakeholder concerns regarding the potential
instability of the high/low cost categories associated with the drug
pass-through policy, as well as stakeholder concerns about the
inclusion of large-sized products that are primarily used for
inpatients in the ASP calculation, when ASP is used to establish the
high cost/low cost categories. As an alternative to using ASP data, in
the CY 2015 OPPS/ASC final rule with comment period, we established the
high cost/low cost threshold using an alternative methodology (that is,
the weighted average mean unit cost (MUC) for all skin substitute
products from claims data) that we believed may provide more stable
high/low cost categories and resolve the issue associated with large
sized products because the MUC will be derived from hospital outpatient
claims only. We indicated that the threshold was based on costs from
hospital outpatient claims data instead of manufacturer reported sales
prices that would not include larger sizes primarily used for inpatient
burn cases.

[[Page 70435]]

As discussed in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66884), after consideration of the public comments we received
on the CY 2015 OPPS/ASC proposed rule, we finalized a policy for CY
2015 to maintain the high cost/low cost APC structure for skin
substitute procedures in CY 2015, and we revised the existing
methodology used to establish the high/low cost threshold with the
alternative MUC methodology. We also finalized for CY 2015 the policies
that skin substitutes with pass-through payment status would be
assigned to the high cost category, and that skin substitutes with
pricing information but without claims data to calculate an MUC would
be assigned to either the high cost or low cost category based on the
product's ASP+6 percent payment rate. If ASP is not available, we
stated we would use WAC+6 percent or 95 percent of AWP to assign a
product to either the high cost or low cost category. We also finalized
a policy for CY 2015 that any new skin substitutes without pricing
information will be assigned to the low cost category until pricing
information is available to compare to the CY 2015 threshold. We stated
that new skin substitute manufacturers must submit pricing information
to CMS no later than the 15th of the third month prior to the effective
date of the next OPPS quarterly update. For example, for a new skin
substitute with new pricing information to be included in the July 1,
2015 OPPS update and designated as included in the high cost group,
verifiable pricing information must have been provided to CMS no later
than April 15, 2015.
We stated in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66884) that we would evaluate the per day cost (PDC) methodology
and compare it to the MUC methodology in CY 2016 once CY 2014 claims
data were available. As discussed in the CY 2016 OPPS/ASC proposed rule
(80 FR 39277), for CY 2016, we analyzed CY 2014 claims data to
calculate a threshold using both the MUC and PDC methods. To calculate
a per patient, per day cost for each skin substitute product, we
multiplied the total units by the mean unit cost and divided the
product by the total number of days. We posted a file on the CMS Web
site that provides details on the CY 2016 high/low cost status for each
skin substitute product based on a MUC threshold (rounded to the
nearest $1) of $25 per cm\2\ and a PDC threshold (rounded to the
nearest $1) of $1,050. The file is available on the CMS Web site at:
https://www.cms.gov/apps/ama/license.asp?file=/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CMS-1633-P-OPPS-Skin-Substitute.zip.
For CY 2016, based on these calculations, we proposed to determine
the high/low cost status for each skin substitute product based on
either a product's geometric MUC exceeding the geometric MUC threshold
or the product's PDC exceeding the PDC threshold. As discussed in the
CY 2016 OPPS/ASC proposed rule (80 FR 39277), skin substitutes that
exceed either of these thresholds would be assigned to the high cost
group and all other products would be assigned to the low cost group.
As demonstrated in the aforementioned file that we posted on the CMS
Web site, we noted that the majority of high cost products remain high
cost under both methodologies. The products shifting to the high-cost
category from the low-cost category varied in size. Observing fairly
consistent results with both methodologies, we stated in the proposed
rule that we believe that, together, both thresholds constitute a more
robust methodology for identifying high cost skin substitute products.
We indicated in the CY 2016 OPPS/ASC proposed rule (80 FR 39277)
that we would continue to assign skin substitutes with pass-through
payment status to the high cost category, and skin substitutes with
pricing information but without claims data to calculate a geometric
MUC or PDC will be assigned to either the high cost or low cost
category based on the product's ASP+6 percent payment rate as compared
to the MUC threshold. If ASP is not available, we would use WAC+6
percent or 95 percent of AWP to assign a product to either the high
cost or low cost category. New skin substitutes without pricing
information would be assigned to the low cost category until pricing
information is available to compare to the CY 2016 MUC threshold.
For CY 2016, we also proposed to remove all implantable biologicals
from the skin substitute cost group list because these products are
typically used in internal surgical procedures to reinforce or repair
soft tissue, and are not typically used to promote healing of wounds on
the skin. The implantable biologicals that we proposed to remove for
the skin cost group were identified in Table 45 of the CY 2016 OPPS/ASC
proposed rule (80 FR 39277). Implantable biologicals are treated as
packaged surgical supplies under the OPPS, which are captured under 42
CFR 419.2(b)(4).
Comment: Several commenters supported CMS' proposal to revise the
methodology used to establish the high/low cost threshold from using
only a geometric mean unit cost methodology (GMUC) to using either a
GMUC methodology or a per day cost (PDC) methodology for all skin
substitutes using CY 2014 claims data. The commenters agreed that
either methodology would promote stability of assignment to the high
and low cost categories and not disadvantage skin substitute products
that are sold in large sizes. Commenters also supported using available
pricing data for skin substitutes without claims data.
Response: We appreciate the commenters' support. We believe that
adopting a policy of using either a GMUC methodology or a PDC
methodology will stabilize cost group assignment.
Comment: A few commenters supported CMS' proposal to remove
implantable biologicals from the skin substitute cost group list.
However, one commenter asked that CMS not remove HCPCS code Q4107
(GraftJacket) because, while this code describes an implantable
biological, the biological does have dual usage as a skin substitute.
Response: Based on information provided by the commenter on the
duality of use for GraftJacket, we agree that HCPCS code Q4107 should
remain on the skin substitute list.
After consideration of the public comments we received, we are
finalizing our proposal to remove the implantable biological products
(excluding the proposed removal of HCPCS code Q4107 included in the
proposed rule) identified in Table 49 below from the skin substitute
cost group list for CY 2016.

Table 49--Implantable Biologicals for Removal From Skin Substitute Cost
Group List
------------------------------------------------------------------------
CY 2016 status
CY 2016 HCPCS code CY 2016 short descriptor indicator
------------------------------------------------------------------------
C9358...................... SurgiMend, fetal.......... N

[[Page 70436]]

C9360...................... SurgiMend, neonatal....... N
Q4125...................... Arthroflex................ N
Q4130...................... Strattice TM.............. N
Q4142...................... Xcm biologic tiss matrix N
1cm.
------------------------------------------------------------------------

Table 46 of the CY 2016 OPPS/ASC proposed rule (80 FR 39278) showed
the proposed CY 2016 high cost/low cost status for each product based
on our combined threshold methodology. As noted earlier, for the
proposed rule we posted a file on the CMS Web site that provides more
information on the high cost/low cost disposition of each product for
each threshold methodology. We stated in the proposed rule that, for
this CY 2016 OPPS/ASC final rule with comment period, we would update
the MUC and PDC threshold amounts using the most recently available CY
2014 claims data and CY 2015 pricing information. The final CY 2016
high cost/low cost status for each skin substitute product is based on
a weighted average geometric mean unit cost threshold of $26, and a
weighted average per day cost threshold of $773.
We proposed that a skin substitute that is assigned to the high
cost group in CY 2015 and exceeds either the MUC or PDC in the proposed
rule for CY 2016 would be assigned to the high cost group for CY 2016,
even if it no longer exceeds the MUC or PDC CY 2016 thresholds based on
updated claims data and pricing information used in this CY 2016 final
rule with comment period.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the high/low cost APC structure for
skin substitute procedures in CY 2016, and our proposal to revise the
current methodology used to establish the high/low cost threshold with
methodology based on either the geometric mean unit cost or a per day
cost. We also are finalizing our proposal that, for CY 2016, skin
substitutes with pass-through payment status will be assigned to the
high cost category. Skin substitutes with pricing information but
without claims data to calculate an MUC will be assigned to either the
high cost or low cost category based on the product's ASP+6 percent
payment rate. If ASP is not available, we will use WAC+6 percent or 95
percent of AWP to assign a product to either the high cost or low cost
category. We also are finalizing our proposal that any new skin
substitutes without pricing information will be assigned to the low
cost category until pricing information is available to compare to the
CY 2016 threshold. New skin substitute manufacturers must submit
pricing information to CMS no later than the 15th of the third month
prior to the effective date of the next OPPS quarterly update. For
example, for a new skin substitute with new pricing information to be
included in the July 1 OPPS update and designated as included in the
high cost group, verifiable pricing information must be provided to CMS
no later than April 15. Table 50 below shows the skin substitute
assignments to high cost and low cost groups for CY 2016.

Table 50--Skin Substitute Assignments to High Cost and Low Cost Groups for CY 2016
----------------------------------------------------------------------------------------------------------------
CY 2016 high/low
CY 2016 Short CY 2016 status CY 2015 high/low status based on
CY 2016 HCPCS code descriptor HCPCS Code dosage indicator status based on weighted MUC or
weighted MUC weighted PDC
----------------------------------------------------------------------------------------------------------------
C9349 *........... PuraPly, PuraPly 1 cm\2\........... G High............. High.
antimic.
C9363............. Integra Meshed 1 cm\2\........... N High............. High.
Bil Wound Mat.
Q4100............. Skin Substitute, 1 cm\2\........... N Low.............. Low.
NOS.
Q4101............. Apligraf......... 1 cm\2\........... N High............. High.
Q4102............. Oasis Wound 1 cm\2\........... N Low.............. Low.
Matrix.
Q4103............. Oasis Burn Matrix 1 cm\2\........... N Low.............. High.
Q4104............. Integra BMWD..... 1 cm\2\........... N High............. High.
Q4105............. Integra DRT...... 1 cm\2\........... N High............. High.
Q4106............. Dermagraft....... 1 cm\2\........... N High............. High.
Q4107............. GraftJacket...... 1 cm\2\........... N High............. High.
Q4108............. Integra Matrix... 1 cm\2\........... N High............. High.
Q4110............. Primatrix........ 1 cm\2\........... N High............. High.
Q4111............. Gammagraft....... 1 cm\2\........... N Low.............. Low.
Q4115............. Alloskin......... 1 cm\2\........... N Low.............. Low.
Q4116............. Alloderm......... 1 cm\2\........... N High............. High.
Q4117............. Hyalomatrix...... 1 cm\2\........... N Low.............. Low.
Q4119............. Matristem Wound 1 cm\2\........... N Low.............. Low.
Matrix.
Q4120............. Matristem Burn 1 cm\2\........... N Low.............. High.
Matrix.
Q4121 *........... Theraskin........ 1 cm\2\........... G High............. High.
Q4122............. Dermacell........ 1 cm\2\........... N High............. High.
Q4123............. Alloskin......... 1 cm\2\........... N High............. High.
Q4124............. Oasis Tri-layer 1 cm\2\........... N Low.............. Low.
Wound Matrix.
Q4126............. Memoderm/derma/ 1 cm\2\........... N High............. High.
tranz/integup.
Q4127............. Talymed.......... 1 cm\2\........... N High............. High.

[[Page 70437]]

Q4128............. Flexhd/ 1 cm\2\........... N High............. High.
Allopatchhd/
Matrixhd.
Q4129............. Unite Biomatrix.. 1 cm\2\........... N High............. Low.
Q4131............. Epifix........... 1 cm\2\........... N High............. High.
Q4132............. Grafix Core...... 1 cm\2\........... N High............. High.
Q4133............. Grafix Prime..... 1 cm\2\........... N High............. High.
Q4134............. hMatrix.......... 1 cm\2\........... N High............. Low.
Q4135............. Mediskin......... 1 cm\2\........... N Low.............. Low.
Q4136............. Ezderm........... 1 cm\2\........... N Low.............. Low.
Q4137............. Amnioexcel or 1 cm\2\........... N High............. High.
Biodexcel, 1cm.
Q4138............. Biodfence 1 cm\2\........... N High............. High.
DryFlex, 1cm.
Q4140............. Biodfence 1cm.... 1 cm\2\........... N High............. High.
Q4141............. Alloskin ac, 1cm. 1 cm\2\........... N High............. High.
Q4143............. Repriza, 1cm..... 1 cm\2\........... N Low.............. Low.
Q4146............. Tensix, 1CM...... 1 cm\2\........... N Low.............. Low.
Q4147............. Architect ecm, 1 cm\2\........... N High............. High.
1cm.
Q4148............. Neox 1k, 1cm..... 1 cm\2\........... N High............. High.
Q4150............. Allowrap DS or 1 cm\2\........... N High............. High.
Dry 1 sq cm.
Q4151............. AmnioBand, 1 cm\2\........... N Low.............. Low.
Guardian 1 sq cm.
Q4152............. Dermapure 1 1 cm\2\........... N High............. Low.
square cm.
Q4153............. Dermavest 1 1 cm\2\........... N High............. High.
square cm.
Q4154............. Biovance 1 square 1 cm\2\........... N High............. Low.
cm.
Q4156............. Neox 100 1 square 1 cm\2\........... N High............. Low.
cm.
Q4157............. Revitalon 1 1 cm\2\........... N Low.............. Low.
square cm.
Q4158............. MariGen 1 square 1 cm\2\........... N Low.............. Low.
cm.
Q4159............. Affinity 1 square 1 cm\2\........... N High............. High.
cm.
Q4160............. NuShield 1 square 1 cm\2\........... N High............. High.
cm.
Q4161 **.......... Bio-Connekt per 1 cm\2\........... N N/A.............. Low.
square cm.
Q4162 **.......... Amnio bio and 1 cm\2\........... N N/A.............. Low.
woundex flow.
Q4163 **.......... Amnion bio and 1 cm\2\........... N N/A.............. Low.
woundex sq cm.
Q4164 **.......... Helicoll, per 1 cm\2\........... N N/A.............. Low.
square cm.
Q4165 **.......... Keramatrix, per 1 cm\2\........... N N/A.............. Low.
square cm.
----------------------------------------------------------------------------------------------------------------
*Pass-through status in CY 2016.
**New HCPCS code for CY 2016.

d. 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.
During CYs 2008 and 2009, we applied a policy that assigned the status
indicator of the previously recognized HCPCS code to the associated
newly recognized code(s), reflecting the packaged or separately payable
status of the new code(s).
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490
through 60491), we finalized a policy to make a single packaging
determination for a drug, rather than an individual HCPCS code, when a
drug has multiple HCPCS codes describing different dosages because we
believed that adopting the standard HCPCS code-specific packaging
determinations for these codes could lead to inappropriate payment
incentives for hospitals to report certain HCPCS codes instead of
others. We continue to believe that making packaging determinations on
a drug-specific basis eliminates payment incentives for hospitals to
report certain HCPCS codes for drugs and allows hospitals flexibility
in choosing to report all HCPCS codes for different dosages of the same
drug or only the lowest dosage HCPCS code. Therefore, in the CY 2016
OPPS/ASC proposed rule (80 FR 39279), we proposed to continue our
policy to make packaging determinations on a drug-specific basis,
rather than a HCPCS code-specific basis, for those HCPCS codes that
describe the same drug or biological but different dosages in CY 2016.
For CY 2016, 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 2014 claims data
and our pricing information at ASP+6 percent across all of the HCPCS
codes that describe each distinct drug or biological in order to
determine the mean units per day of the drug or biological in terms of
the HCPCS code with the lowest dosage descriptor. The following drugs
did not have pricing information available for the ASP methodology for
the CY 2016 OPPS/ASC proposed rule and, as is our current policy for
determining the packaging status of other drugs, we used the mean unit
cost available from the CY 2014 claims data to make the proposed
packaging determinations for these drugs: HCPCS code J3471 (Injection,
hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp
units)) and HCPCS code J3472 (Injection, hyaluronidase, ovine,
preservative free, per 1000 usp units).
For all other drugs and biologicals that have HCPCS codes
describing different doses, we then multiplied the proposed weighted
average ASP+6

[[Page 70438]]

percent per unit payment amount across all dosage levels of a specific
drug or biological by the estimated units per day for all HCPCS codes
that describe each drug or biological from our claims data to determine
the estimated per day cost of each drug or biological at less than or
equal to $100 (so that all HCPCS codes for the same drug or biological
would be packaged) or greater than $100 (so that 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 in CY 2016 was displayed in
Table 47 of the CY 2016 OPPS/ASC proposed rule (80 FR 39279 through
39280).
We did not receive any public comments on this proposal. Therefore,
we are finalizing our CY 2016 proposal, without modification, to
continue 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. Table 51
below displays the packaging status of each drug and biological HCPCS
code to which our methodology applies for CY 2016.

Table 51--HCPCS Codes to Which the CY 2016 Drug-Specific Packaging
Determination Methodology Applies
------------------------------------------------------------------------
CY 2016 HCPCS code CY 2016 Long descriptor CY 2016 SI
------------------------------------------------------------------------
C9257...................... Injection, bevacizumab, K
0.25 mg.
J9035...................... Injection, bevacizumab, 10 K
mg.
J1020...................... Injection, N
methylprednisolone
acetate, 20 mg.
J1030...................... Injection, N
methylprednisolone
acetate, 40 mg.
J1040...................... Injection, N
methylprednisolone
acetate, 80 mg.
J1070...................... Injection, testosterone N
cypionate, up to 100 mg.
J1080...................... Injection, testosterone N
cypionate, 1 cc, 200 mg.
J1460...................... Injection, gamma globulin, N
intramuscular, 1 cc.
J1560...................... Injection, gamma globulin, N
intramuscular over 10 cc.
J1642...................... Injection, heparin sodium, N
(heparin lock flush), per
10 units.
J1644...................... Injection, heparin sodium, N
per 1000 units.
J1850...................... Injection, kanamycin N
sulfate, up to 75 mg.
J1840...................... Injection, kanamycin N
sulfate, up to 500 mg.
J2788...................... Injection, rho d immune N
globulin, human,
minidose, 50 micrograms
(250 i.u.).
J2790...................... Injection, rho d immune N
globulin, human, full
dose, 300 micrograms
(1500 i.u.).
J2920...................... Injection, N
methylprednisolone sodium
succinate, up to 40 mg.
J2930...................... Injection, N
methylprednisolone sodium
succinate, up to 125 mg.
J3120...................... Injection, testosterone N
enanthate, up to 100 mg.
J3130...................... Injection, testosterone N
enanthate, up to 200 mg.
J3471...................... Injection, hyaluronidase, N
ovine, preservative free,
per 1 usp unit (up to 999
usp units).
J3472...................... Injection, hyaluronidase, N
ovine, preservative free,
per 1000 usp units.
J7050...................... Infusion, normal saline N
solution , 250 cc.
J7040...................... Infusion, normal saline N
solution, sterile (500 ml
= 1 unit).
J7030...................... Infusion, normal saline N
solution , 1000 cc.
J7515...................... Cyclosporine, oral, 25 mg. N
J7502...................... Cyclosporine, oral, 100 mg N
J8520...................... Capecitabine, oral, 150 mg K
J8521...................... Capecitabine, oral, 500 mg K
J9250...................... Methotrexate sodium, 5 mg. N
J9260...................... Methotrexate sodium, 50 mg N
------------------------------------------------------------------------

3. Payment for Drugs and Biologicals Without Pass-Through Status That
Are Not Packaged
a. 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'' (known as a SCOD) is defined as 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 SCODs. These exceptions are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(A)(iii) of the Act requires that payment for
SCODs in CY 2006 and subsequent years be equal to the average
acquisition cost for the drug for that year as determined by the
Secretary, subject to any adjustment for overhead costs and taking into
account the hospital acquisition cost survey data collected by the
Government Accountability Office (GAO) in CYs 2004 and 2005, and later
periodic surveys conducted by the Secretary as set forth in the
statute. If hospital acquisition cost data are not available, the law
requires that payment be equal to payment rates established under the
methodology described in section 1842(o), section 1847A, or section
1847B of the Act, as calculated and adjusted by the Secretary as
necessary. Most physician Part B drugs are paid at ASP+6 percent
pursuant to section 1842(o) and section 1847A of the Act.
Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in
OPPS

[[Page 70439]]

payment rates for SCODs to take into account overhead and related
expenses, such as pharmacy services and handling costs. Section
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead
and related expenses and to make recommendations to the Secretary
regarding whether, and if so how, a payment adjustment should be made
to compensate hospitals for overhead and related expenses. Section
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the
weights for ambulatory procedure classifications for SCODs to take into
account the findings of the MedPAC study.
It has been our longstanding policy to apply the same treatment to
all separately payable drugs and biologicals, which include SCODs, and
drugs and biologicals that are not SCODs. Therefore, we apply the
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs,
as required by statute, but we also apply it to separately payable
drugs and biologicals that are not SCODs, which is a policy
determination rather than a statutory requirement. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39280), we proposed to apply section
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and
biologicals, including SCODs. Although we do not distinguish SCODs in
this discussion, we note that we are required to apply section
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying
this provision to other separately payable drugs and biologicals,
consistent with our history of using the same payment methodology for
all separately payable drugs and biologicals.
Since CY 2006, we have attempted to establish a drug payment
methodology that reflects hospitals' acquisition costs for drugs and
biologicals while taking into account relevant pharmacy overhead and
related handling expenses. We have attempted to collect more data on
hospital overhead charges for drugs and biologicals by making several
proposals that would require hospitals to change the way they report
the cost and charges for drugs. None of these proposals were adopted
due to significant stakeholder concern, including that hospitals stated
that it would be administratively burdensome to report hospital
overhead charges. We established a payment policy for separately
payable drugs and biologicals, authorized by section
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is
calculated by comparing the estimated aggregate cost of separately
payable drugs and biologicals in our claims data to the estimated
aggregate ASP dollars for separately payable drugs and biologicals,
using the ASP as a proxy for average acquisition cost (70 FR 68642
through 68643). We referred to this methodology as our standard drug
payment methodology. Taking into consideration comments made by the
pharmacy stakeholders and acknowledging the limitations of the reported
data due to charge compression and hospitals' reporting practices, we
added an ``overhead adjustment'' in CY 2010 (an internal adjustment of
the data) by redistributing cost from coded and uncoded packaged drugs
and biologicals to separately payable drugs in order to provide more
appropriate payments for drugs and biologicals in the HOPD. We
continued this methodology, and we further refined it in CY 2012 by
finalizing a policy to update the redistribution amount for inflation
and to keep the redistribution ratio constant between the proposed rule
and the final rule. For a detailed discussion of our OPPS drug payment
policies from CY 2006 to CY 2012, we refer readers to the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68383 through 68385).
Because of continuing uncertainty about the full cost of pharmacy
overhead and acquisition cost, based in large part on the limitations
of the submitted hospital charge and claims data for drugs, in the CY
2013 OPPS/ASC final rule with comment period (77 FR 68386), we
indicated our concern that the continued use of the standard drug
payment methodology (including the overhead adjustment) still may not
appropriately account for average acquisition and pharmacy overhead
cost and, therefore, may result in payment rates that are not as
predictable, accurate, or appropriate as they could be. Section
1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology
for determining payment rates for SCODS wherein, if hospital
acquisition cost data are not available, payment shall be equal
(subject to any adjustment for overhead costs) to payment rates
established under the methodology described in section 1842(o), 1847A,
or 1847B of the Act. We refer to this alternative methodology as the
``statutory default.'' In the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of
the Act authorizes the Secretary to calculate and adjust, as necessary,
the average price for a drug in the year established under section
1842(o), 1847A, or 1847B of the Act, as the case may be, in determining
payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act,
Part B drugs are paid at ASP+6 percent when furnished in physicians'
offices. We indicated that we believe that establishing the payment
rates based on the statutory default of ASP+6 percent is appropriate as
it yields increased predictability in payment for separately payable
drugs and biologicals under the OPPS and, therefore, we finalized our
proposal for CY 2013 to pay for separately payable drugs and
biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II)
of the Act (the statutory default). We also finalized our proposal that
the ASP+6 percent payment amount for separately payable drugs and
biologicals requires no further adjustment and represents the combined
acquisition and pharmacy overhead payment for drugs and biologicals,
that payments for separately payable drugs and biologicals are included
in the budget neutrality adjustments under the requirements in section
1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is
not applied in determining payments for these separately paid drugs and
biologicals for CY 2013 (77 FR 68389). We continued our final policy of
paying the statutory default for both CY 2014 and CY 2015.
b. CY 2016 Payment Policy
In the CY 2016 OPPS/ASC proposed rule (80 FR 39281), for CY 2016
and subsequent years, we proposed to continue our CY 2015 policy and
pay for separately payable drugs and biologicals at ASP+6 percent
pursuant to section 1833(t)(14)(A)(iii)(II) of the Act (the statutory
default). We proposed that the ASP+6 percent payment amount for
separately payable drugs and biologicals requires no further adjustment
and represents the combined acquisition and pharmacy overhead payment
for drugs and biologicals. We also proposed that payments for
separately payable drugs and biologicals are included in the budget
neutrality adjustments, under the requirements in section 1833(t)(9)(B)
of the Act, and that the budget neutral weight scaler is not applied in
determining payments for these separately paid drugs and biologicals.
Comment: Commenters supported CMS' proposal to pay for separately
payable drugs and biologicals based on the statutory default rate of
ASP+6 percent. A few commenters supported CMS' proposal, but
recommended that CMS examine ways to compensate hospitals for the
unique, higher overhead and handling costs associated with therapeutic
radiopharmaceuticals.
Response: We appreciate the commenters' support. We continue to

[[Page 70440]]

believe that ASP+6 percent based on the statutory default is
appropriate for hospitals for CY 2016 and that this percentage amount
includes payment for acquisition and overhead cost. We see no evidence
that an additional overhead adjustment is required for separately
payable drugs, biologicals, and therapeutic radiopharmaceuticals for CY
2016.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to pay for separately
payable drugs and biologicals at ASP+6 percent based on section
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6
percent payment amount for separately payable drugs and biologicals
requires no further adjustment and represents the combined acquisition
and pharmacy overhead payment for drugs and biologicals for CY 2016. In
addition, we are finalizing our proposal that payment for separately
payable drugs and biologicals be included in the budget neutrality
adjustments, under the requirements of section 1833(t)(9)(B) of the
Act, and that the budget neutral weight scaler is not applied in
determining payment of these separately paid drugs and biologicals.
We note that separately payable drug and biological payment rates
listed in Addenda A and B to this final rule with comment period
(available via the Internet on the CMS Web site), which illustrate the
final CY 2016 payment of ASP+6 percent for separately payable non-pass-
through drugs and biologicals and ASP+6 percent for pass-through drugs
and biologicals, reflect either ASP information that is the basis for
calculating payment rates for drugs and biologicals in the physician's
office setting effective October 1, 2015, or WAC, AWP, or mean unit
cost from CY 2014 claims data and updated cost report information
available for this final rule with comment period. In general, these
published payment rates are not reflective of actual January 2016
payment rates. This is because payment rates for drugs and biologicals
with ASP information for January 2016 will be determined through the
standard quarterly process where ASP data submitted by manufacturers
for the fourth quarter of 2015 (October 1, 2015 through December 31,
2015) are used to set the payment rates that are released for the
quarter beginning in January 2016 near the end of December 2015. In
addition, payment rates for drugs and biologicals in Addenda A and B to
this final rule with comment period for which there was no ASP
information available for October 2015 are based on mean unit cost in
the available CY 2014 claims data. If ASP information becomes available
for payment for the quarter beginning in January 2016, we will price
payment for these drugs and biologicals based on their newly available
ASP information. Finally, there may be drugs and biologicals that have
ASP information available for this final rule with comment period
(reflecting October 2015 ASP data) that do not have ASP information
available for the quarter beginning in January 2016. These drugs and
biologicals will then be paid based on mean unit cost data derived from
CY 2014 hospital claims. Therefore, the payment rates listed in Addenda
A and B to this final rule with comment period are not for January 2016
payment purposes and are only illustrative of the CY 2016 OPPS payment
methodology using the most recently available information at the time
of issuance of this final rule with comment period.
4. Payment Policy for Therapeutic Radiopharmaceuticals
Beginning in CY 2010 and continuing for CY 2015, we established a
policy to pay for separately paid therapeutic radiopharmaceuticals
under the ASP methodology adopted for separately payable drugs and
biologicals. If ASP information is unavailable for a therapeutic
radiopharmaceutical, we base therapeutic radiopharmaceutical payment on
mean unit cost data derived from hospital claims. We believe that the
rationale outlined in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60524 through 60525) for applying the principles of
separately payable drug pricing to therapeutic radiopharmaceuticals
continues to be appropriate for nonpass-through, separately payable
therapeutic radiopharmaceuticals in CY 2016. Therefore, in the CY 2016
OPPS/ASC proposed rule (80 FR 39281), we proposed for CY 2016 to pay
all nonpass-through, separately payable therapeutic
radiopharmaceuticals at ASP+6 percent, based on the statutory default
described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full
discussion of ASP-based payment for therapeutic radiopharmaceuticals,
we refer readers to the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60520 through 60521). We also proposed to rely on CY 2014 mean
unit cost data derived from hospital claims data for payment rates for
therapeutic radiopharmaceuticals for which ASP data are unavailable and
to update the payment rates for separately payable therapeutic
radiopharmaceuticals according to our usual process for updating the
payment rates for separately payable drugs and biologicals on a
quarterly basis if updated ASP information is available. For a complete
history of the OPPS payment policy for therapeutic
radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule
with comment period (69 FR 65811), the CY 2006 OPPS final rule with
comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60524).
The proposed CY 2016 payment rates for nonpass-through separately
payable therapeutic radiopharmaceuticals were included in Addenda A and
B to the proposed rule (which are available via the Internet on the CMS
Web site).
Comment: Several commenters supported CMS' proposal to pay for
separately payable therapeutic radiopharmaceuticals under the statutory
default payment rate of ASP+6 percent if ASP data are submitted to CMS.
Response: We appreciate the commenters' support. We continue to
believe that providing payment for therapeutic radiopharmaceuticals
based on ASP or mean unit cost if ASP information is not available
would provide appropriate payment for these products. When ASP data are
not available, we believe that paying for therapeutic
radiopharmaceuticals using mean unit cost will appropriately pay for
the average hospital acquisition and associated handling costs of
nonpass-through separately payable therapeutic radiopharmaceuticals. As
we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60523), although using mean unit cost for payment for therapeutic
radiopharmaceuticals when ASP data are not available is not the usual
OPPS process (the usual process 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
continue to believe that WAC or AWP is not 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. Payment based on WAC or AWP under the
established OPPS methodology for payment of separately payable drugs
and biologicals is usually temporary for a calendar quarter until a
manufacturer is able to submit the required ASP data in accordance with
the quarterly ASP submission timeframes for reporting under section
1847A of the Act. Because ASP reporting for OPPS payment of

[[Page 70441]]

separately payable therapeutic radiopharmaceuticals is not required, a
manufacturer's choice to not submit ASP could result in payment for a
separately payable therapeutic radiopharmaceutical based on WAC or AWP
for a full year, a result that we believe would be inappropriate.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to pay all
nonpass-through, separately payable therapeutic radiopharmaceuticals at
ASP+6 percent. We also are finalizing our proposal to continue to rely
on CY 2014 mean unit cost data derived from hospital claims data for
payment rates for therapeutic radiopharmaceuticals for which ASP data
are unavailable. The CY 2016 final rule payment rates for nonpass-
through separately payable therapeutic radiopharmaceuticals are
included in Addenda A and B to this final rule with comment period
(which are available via the Internet on the CMS Web site).
5. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly
Enriched Uranium Sources
Radioisotopes are widely used in modern medical imaging,
particularly for cardiac imaging and predominantly for the Medicare
population. Technetium-99 (Tc-99m), the radioisotope used in the
majority of such diagnostic imaging services, is currently produced in
legacy reactors outside of the United States using highly enriched
uranium (HEU).
The United States would like to eliminate domestic reliance on
these reactors, and is promoting the conversion of all medical
radioisotope production to non-HEU sources. Alternative methods for
producing Tc-99m without HEU are technologically and economically
viable, and conversion to such production has begun and is expected to
be completed by CY 2017. We expect this change in the supply source for
the radioisotope used for modern medical imaging will introduce new
costs into the payment system that are not accounted for in the
historical claims data.
Therefore, for CY 2013, we finalized a policy to provide an
additional payment of $10 for the marginal cost for radioisotopes
produced by non-HEU sources (77 FR 68323). Under this policy, hospitals
report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium
source, full cost recovery add-on per study dose) once per dose along
with any diagnostic scan or scans furnished using Tc-99m as long as the
Tc-99m doses used can be certified by the hospital to be at least 95
percent derived from non-HEU sources. The time period for this
additional payment was not to exceed 5 years from January 1, 2013 (77
FR 68321).
We stated in the CY 2013 OPPS/ASC final rule with comment period
(77 FR 68316) that our expectation was that the transition to non-HEU
sourced Mo-99 would be completed within 4 to 5 years and that there
might be a need to make differential payments for a period of 4 to 5
years. We further stated that we would reassess, and propose if
necessary, on an annual basis whether such an adjustment continued to
be necessary and whether any changes to the adjustment were warranted.
As discussed in the CY 2015 OPPS/ASC final rule with comment period (79
FR 66892), we reassessed this payment for CY 2015 and did not identify
any new information that would cause us to modify payment. We stated
that we were continuing the policy of providing an additional $10
payment for radioisotopes produced by non-HEU sources for CY 2015. We
also stated that, although we will reassess this policy annually,
consistent with the original policy in the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68321), we do not anticipate that this
additional payment would extend beyond CY 2017.
We reassessed this payment for CY 2016 and did not identify any new
information that would cause us to modify payment. Therefore, in the CY
2016 OPPS/ASC proposed rule (80 FR 39282), for CY 2016, we proposed to
continue to provide an additional $10 payment for radioisotopes
produced by non-HEU sources.
Comment: A few commenters requested that CMS extend payment for
HCPCS code Q9969 to CY 2017 and beyond.
Response: We stated in our CY 2013 OPPS/ASC final rule with comment
period (77 FR 68316) that our expectation was that the transition to
non-HEU sourced Mo-99 would be completed within 4 to 5 years and that
there might be a need to make differential payments for a period of 4
to 5 years. We further stated that we would reassess, and propose if
necessary, on an annual basis whether such an adjustment continued to
be necessary and whether any changes to the adjustment were warranted.
We reassessed this payment for CY 2016 and have not identified any new
information that would cause us to modify payment at this time. We are
continuing the policy of providing an additional $10 payment for
radioisotopes produced by non-HEU sources for CY 2016. Although we will
reassess this policy annually, consistent with the original policy in
the CY 2013 OPPS/ASC final rule with comment period (77 FR 68321), we
do not anticipate that this additional payment would extend beyond CY
2017.
6. Payment for Blood Clotting Factors
For CY 2015, we provided payment for blood clotting factors under
the same methodology as other non-pass-through separately payable drugs
and biologicals under the OPPS and continued paying an updated
furnishing fee (79 FR 66893). That is, for CY 2015, we provided payment
for blood clotting factors under the OPPS at ASP+6 percent, plus an
additional payment for the furnishing fee. We note that when blood
clotting factors are provided in physicians' offices under Medicare
Part B and in other Medicare settings, a furnishing fee is also applied
to the payment. The CY 2015 updated furnishing fee was $0.197 per unit.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39282), for CY 2016,
we proposed to pay for blood clotting factors at ASP+6 percent,
consistent with our proposed payment policy for other nonpass-through,
separately payable drugs and biologicals, and to continue our policy
for payment of the furnishing fee using an updated amount. Our policy
to pay for a furnishing fee for blood clotting factors under the OPPS
is consistent with the methodology applied in the physician office and
inpatient hospital setting. These methodologies were first articulated
in the CY 2006 OPPS final rule with comment period (70 FR 68661) and
later discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66765). The proposed furnishing fee update was based on the
percentage increase in the Consumer Price Index (CPI) for medical care
for the 12-month period ending with June of the previous year. Because
the Bureau of Labor Statistics releases the applicable CPI data after
the MPFS and OPPS/ASC proposed rules are published, we were not able to
include the actual updated furnishing fee in the proposed rules.
Therefore, in accordance with our policy, as finalized in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66765), we proposed to
announce the actual figure for the percent change in the applicable CPI
and the updated furnishing fee calculated based on that figure through
applicable program instructions and posting on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/

[[Page 70442]]

McrPartBDrugAvgSalesPrice/index.html.
Comment: Commenters supported CMS' proposal to continue to apply
the furnishing fee for blood clotting factors provided in the OPD. The
commenters also supported CMS' proposal to pay for separately payable
drugs at ASP+6 percent based on the statutory default for CY 2016.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to provide payment for
blood clotting factors under the same methodology as other separately
payable drugs and biologicals under the OPPS and to continue payment of
an updated furnishing fee. We will announce the actual figure of the
percent change in the applicable CPI and the updated furnishing fee
calculation based on that figure through the applicable program
instructions and posting on the CMS Web site.
7. Payment for Non-Pass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims
Data
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005
and subsequent years 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 was no statutory provision that dictated payment for such drugs,
biologicals, and radiopharmaceuticals in CY 2005, and because we had no
hospital claims data to use in 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. Beginning in CY 2008 and continuing
through CY 2015, we implemented a policy to provide payment for new
drugs and biologicals with HCPCS codes (except those that are policy-
packaged), but which did not have pass-through status and were without
OPPS hospital claims data, at an amount consistent with the final OPPS
payment methodology for other separately payable non-pass-through drugs
and biologicals for the given year.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39282), for CY 2016,
we proposed to continue this policy and provide payment for new drugs,
biologicals, and therapeutic radiopharmaceuticals that do not have
pass-through status at ASP+6 percent, consistent with the proposed CY
2016 payment methodology for other separately payable non-pass-through
drugs, biologicals, and therapeutic radiopharmaceuticals, which was
proposed to be ASP+6 percent as discussed earlier in this section. We
stated that we believe this proposed policy would ensure that new
nonpass-through drugs, biologicals, and therapeutic
radiopharmaceuticals would be treated like other drugs, biologicals,
and therapeutic radiopharmaceuticals under the OPPS.
For CY 2016, we also proposed to continue to package payment for
all new nonpass-through policy-packaged products (diagnostic
radiopharmaceuticals; contrast agents; stress agents; anesthesia drugs;
drugs, biologicals, and radiopharmaceuticals that function as supplies
when used in a diagnostic test or procedure; and drugs and biologicals
that function as supplies when used in a surgical procedure) with HCPCS
codes but without claims data (those new proposed CY 2016 HCPCS codes
that do not replace predecessor HCPCS codes). This is consistent with
the CY 2014 final packaging policy for all existing nonpass-through
diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs;
drugs, biologicals, and radiopharmaceuticals that function as supplies
when used in a diagnostic test or procedure; and drugs and biologicals
that function as supplies when used in a surgical procedure, as
discussed in more detail in section II.A.3. of this final rule with
comment period.
In accordance with the OPPS ASP methodology, in the absence of ASP
data, for CY 2016 and subsequent years, we proposed to continue our
policy 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 noted that
if the WAC is also unavailable, we would make payment at 95 percent of
the product's most recent AWP. We also proposed to assign status
indicator ``K'' (Separately paid nonpass-through drugs and biologicals,
including therapeutic radiopharmaceuticals) to HCPCS codes for new
drugs and biologicals without OPPS claims data and for which we have
not granted pass-through status. With respect to new nonpass-through
drugs and biologicals for which we do not have ASP data, we proposed
that once their ASP data become available in later quarterly
submissions, their payment rates under the OPPS would be adjusted so
that the rates would be based on the ASP methodology and set to the
proposed ASP-based amount (proposed for CY 2016 at ASP+6 percent) for
items that have not been granted pass-through status. This proposed
policy, which utilizes the ASP methodology for new nonpass-through
drugs and biologicals with an ASP, is consistent with prior years'
policies for these items and would ensure that new nonpass-through
drugs and biologicals would be treated like other drugs and biologicals
under the OPPS, unless they are granted pass-through status.
Similarly, we proposed to continue to base the initial payment for
new therapeutic radiopharmaceuticals with HCPCS codes, but which do not
have pass-through status and are without claims data, on the WACs for
these products if ASP data for these therapeutic radiopharmaceuticals
are not available. If the WACs also are unavailable, we proposed to
make payment for new therapeutic radiopharmaceuticals at 95 percent of
the products' most recent AWP because we would not have mean costs from
hospital claims data upon which to base payment. As we proposed with
new drugs and biologicals, we proposed to continue our policy of
assigning status indicator ``K'' to HCPCS codes for new therapeutic
radiopharmaceuticals without OPPS claims data for which we have not
granted pass-through status.
Consistent with other ASP-based payment, for CY 2016, we proposed
to announce any changes to the payment amounts for new drugs and
biologicals in this CY 2016 OPPS/ASC final rule with comment period and
also on a quarterly basis on the CMS Web site during CY 2016 if later
quarter ASP submissions (or more recent WACs or AWPs) indicate that
changes to the payment rates for these drugs and biologicals are
necessary. The payment rates for new therapeutic radiopharmaceuticals
also would be changed accordingly based on later quarter ASP
submissions. We note that

[[Page 70443]]

the new CY 2016 HCPCS codes for drugs, biologicals, and therapeutic
radiopharmaceuticals were not available at the time of development of
the proposed rule. However, these drugs, biologicals, and therapeutic
radiopharmaceuticals are included in Addendum B to this CY 2016 OPPS/
ASC final rule with comment period (which is available via the Internet
on the CMS Web site), where they are assigned comment indicator ``NI.''
This comment indicator reflects that their interim final OPPS treatment
is open to public comment in this CY 2016 OPPS/ASC final rule with
comment period.
There are several nonpass-through drugs and biologicals that were
payable in CY 2014 and/or CY 2015 for which we did not have CY 2014
hospital claims data available for the proposed rule and for which
there are no other HCPCS codes that describe different doses of the
same drug, but which have pricing information available for the ASP
methodology. In order to determine the packaging status of these
products for CY 2016, we proposed to continue our policy to calculate
an estimate of the per day cost of each of these items by multiplying
the payment rate of each product based on ASP+6 percent, similar to
other nonpass-through drugs and biologicals paid separately under the
OPPS, by an estimated average number of units of each product that
would typically be furnished to a patient during 1 day in the hospital
outpatient setting. This rationale was first adopted in the CY 2006
OPPS/ASC final rule with comment period (70 FR 68666 through 68667).
We proposed to package items for which we estimated the per day
administration cost to be less than or equal to $100 and to pay
separately for items for which we estimated the per day administration
cost to be greater than $100 (with the exception of diagnostic
radiopharmaceuticals; contrast agents; stress agents; anesthesia drugs;
drugs, biologicals, and radiopharmaceuticals that function as supplies
when used in a diagnostic test or procedure; and drugs and biologicals
that function as supplies when used in a surgical procedure, which we
proposed to continue to package regardless of cost) in CY 2016. We also
proposed that the CY 2016 payment for separately payable items without
CY 2014 claims data would be ASP+6 percent, similar to payment for
other separately payable nonpass-through drugs and biologicals under
the OPPS. In accordance with the ASP methodology paid in the
physician's office setting, in the absence of ASP data, we proposed to
use the WAC for the product to establish the initial payment rate and,
if the WAC is also unavailable, we would make payment at 95 percent of
the most recent AWP available. The proposed estimated units per day and
status indicators for these items were displayed in Table 48 of the
proposed rule (80 FR 39284).
Finally, there were 33 drugs and biologicals, shown in Table 49 of
the proposed rule (80 FR 39284), that were payable in CY 2014 but for
which we lacked CY 2014 claims data and any other pricing information
for the ASP methodology for the CY 2016 OPPS/ASC proposed rule. For CY
2010, we finalized a policy to assign status indicator ``E'' (Not paid
by Medicare when submitted on outpatient claims [any outpatient bill
type]) whenever we lacked claims data and pricing information and were
unable to determine the per day cost of a drug or biological. In
addition, we noted that we would provide separate payment for these
drugs and biologicals if pricing information reflecting recent sales
became available mid-year for the ASP methodology.
For CY 2016, as we finalized in CY 2015 (79 FR 66894), we proposed
to continue to assign status indicator ``E'' to drugs and biologicals
that lack CY 2014 claims data and pricing information for the ASP
methodology. All drugs and biologicals without CY 2014 hospital claims
data or data based on the ASP methodology that were assigned status
indicator ``E'' on this basis at the time of the proposed rule for CY
2016 were displayed in Table 49 of the proposed rule (80 FR 39284). We
also proposed to continue our policy to assign the products status
indicator ``K'' and pay for them separately for the remainder of CY
2016 if pricing information becomes available.
We did not receive any specific public comments regarding our
proposed payment for nonpass-through drugs, biologicals, and
radiopharmaceuticals with HCPCS codes, but without OPPS hospital claims
data. Many commenters supported our proposal to pay for separately
payable drugs at ASP+6 percent under the statutory default. However,
these comments were not specific to new drugs and biologicals with
HCPCS codes but without OPPS claims data.
After consideration of the public comments we received, we are
finalizing our CY 2016 proposal without modification, including our
proposal to assign drug or biological products status indicator ``K''
and pay for them separately for the remainder of CY 2015 if pricing
information becomes available. Table 52 below shows the drugs and
biologicals without CY 2014 claims data. Table 53 shows the drugs and
biologicals without CY 2014 claims data and without pricing information
for the ASP methodology.

Table 52--Drugs and Biologicals Without CY 2014 Claims Data
----------------------------------------------------------------------------------------------------------------
Estimated
average number CY 2016 status
CY 2016 HCPCS code CY 2016 long descriptor of units per indicator CY 2016 APC
day
----------------------------------------------------------------------------------------------------------------
90581.......................... Anthrax vaccine, for 1 N N/A
subcutaneous or intramuscular
use.
C9293.......................... Injection, glucarpidase, 10 400 K 9293
units.
J0215.......................... Injection, alefacept, 0.5 mg.. 29 K 1633
J0630.......................... Injection, calcitonin salmon, 2 K 1433
up to 400 units.
J1324.......................... Injection, enfuvirtide, 1 mg.. 169 K 1361
J1556.......................... Inj, Imm Glob Bivigam, 500mg.. 78 K 9130
J2670.......................... Tolazoline hcl injection...... 1 K 1457
J3060.......................... Inj, Taliglucerace Alfa 10 u.. 479 K 9294
J3355.......................... Injection, urofollitropin, 75 2 K 1741
IU.
J3489.......................... Injection, Zoledronic Acid, 4 K 1356
1mg.
J7191.......................... Factor VIII (porcine)......... 8,500 K 1464
J7196.......................... Injection, antithrombin 268 K 1332
recombinant, 50 IU.
J7316.......................... Inj, Ocriplasmin, 0.125 mg.... 3 K 9298
J7513.......................... Daclizumab, parenteral........ 5 K 1612
J8650.......................... Nabilone, oral, 1 mg.......... 4 K 1424

[[Page 70444]]

J9047.......................... Injection, carfilzomib, 1 mg.. 57 K 9295
J9262.......................... Inj, omacetaxine mep, 0.01mg.. 481 K 9297
J9306.......................... Injection, pertuzumab, 1 mg... 450 K 1471
J9354.......................... Inj, Ado-trastuzumab Emt 1mg.. 262 K 9131
J9400.......................... Inj, ziv-aflibercept, 1mg..... 326 K 9296
Q2050.......................... Injection, Doxorubicin 7 K 7046
Hydrochloride, Liposomal, Not
Otherwise Specified, 10 mg.
Q3027.......................... Injection, Interferon Beta-1a, 3 K 1472
1 mcg For Intramuscular Use.
----------------------------------------------------------------------------------------------------------------

Table 53--Drugs and Biologicals Without CY 2014 Claims Data and Without
Pricing Information for the ASP Methodology
------------------------------------------------------------------------
CY 2016 status
CY 2016 HCPCS code CY 2016 long descriptor indicator
------------------------------------------------------------------------
90296...................... Diphtheria antitoxin, E
equine, any route.
90477...................... Adenovirus vaccine, type E
7, live, for oral use.
90681...................... Rotavirus vaccine, human, E
attenuated, 2 dose
schedule, live, for oral
use.
J0190...................... Injection, biperiden E
lactate, per 5 mg.
J0205...................... Injection, alglucerase, E
per 10 units.
J0350...................... Injection, anistreplase, E
per 30 units.
J0365...................... Injection, aprotonin, E
10,000 kiu.
J0395...................... Injection, arbutamine hcl, E
1 mg.
J0710...................... Injection, cephapirin E
sodium, up to 1 gm.
J0888...................... Epoetin Beta, non-esrd.... E
J1180...................... Injection, dyphylline, up E
to 500 mg.
J1433...................... Inj Ferric Pyrophosphate E
Cit.
J1435...................... Injection, estrone, per 1 E
mg.
J1452...................... Injection, fomivirsen E
sodium, intraocular, 1.65
mg.
J1562...................... Injection, immune globulin E
(vivaglobin), 100 mg.
J1655...................... Injection, tinzaparin E
sodium, 1000 iu.
J1835...................... Injection, itraconazole, E
50 mg.
J2513...................... Injection, pentastarch, E
10% solution, 100 ml.
J2725...................... Injection, protirelin, per E
250 mcg.
J2940...................... Injection, somatrem, 1 mg. E
J3320...................... Injection, spectinomycin E
dihydrochloride, up to 2
gm.
J3400...................... Injection, triflupromazine E
hcl, up to 20 mg.
J7505...................... Muromonab-cd3, parenteral, E
5 mg.
J8562...................... Fludarabine phosphate, E
oral, 10 mg.
J9160...................... Injection, denileukin E
diftitox, 300 micrograms.
J9215...................... Injection, interferon, E
alfa-n3, (human leukocyte
derived), 250,000 iu.
J9300...................... Injection, gemtuzumab E
ozogamicin, 5 mg.
Q0515...................... Injection, sermorelin E
acetate, 1 microgram.
Q9980...................... Hyaluronan or derivative, E
GenVisc 850, for intra-
articular injection, 1 mg.
------------------------------------------------------------------------

C. Self-Administered Drugs (SADs) Technical Correction

Sections 1861(s)(2)(A) and (s)(2)(B) of the Act define covered
``medical and other health services'' to include both ``services and
supplies'' and ``hospital services'', which both, in turn, include
drugs and biologicals not usually self-administered by the patient. Our
regulations at 42 CFR 410.29 set forth limitations on payment of drugs
and biologicals under Medicare Part B, and capture the description of
self-administered drugs noted in sections 1861(s)(2)(A) and (s)(2)(B)
of the Act. In our review of Sec. 410.29, which defines exclusions to
Medicare Part B payment for drugs and biologicals, we noted that
paragraph (a), as currently written, excludes payment for any drug or
biological that can be self-administered. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39285), we proposed to make a technical correction
that would amend the description of these drugs and biologicals at
Sec. 410.29(a) to more appropriately reflect the statutory language.
Specifically, we proposed to delete the phrase ``any drug or biological
that can be self-administered'' and replace it with the phrase ``any
drug or biological which is usually self-administered by the patient''.
We did not receive any public comments on this proposal. Therefore,
we are finalizing our proposed technical correction to Sec. 410.29 to
amend the description of self-administered drugs and biologicals to
more appropriately reflect the statutory language.

D. OPPS Payment for Biosimilar Biological Products

1. Background

The Affordable Care Act authorized an abbreviated pathway for the
licensing of biosimilar biological products. Under this abbreviated
pathway, a proposed biological product that is demonstrated to be
biosimilar to a reference product can rely on certain existing
scientific knowledge about the safety, purity, and potency of the
reference product to support licensure. Section 3139 of the

[[Page 70445]]

Affordable Care Act amended section 1847A of the Act to add the
definition of biosimilar biological product and set forth a payment
methodology for biosimilar biological products. In 2010, CMS published
regulations for the payment for biosimilar biological products that are
administered in a physician's office (75 FR 73393 through 73394).
However, at that time, it was not clear how or when the new Food and
Drug Administration (FDA) approval pathway would be implemented or when
biosimilar products would be approved.
The FDA approved the first biosimilar under the new pathway on
March 6, 2015. In the CY 2016 OPPS/ASC proposed rule (80 FR 39285), we
stated that by the end of 2015, we anticipated that the FDA may approve
several more biosimilar biological products, including products that
have a common previously licensed reference product. Although we
described our Medicare Part B payment policy for biosimilar biological
products when administered in the physician office setting in the CY
2011 MPFS final rule with comment period, we did not describe how
payment would be made for these products when administered in the
hospital outpatient department.
2. Payment Policy for Biosimilar Biological Products
Section 1833(t)(14)(A)(iii) of the Act defines payment policy for
separately covered outpatient drugs (SCODs), and currently, CMS pays
for SCODs under the payment methodology set forth at section
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). Through
rulemaking, CMS adopted this payment methodology to apply to separately
payable drugs and biologicals that are not SCODs. Under this authority,
the payment rate for SCODs and applicable separately payable drugs and
biologicals is determined in accordance with sections 1842(o) and 1847A
of the Act, which generally equates to average sales price (ASP) plus 6
percent.
As noted above, the Affordable Care Act amended section 1847A of
the Act to add the definition of biosimilar biological product and set
forth a payment methodology for biosimilar biological products. Since
the statutory authority under section 1833(t)(14)(A)(iii)(II) of the
Act authorizes payment in accordance with section 1847A of the Act, and
provides additional discretionary authority for such payments to be
calculated and adjusted by the Secretary as necessary, we believe that
it is reasonable to adopt a policy to pay for biosimilar biological
products as provided under section 1847A(b)(8) of the Act. Therefore,
in the CY 2016 OPPS/ASC proposed rule (80 FR 39285), we proposed to
extend the application of the methodology for determining the amount of
payment applicable to SCODs authorized by section
1833(t)(14)(A)(iii)(II) of the Act, which, through rulemaking, is
applicable to separately paid drugs and biologicals, to biosimilar
biological products provided under the OPPS. This equates to a payment
determined under section 1847A of the Act. That is, we proposed to pay
for biosimilar biological products based on the payment allowance of
the product as determined under section 1847A of the Act. In addition,
we proposed that nonpass-through biosimilar biological products would
be subject to our threshold-packaged policy as described in section
V.B.2. of the proposed rule and this final rule with comment period.
Consistent with our established OPPS drug, biological, and
radiopharmaceutical payment policy, we proposed that HCPCS coding and
modifiers for biosimilar biological products will be based on policy
established under the CY 2016 MPFS rule. We stated in the proposed rule
that public comments on HCPCS codes and modifiers for biosimilar
biological products should be submitted in response to the CY 2016 MPFS
proposed rule.
We received several public comments on the proposed HCPCS coding
and modifiers for biosimilar biological products. As proposed, under
the OPPS, we will use the HCPCS codes and modifiers for biosimilar
biological products based on policy established under the CY 2016 MPFS
final rule with comment period. Therefore, we are considering the
public comments received on biosimilar biological product HCPCS coding
and modifiers in response to the CY 2016 OPPS/ASC proposed rule to be
outside the scope to the proposed rule and we are not addressing them
in this CY 2016 OPPS/ASC final rule with comment period. We refer
readers to the CY 2016 MPFS final rule with comment period.
We are finalizing our proposal, without modification, to pay for
biosimilar biological products based on the payment allowance of the
product as determined under section 1847A of the Act. In addition, we
are finalizing our proposal, without modification, to subject nonpass-
through biosimilar biological products to our annual threshold-packaged
policy.
3. OPPS Transitional Pass-Through Payment Policy for Biosimilar
Biological Products
Section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) of the Act
and the otherwise applicable hospital outpatient department fee
schedule amount. Because section 1842(o)(1)(C) of the Act cross
references section 1847A of the Act, we believe that it is reasonable
to infer that biosimilar biological products are eligible for
transitional pass-through payment, and that such payment amount may be
set as the difference between the amount paid under section 1842(o) of
the Act (that is, the payment allowance of the product determined under
section 1847A(b)(8) of the Act) and the otherwise applicable hospital
outpatient department fee schedule amount. Therefore, in the CY 2016
OPPS/ASC proposed rule (80 FR 39285), we proposed to extend pass-
through payment eligibility to biosimilar biological products and to
establish pass-through payment based on the difference between the
amount paid under section 1842(o) of the Act (that is, the payment
allowance of the product determined under section 1847A(b)(8) of the
Act) and the otherwise applicable hospital outpatient department fee
schedule amount.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39285), we solicited
public comments on our proposed payment policies for biosimilar
biological products, including whether biosimilar biological products
should be eligible for transitional pass-through payment, and the
appropriate methodologies for determining payment for biosimilar
biological products eligible for transitional pass-through payment.
Comment: Commenters supported our proposed policy to extend pass-
through payment eligibility to biosimilar biological products.
Response: We appreciate the commenters' support. We clarify that
pass-through payment will be made to the first eligible biosimilar
biological product to a reference product. Subsequent biosimilar
biological products to a reference product will not meet the newness
criterion at 42 CFR 419.64, and therefore will be ineligible for pass-
through payment.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to extend pass-through
payment eligibility to biosimilar biological products and to establish

[[Page 70446]]

pass-through payment based on the difference between the amount paid
under section 1842(o) of the Act (that is, the payment allowance of the
product determined under section 1847A(b)(8) of the Act) and the
otherwise applicable hospital outpatient department fee schedule
amount.

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
``applicable percentage,'' currently not to exceed 2.0 percent of total
program payments estimated to be made for all covered services under
the OPPS furnished for that year. If we estimate before the beginning
of the calendar year that the total amount of pass-through payments in
that year would exceed the applicable percentage, section
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction
in the amount of each of the transitional pass-through payments made in
that year to ensure that the limit is not exceeded. We estimate the
pass-through spending to determine whether payments exceed the
applicable percentage and the appropriate prorata reduction to the
conversion factor for the projected level of pass-through spending in
the following year to ensure that total estimated pass-through spending
for the prospective payment year is budget neutral, as required by
section 1833(t)(6)(E) of the Act.
For devices, developing an estimate of pass-through spending in CY
2016 entails estimating spending for two groups of items. The first
group of items consists of device categories that are currently
eligible for pass-through payment and that will continue to be eligible
for pass-through payment in CY 2016. 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 of items consists of items that we know are newly
eligible, or project may be newly eligible, for device pass-through
payment in the remaining quarters of CY 2015 or beginning in CY 2016.
The sum of the CY 2016 pass-through estimates for these two groups of
device categories equals the total CY 2016 pass-through spending
estimate for device categories with pass-through status. We base the
device pass-through estimated payments for each device category on the
amount of payment as established in section 1833(t)(6)(D)(ii) of the
Act, and as outlined in previous rules, including the CY 2014 OPPS/ASC
final rule with comment period (78 FR 75034 through 75036). We note
that, beginning in CY 2010, the pass-through evaluation process and
pass-through payment for implantable biologicals newly approved for
pass-through payment beginning on or after January 1, 2010 that are
surgically inserted or implanted (through a surgical incision or a
natural orifice) use the device pass-through process and payment
methodology (74 FR 60476). As has been our past practice (76 FR 74335),
in the CY 2016 OPPS/ASC proposed rule (80 FR 39286), for CY 2016, we
proposed to include an estimate of any implantable biologicals eligible
for pass-through payment in our estimate of pass-through spending for
devices. Similarly, we finalized a policy in CY 2015 that applications
for pass-through payment for skin substitutes and similar products be
evaluated using the medical device pass-through process and payment
methodology (76 FR 66885 to 66888). Therefore, as we did beginning in
CY 2015, for CY 2016, we also proposed to include an estimate of any
skin substitutes and similar products in our estimate of pass-through
spending for devices.
We did not receive any public comments on our proposed methodology
or the proposed estimate for pass-through spending for devices.
Therefore, we are finalizing our proposal to base the pass-through
estimate for devices on our established methodology, as described
above.
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. We note that the Part B drug CAP program has been postponed
since CY 2009, and such a program has not been reinstated for CY 2016.
Because, as we proposed to pay for most non-pass-through separately
payable drugs and biologicals under the CY 2016 OPPS at ASP+6 percent,
as we discussed in section V.B.3. of the proposed rule and this final
rule with comment period, which represents the otherwise applicable fee
schedule amount associated with most pass-through drugs and
biologicals, and because, as we proposed to pay for CY 2016 pass-
through drugs and biologicals at ASP+6 percent, as we discussed in
section V.A. of the proposed rule, our estimate of drug and biological
pass-through payment for CY 2016 for this group of items is $0, as
discussed below.
Furthermore, payment for certain drugs, specifically diagnostic
radiopharmaceuticals and contrast agents without pass-through status,
will always be packaged into payment for the associated procedures and
these products will not be separately paid. In addition, we policy-
package all nonpass-through drugs, biologicals, and
radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure and drugs and biologicals that function as
supplies when used in a surgical procedure, as discussed in section
II.A.3. of this final rule with comment period. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39286), we proposed that all of these policy-
packaged drugs and biologicals with pass-through status would be paid
at ASP+6 percent, like other pass-through drugs and biologicals, for CY
2016. Therefore, our estimate of pass-through payment for policy-
packaged drugs and biologicals with pass-through status approved prior
to CY 2016 is not $0, as discussed below. In section V.A.4. of this
final rule with comment period, we discuss our policy to determine if
the costs of certain policy-packaged drugs or biologicals are already
packaged into the existing APC structure. If we determine that a
policy-packaged drug or biological approved for pass-through payment
resembles predecessor drugs or biologicals already included in the
costs of the APCs that are associated with the drug receiving pass-
through payment, we proposed to offset the amount of pass-through
payment for the policy-packaged drug or biological. For these drugs or
biologicals, the APC offset amount is the portion of the APC payment
for the specific procedure performed with the pass-through drug or
biological, which we refer to as the policy-packaged drug APC offset
amount. If we determine that an offset is appropriate for a specific
policy-packaged drug or biological receiving

[[Page 70447]]

pass-through payment, we proposed to reduce our estimate of pass-
through payments for these drugs or biologicals by this amount.
Similar to pass-through 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 will continue to be eligible for pass-through
payment in CY 2016. The second group contains drugs and biologicals
that we know are newly eligible, or project will be newly eligible in
the remaining quarters of CY 2015 or beginning in CY 2016. The sum of
the CY 2016 pass-through estimates for these two groups of drugs and
biologicals equals the total CY 2016 pass-through spending estimate for
drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

In the CY 2016 OPPS/ASC proposed rule (80 FR 39286), we proposed to
set the applicable pass-through payment percentage limit at 2.0 percent
of the total projected OPPS payments for CY 2016, consistent with
section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from CY
2004 through CY 2015 (79 FR 66897 through 66898).
For the first group, consisting of device categories that are
currently eligible for pass-through payment and will continue to be
eligible for pass-through payment in CY 2016, there are three active
categories for CY 2016. For CY 2015, we established one new device
category subsequent to the publication of the CY 2015 OPPS/ASC proposed
rule, HCPCS code C2624 (Implantable wireless pulmonary artery pressure
sensor with delivery catheter, including all system components), that
was effective January 1, 2015. We estimated in the proposed rule that
HCPCS code C2624 will cost $50.5 million in pass-through expenditures
in CY 2016. Effective Apri1 1, 2015, we established that HCPCS code
C2623 (Catheter, transluminal angioplasty, drug-coated, non-laser) will
be eligible for pass-through payment. We estimated that HCPCS code
C2623 will cost $73 million in pass-through expenditures in CY 2016.
Effective July 1, 2015, we established that HCPCS code C2613 (Lung
biopsy plug with delivery system) will be eligible for pass-through
payment. We estimated that HCPCS code C2613 will cost $3.3 million in
pass-through expenditures in CY 2016. Based on the three device
categories of HCPCS codes C2624, C2623, and C2613, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39287), we proposed an estimate for the first
group of devices of $126.8 million.
We did not receive any public comments on our proposed estimate for
the first group of devices that included HCPCS codes C2624, C2623 and
C2613. Therefore, we are finalizing the proposed estimate for this
first group of devices of $126.8 million for CY 2016.
In estimating our proposed CY 2016 pass-through spending for device
categories in the second group, we included: Additional device
categories that we estimated could be approved for pass-through status
subsequent to the development of the proposed rule and before January
1, 2016; and contingent projections for new device categories
established in the second through fourth quarters of CY 2016. In the CY
2016 OPPS/ASC proposed rule (80 FR 39287), we proposed to use the
general methodology described in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66778), while also taking into account recent
OPPS experience in approving new pass-through device categories. For
the proposed rule, the estimate of CY 2016 pass-through spending for
this second group of device categories was $10 million.
We did not receive any public comments on our proposed estimate for
the second group of devices. Therefore, we are finalizing the proposed
estimate for this second group of devices of $10 million for CY 2016.
To estimate proposed CY 2016 pass-through spending for drugs and
biologicals in the first group, specifically those drugs and
biologicals recently made eligible for pass-through payment and
continuing on pass-through payment status for CY 2016, we proposed to
use the most recent Medicare physician claims 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 to project the CY 2016 OPPS utilization of the products.
For the known drugs and biologicals (excluding policy-packaged
diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals,
and radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure, and drugs and biologicals that function
as supplies when used in a surgical procedure) that will be continuing
on pass-through payment status in CY 2016, we estimate the pass-through
payment amount as the difference between ASP+6 percent and the payment
rate for nonpass-through drugs and biologicals that will be separately
paid at ASP+6 percent, which is zero for this group of drugs. Because
payment for policy-packaged drugs and biologicals is packaged if the
product was not paid separately due to its pass-through status, we
proposed to include in the CY 2016 pass-through estimate the difference
between payment for the policy-packaged drug or biological at ASP+6
percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC
information is not available) and the policy-packaged drug APC offset
amount, if we determine that the policy-packaged drug or biological
approved for pass-through payment resembles a predecessor drug or
biological already included in the costs of the APCs that are
associated with the drug receiving pass-through payment. For the
proposed rule, using the proposed methodology described above, we
calculated a CY 2016 proposed spending estimate for this first group of
drugs and biologicals of approximately $5.2 million.
We did not receive any public comments on our proposed methodology
for calculating the spending estimate for the first group of drugs and
biologicals.
For this final rule with comment period, using the methodology
described above, we calculated a final CY 2016 spending estimate for
the first group of drugs and biologicals of approximately $12.8
million.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39287), we also
estimated proposed CY 2016 pass-through spending for drugs and
biologicals in the second group (that is, drugs and biologicals that we
knew at the time of development of the proposed rule were newly
eligible for pass-through payment in CY 2016, additional drugs and
biologicals that we estimated could be approved for pass-through status
subsequent to the development of the proposed rule and before January
1, 2016, and projections for new drugs and biologicals that could be
initially eligible for pass-through payment in the second through
fourth quarters of CY 2016). We proposed 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 2016 pass-through payment estimate. We also
proposed to consider the most recent OPPS experience in approving new
pass-through drugs and biologicals. Using our proposed methodology for
estimating CY 2016 pass-through payments for this second group of

[[Page 70448]]

drugs, we calculated a proposed spending estimate for this second group
of drugs and biologicals of approximately $4.6 million.
We did not receive any public comments on our proposed methodology
for calculation of the spending estimate of the second group of drugs
and nonimplantable biologicals, and therefore are finalizing its use in
this final rule with comment period for CY 2016.
For this final rule with comment period, using our finalized
methodology for estimating CY 2016 pass-through payments for this
second group of drugs, we calculated a spending estimate for this
second group of drugs and biologicals of approximately $11.2 million.
Our CY 2016 estimate for total pass-through spending for drugs and
biologicals (spending for the first group of drugs and biologicals
($12.8 million) plus spending for the second group of drugs and
biologicals ($11.2 million)) equals approximately $24 million.
In summary, in accordance with the methodology described above in
this section, for this final rule with comment period, we estimate that
total pass-through spending for the device categories and the drugs and
biologicals that are continuing to receive pass-through payment in CY
2016 and those device categories, drugs, and biologicals that first
become eligible for pass-through payment during CY 2016 will be
approximately $160.8 million (approximately $136.8 million for device
categories and approximately $24 million for drugs and biologicals),
which represents 0.26 percent of total projected OPPS payments for CY
2016. Therefore, we estimate that pass-through spending in CY 2016 will
not amount to 2.0 percent of total projected OPPS CY 2016 program
spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. Payment for Hospital Outpatient Clinic and Emergency Department
Visits

Since April 7, 2000, we have instructed hospitals to report
facility resources for clinic and emergency department (ED) hospital
outpatient visits using the CPT E/M codes and to develop internal
hospital guidelines for reporting the appropriate visit level (65 FR
18451). Because a national set of hospital-specific codes and
guidelines does not currently exist, we have advised hospitals that
each hospital's internal guidelines that determine the levels of clinic
and ED 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.
While many hospitals have advocated for hospital-specific national
guidelines for visit billing since the OPPS started in 2000, and we
have signaled in past rulemaking our intent to develop guidelines, this
complex undertaking has proven challenging. Our work with interested
stakeholders, such as hospital associations, along with a contractor,
has confirmed that no single approach could consistently and accurately
capture hospitals' relative costs. Public comments received on this
issue, as well as our own knowledge of how clinics operate, have led us
to conclude that it is not feasible to adopt a set of national
guidelines for reporting hospital clinic visits that can accommodate
the enormous variety of patient populations and service-mix provided by
hospitals of all types and sizes throughout the country. Moreover, no
single approach has been broadly endorsed by the stakeholder community.
With respect to outpatient clinic visits, in the CY 2014 OPPS/ASC
final rule with comment period (78 FR 75036 through 75045), we
finalized a policy that created alphanumeric HCPCS code G0463 (Hospital
outpatient clinic visit for assessment and management of a patient) for
hospital use only, representing any and all clinic visits under the
OPPS, and assigned HCPCS code G0463 to APC 0634 (Hospital Clinic
Visits). We also finalized a policy to use CY 2012 claims data to
develop the CY 2014 OPPS payment rates for HCPCS code G0463 based on
the total geometric mean cost of the levels one through five CPT E/M
codes for clinic visits (five levels for new patient clinic visits and
five levels for established patient clinic visits) previously
recognized under the OPPS (CPT codes 99201 through 99205 and 99211
through 99215). In addition, we finalized a policy to no longer
recognize a distinction between new and established patient clinic
visits.
With respect to ED visits, in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75036 through 75043), we also stated our policy
that we would continue to use our existing methodology to recognize the
existing CPT codes for Type A ED visits as well as the five HCPCS codes
that apply to Type B ED visits, and to establish the OPPS payment under
our established standard process. We refer readers to the CY 2014 OPPS/
ASC final rule with comment period for a detailed discussion of the
public comments and our rationale for the CY 2014 policies (78 FR 75036
through 75043).
In the CY 2016 OPPS/ASC proposed rule (80 FR 39287 through 39288),
for CY 2016, we proposed to continue the current policy, adopted in CY
2014, for clinic and ED visits. HCPCS code G0463 (for hospital use
only) will represent any and all clinic visits under the OPPS. As part
of our broader initiative to restructure APCs across the OPPS to
collectively group services that are clinically similar and have
similar resource costs within the same APC, we proposed to reassign
HCPCS code G0463 from existing APC 0634 to renumbered APC 5012 (Level 2
Examinations and Related Services), formerly APC 0632. Renumbered APC
5012 includes other services that are clinically similar with similar
resource costs to HCPCS code G0463, such as HCPCS code G0402 (Initial
preventive physical examination). We proposed to use CY 2014 claims
data to develop the CY 2016 OPPS payment rate for HCPCS code G0463
based on the total geometric mean cost of HCPCS code G0463, as CY 2014
is the first year for which claims data are available for this code.
Finally, as we established in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75042), there is no longer a policy to recognize
a distinction between new and established patient clinic visits.
Comment: A few commenters requested that CMS discontinue the single
HCPCS G-code for reporting clinic visits and return to a reporting
structure that recognizes differences in clinical acuity and resource
utilization. The commenters expressed concern that CMS' clinic visit
coding policy creates a payment bias that unfairly penalizes certain
providers, such as cancer hospitals, which provide care for more
severely ill Medicare beneficiaries. One commenter believed that
utilization of the single HCPCS G-code for reporting clinic visits does
not provide a distinction between new and established patients and is
administratively burdensome, as HCPCS G-codes are only recognized by
Medicare.
Response: We believe that the spectrum of hospital resources
provided during an outpatient hospital clinic visit is appropriately
captured and reflected in the single level payment for clinic visits.
We believe the proposed payment rate for APC 5012 represents an
appropriate payment for clinic visits as it is based on the geometric
mean costs of all visits. Although the cost for any given clinic visit
may be higher or lower than the geometric mean cost of APC 5012, the
payment remains appropriate to the hospital delivering a variety of

[[Page 70449]]

clinic visits. The high volume of claims used for ratesetting for HCPCS
code G0463 allows us to have accurate data upon which to develop
appropriate payment rates. With regard to specific concerns for
hospitals that treat patients with a more complex case-mix, we note
that the relatively low estimated cost of clinic visits overall would
result in lesser underpayment or overpayment for hospitals that may
serve a population with a more complex case-mix. In addition, past
stakeholder and commenter support for eliminating distinctions for new
and established patients (78 FR 75040 through 75041) suggests that
hospitals prefer the administrative ease of not tracking new or
established patients. Consistent with our longstanding practice, we
will continue to monitor clinic visit costs under the OPPS.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to continue to use HCPCS
code G0463 (for hospital use only) to represent any and all clinic
visits under the OPPS for CY 2016. In addition, we are finalizing our
proposal to reassign HCPCS code G0463 from existing APC 0634 to
renumbered APC 5012 and to use CY 2014 claims data to develop the CY
2016 OPPS payment rate for HCPCS code G0463 based on the total
geometric mean cost of HCPCS code G0463, as CY 2014 is the first year
for which claims data are available for this code. We note again that,
as we established in the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75042), we no longer have a policy to recognize a
distinction between new and established patient clinic visits.
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
75040), we stated that additional study was needed to fully assess the
most suitable payment structure for ED visits, including the particular
number of visit levels that would not underrepresent resources required
to treat the most complex patients, such as trauma patients, and that
we believed it was best to delay any change in ED visit coding while we
reevaluate the most appropriate payment structure for Type A and Type B
ED visits. At this time, we continue to believe that additional study
is needed to assess the most suitable payment structure for ED visits.
Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39288), we did
not propose any change in ED visit coding. Rather, for CY 2016, we
proposed to continue to use our existing methodology to recognize the
existing five CPT codes for Type A ED visits as well as the five HCPCS
codes that apply to Type B ED visits, and to establish the proposed CY
2016 OPPS payment rates using our established standard process. We
stated that we may propose changes to the coding and APC assignments
for ED visits in future rulemaking.
Comment: Commenters supported CMS' proposal to continue its current
methodology to recognize the existing five CPT codes for Type A ED
visits, as well as the five HCPCS codes for Type B ED visits for CY
2016, and to establish the associated CY 2016 OPPS payment rates using
its standard process. One commenter urged CMS to develop standard ED
visit guidelines for a 5-level E/M system for the ED.
Response: We appreciate the commenters' support. As we have in the
past (76 FR 74345 through 74346), we acknowledge that it would be
desirable to many hospitals to have national ED visit guidelines for a
5-level E/M system for the ED. However, we also understand that it
would be disruptive and administratively burdensome to other hospitals
that have successfully adopted internal guidelines to have to implement
new national guidelines, particularly while we address the problems
that would inevitably arise with the implementation of a new set of
guidelines being applied by thousands of hospitals.
Comment: One commenter recommended, as an alternative to our
proposed policy, that CMS develop, on a short-term basis, a set of
three trauma[hyphen]specific HCPCS codes for all trauma patients for
whom a trauma team is activated. The commenter also recommended that
CMS consider a long-term restructuring of payment for trauma care,
developed by specifically taking the following steps:
CMS should rigorously evaluate historical trauma cases
data to better understand the precise nature of trauma care and how it
is reimbursed.
Armed with this understanding, CMS should develop a
complete value-based reimbursement model for trauma care, distinct from
the fee-for-service reimbursement for ED visits, based on the
conceptual framework of the Trauma Center Association of America
(TCAA).
CMS should test its value-based reimbursement model
through a pilot program or simulation to ensure that it accurately
compensates trauma centers for providing an appropriate level of care.
CMS should incorporate its restructured model into the
hospital OPPS as expeditiously as possible.
Response: We appreciate the alternatives presented by the
commenter. We will take this recommendation into consideration as we
continue to study and fully consider the most appropriate payment
structure for Type A and Type B ED visits.
After consideration of the public comments we received, we are
finalizing our proposals, without modification, to continue to use our
existing methodology to recognize the existing CPT codes for Type A ED
visits as well as the five HCPCS codes that apply to Type B ED visits,
and to establish the CY 2016 OPPS payment rates using our established
standard process. We intend to further explore the issues described
above related to ED visits, including concerns about excessively costly
patients, such as trauma patients. We note that we may propose changes
to the coding and APC assignments for ED visits in the future
rulemaking.

B. Payment for Critical Care Services

For the history of the payment policy for critical care services,
we refer readers to the CY 2014 OPPS/ASC final rule with comment period
(78 FR 75043). In the CY 2014 OPPS/ASC final rule with comment period,
we continued to use the methodology established in the CY 2011 OPPS/ASC
final rule with comment period for calculating a payment rate for
critical care services that includes packaged payment of ancillary
services, for example electrocardiograms, chest X-rays, and pulse
oximetry. Critical care services are described by CPT codes 99291
(Critical care, evaluation and management of the critically ill or
critically injured patient; first 30-74 minutes) and 99292 (Critical
care, evaluation and management of the critically ill or critically
injured patient; each additional 30 minutes (List separately in
addition to code for primary service)).
Since CY 2013, we have stated that we would continue to monitor the
hospital claims data for CPT code 99291 in order to determine whether
revisions to our current payment policy for critical care services are
warranted based on changes in hospitals' billing practices. Because the
CY 2011 through CY 2014 claims data (used for CY 2013 through CY 2016
ratesetting, respectively) do not demonstrate any significant change in
hospital billing practices for critical care services, we continue to
believe that it would be inappropriate to pay separately for the
ancillary services that hospitals typically report in addition to CPT
codes for critical care services. Based on this pattern of billing
practices, we continue to believe that packaging ancillary services
into critical care

[[Page 70450]]

services is appropriate. Therefore, in the CY 2016 OPPS/ASC proposed
rule (80 FR 39288), for CY 2016 and subsequent years, we proposed to
continue our policy (that has been in place since CY 2011) to recognize
the existing CPT codes for critical care services and establish a
payment rate based on historical claims data. We also proposed to
continue to implement claims processing edits that conditionally
package payment for the ancillary services that are reported on the
same date of service as critical care services in order to avoid
overpayment.
Comment: One commenter opposed the claims processing edits
conditionally packaging payment for the ancillary services that are
reported on the same date of service as critical care services. The
commenter also encouraged CMS to use recent data in setting the rates
for critical care.
Response: As we stated in the proposed rule (80 FR 39288), because
the CY 2011 through CY 2014 claims data (used for CY 2013 through CY
2016 ratesetting, respectively) do not demonstrate any significant
change in hospital billing practices for critical care services, we
continue to believe that it would be inappropriate to pay separately
for the ancillary services that hospitals typically report in addition
to CPT codes for critical care services. Based on this pattern of
billing practices, we continue to believe that packaging ancillary
services into critical care services is appropriate. We note that CY
2014 claims data used for CY 2016 ratesetting represents the most
recent complete year of available claims data.
After consideration of the public comments we received, we are
finalizing our proposals, without modification, to continue our policy
to recognize the existing CPT codes for critical care services and
establish a payment rate based on historical claims data, and to
continue to implement claims processing edits that conditionally
package payment for the ancillary services that are reported on the
same date of service as critical care services in order to avoid
overpayment.

C. Payment for Chronic Care Management Services

In the CY 2015 OPPS/ASC final rule with comment period, we assigned
CPT code 99490 to APC 0631 (Level 1 Examinations and Related Services),
with a payable status indicator of ``V,'' under general physician
supervision. (We note that in the CY 2016 OPPS/ASC proposed rule (80 FR
39288), for CY 2016 and subsequent years, we proposed to renumber APC
0631 as APC 5011.) The current code descriptor for CPT code 99490 is
``Chronic care management services (CCM), at least 20 minutes of
clinical staff time directed by a physician or other qualified health
care professional, per calendar month), with the following required
elements:
Multiple (two or more) chronic conditions expected to last
at least 12 months, or until the death of the patient;
Chronic conditions place the patient at significant risk
of death, acute exacerbation/decompensation, or functional decline; and
Comprehensive care plan established, implemented, revised,
or monitored.''
CPT code 99490 is a physician-directed service, where the physician
is directing the clinical staff time spent on care management for a
specific patient. As a physician-directed service, payment under the
OPPS for services described by CPT code 99490 is made to the hospital
when the hospital's clinical staff furnishes the service at the
direction of the physician (or other appropriate nonphysician
practitioner) who meets all the requirements to bill for services
described by CPT code 99490 under the MPFS. The billing physician or
nonphysician practitioner directing the CCM services must meet the
requirements to bill CPT code 99490 under the MPFS. These requirements
are the same, regardless of whether the services described by CPT code
99490 are furnished in the office or in the HOPD.
While the services described by CPT code 99490 has been payable
under the OPPS since January 1, 2015, we have received questions about
specific requirements for hospitals to bill this code beyond those
requirements discussed in the CY 2015 MPFS final rule with comment
period (79 FR 67721). In response to these questions, we posted
frequently asked questions (FAQs) and answers on the CMS Web site on
May 8, 2015. These FAQs can be accessed on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/. In reviewing the questions from hospitals on
billing of CCM services, we identified several issues that we believe
need to be clarified. Therefore, in the CY 2016 OPPS/ASC proposed rule
(80 FR 39289), for CY 2016 and subsequent years, we proposed additional
requirements for hospitals to bill and receive OPPS payment for CMM
services described by CPT code 99490. These proposed requirements,
discussed below, are in addition to those already required under the
OPPS for billing for services described by CPT code 99490 in CY 2015.
In accordance with the CPT code descriptor for CPT code 99490, a
hospital can only bill CMM services described by CPT code 99490 and
receive payment under the OPPS for furnishing clinical staff services
under a physician's or other appropriate nonphysician practitioner's
direction to a patient that has multiple (two or more) chronic
conditions expected to last at least 12 months or until the death of
the patient, and that place the patient at significant risk of death,
acute exacerbation/decompensation, or functional decline. While we have
always expected the hospital furnishing the clinical staff portion of
CCM services, as described by CPT code 99490, to have an established
relationship with the patient and to provide care and treatment to the
patient during the course of illness (that is, the chronic conditions
that are expected to last at least 12 months), we have not previously
specified through notice-and-comment rulemaking that the hospital must
have an established relationship with the patient as a requirement for
billing and OPPS payment for CMM services described by CPT code 99490.
Therefore, for CY 2016 and subsequent years, we proposed that a
hospital would be able to bill CPT code 99490 for CCM services only
when furnished to a patient who has been either admitted to the
hospital as an inpatient or has been a registered outpatient of the
hospital within the last 12 months and for whom the hospital furnished
therapeutic services. Section 20.2, Chapter 4 of the Medicare Claims
Processing Manual (Pub. 100-04) defines a hospital outpatient as a
person who has not been admitted by the hospital as an inpatient but is
registered on the hospital records as an outpatient and receives
services (other than supplies alone) from the hospital. We believe that
hospitals furnishing services described by CPT code 99490 are, in all
likelihood, already meeting this requirement because they are providing
CCM services described by CPT code 99490 to patients for whom they
already provide care and treatment. However, we proposed to adopt the
relationship requirement as an explicit condition for billing and
payment of CCM services under the OPPS.
As outlined in the CY 2015 MPFS final rule with comment period (79
FR 67721 through 67722), practitioners furnishing and billing CCM
services as described by CPT code 99490 under the MPFS are required to
(1) inform the beneficiary about the availability of the CCM services
from the practitioner and

[[Page 70451]]

obtain his or her written agreement to have the service(s) provided;
(2) document in the beneficiary's medical record that all elements of
the CCM service(s) were explained and offered to the beneficiary,
noting the beneficiary's decision to accept or decline the service; and
(3) inform the beneficiary that only one practitioner can furnish and
be paid for these services during the calendar month service period.
For CY 2016 and subsequent years, we proposed to adopt analogous
requirements for billing services described by CPT code 99490 under the
OPPS. Specifically, we proposed, for CY 2016 and subsequent years, that
hospitals furnishing and billing services described by CPT code 99490
under the OPPS would be required to have documented in the hospital's
medical record the patient's agreement to have the services provided
or, alternatively, to have the patient's agreement to have the CCM
services provided documented in a beneficiary's medical record that the
hospital can access. In addition, for CY 2016 and subsequent years, we
proposed to require hospitals furnishing and billing for the CCM
services described by CPT code 99490 under the OPPS to have documented
in the hospital medical record (or beneficiary medical record that the
hospital can access) that all elements of the CCM services were
explained and offered to the beneficiary, including a notation of the
beneficiary's decision to accept or decline the services. If the
hospital is billing for the CCM services, we would expect the physician
or practitioner under whose direction the services are furnished to
have discussed with the beneficiary that hospital clinical staff will
furnish the services and that the beneficiary could be liable for two
separate copayments from both the hospital and the physician.
Consistent with the MPFS requirement that only one practitioner can
furnish and be paid for services described by CPT code 99490 during the
calendar month service period, we proposed, for the OPPS for CY 2016
and subsequent years, that only one hospital can furnish and be paid
for services described by CPT code 99490 during the calendar month
service period. The physician or other appropriate nonphysician
practitioner directing the CCM services should inform the beneficiary
that only one hospital can furnish and be paid for these services
during the calendar month service period. These proposed requirements
are consistent with and support the MPFS requirements set forth in the
CY 2015 MPFS final rule with comment period (79 FR 67728).
Comment: Commenters generally supported CMS' proposed policy to
adopt billing requirements for CMM services described by CPT code 99490
analogous to those required for billing under the MPFS for CY 2016 and
subsequent years. A few commenters encouraged CMS to continue to
actively work with stakeholders to ensure that the implementation of
these codes will not be administratively burdensome. Another commenter
requested that CMS clarify in the final rule whether one hospital (paid
under OPPS) and one practitioner (paid under the MPFS) may furnish and
be paid for services described by CPT code 99490 during a calendar
month, or whether only one provider across all care settings may be
paid for the service. One commenter requested that CMS amend the
hospital claim form so that the ``place of service'' code can be noted
to permit better data capture and monitoring of the settings in which
CCM services are provided.
Response: We appreciate commenters' support for our proposal. We
look forward to hearing from stakeholders about the administrative
requirements associated with hospital billing of CMM services described
by CPT code 99490.
We reiterate that one hospital (paid under the OPPS) and one
practitioner (paid under the MPFS) may furnish and be paid for services
described by CPT code 99490 during a calendar month when CCM services
are furnished by a physician in an HOPD to an eligible patient.
Specifically, in this scenario, the physician or nonphysician
practitioner may bill Medicare for services described by CPT code 99490
under the MPFS and report the hospital outpatient setting as the place
of service. The hospital also may bill for the services described by
CPT code 99490 under the OPPS. The physician or nonphysician
practitioner would be paid under the MPFS at the facility rate, and the
hospital would be paid under the OPPS.
Comment: With respect to the proposed requirement that a patient
must have either been admitted to the hospital as an inpatient or have
been a registered outpatient of the hospital and received therapeutic
services from the hospital within the last 12 months, one commenter
requested that CMS permit a hospital to bill for services described by
CPT 99490 if the physician or nonphysician practitioner providing
general supervision previously furnished CCM services for the
beneficiary, but the physician's or nonphysician practitioner's
practice was subsequently acquired by a hospital that does not have an
established relationship with the patient.
Response: Because only one hospital may furnish CCM services to a
patient during a billing period and the patient's consent to have such
services furnished must be documented in the medical record, we believe
it is necessary for the hospital to have an established relationship
with the patient, as we proposed. We note that a physician or other
qualified nonphysician practitioner who previously billed CCM services
for a patient under the MPFS at the nonfacility rate could continue to
do so (assuming that all requirements for billing under the MPFS are
met). However, if the place of service becomes a hospital outpatient
department, payment under the MPFS would be made. We also believe,
given that patients who receive CCM services have multiple chronic
conditions, patients would be likely to have an established
relationship with the hospital. Accordingly, we do not believe that we
should modify this requirement at this time.
Comment: Commenters requested that CMS: (1) Classify the services
described by CPT code 99490 as a preventive service; and (2) allow for
billing and separate payment of complex chronic care codes (CPT 99487
and 99489) at similar rates to the AMA Relative Value Scale Update
Committee's (RUC's) recommended values.
Response: The services described by CPT code 99490 are not
preventive services because they do not have a USPSTF rating of A or B,
nor are they explicitly defined as a preventive service in the statute.
In addition, the complex CCM services described by CPT codes 99487 and
99489 are currently eligible to be reported when performed in the
outpatient hospital setting and are assigned status indicator ``N,''
which indicates that payment is packaged for these services. We may
consider separate payment for complex CMM services described by CPT
codes 99497 and 99489 in future rulemaking.
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to require hospitals, in
order to bill and receive OPPS payment for CMM services described by
CPT code 99490, to have documented in the hospital's medical record the
patient's agreement to have the services provided or, alternatively, to
have the patient's agreement to have the CCM services provided
documented in a beneficiary's medical record that the hospital can
access. In addition, for CY 2016 and subsequent years, we are requiring
hospitals furnishing and billing for the CCM services described by CPT
code 99490 under the OPPS to have

[[Page 70452]]

documented in the hospital medical record (or beneficiary medical
record that the hospital can access) that all elements of the CCM
services were explained and offered to the beneficiary, including a
notation of the beneficiary's decision to accept or decline the
services. In addition, only one hospital under the OPPS (in addition to
only one practitioner under the MPFS) can furnish and be paid for
services described by CPT code 99490 during the calendar month service
period.
In addition, a number of scope of service elements for CCM services
were finalized as requirements to bill for CCM services described by
CPT code 99490 in the CY 2015 MPFS final rule with comment period (79
FR 67715 through 67728). For CY 2016 and subsequent years, in the CY
2016 OPPS/ASC proposed rule (80 FR 39289 through 39290), we proposed to
require analogous scope of service elements for the CCM services,
listed below, to be met in order for hospitals to bill and receive OPPS
payment for furnishing CCM services described by CPT code 99490.
Specifically, we proposed to require a hospital that bills and receives
OPPS payment for their clinical staff furnishing CCM services described
by CPT code 99490 under the direction of a physician or other qualified
nonphysician practitioner to provide--
Structured recording of demographics, problems,
medications, medication allergies, and the creation of a structured
clinical summary record. A full list of problems, medications, and
medication allergies in the electronic health record (EHR) must inform
the care plan, care coordination, and ongoing clinical care.
Access to care management services 24 hours a day/7 days a
week (providing the beneficiary with a means to make timely contact
with health care providers to address his or her urgent chronic care
needs, regardless of the time of day or day of the week).
Continuity of care with a designated practitioner or
member of the care team with whom the beneficiary is able to get
successive routine appointments.
Care management for chronic conditions, including
systematic assessment of the beneficiary's medical, functional, and
psychosocial needs; system-based approaches to ensure timely receipt of
all recommended preventive care services; medication reconciliation
with review of adherence and potential interactions; and oversight of
beneficiary self-management of medications.
Documentation of the creation of a patient-centered care
plan based on a physical, mental, cognitive, psychosocial, functional,
and environmental assessment or reassessment and an inventory of
resources and supports (a comprehensive care plan for all health
issues). Electronically capture care plan information, make this
information available on a 24 hour/7 day a week basis to all
practitioners furnishing CCM services, and electronically share, as
appropriate, with other practitioners and providers.
A written or electronic copy of the care plan provided to
the beneficiary, and document its provision in the electronic medical
record using certified information technology (IT).
Management of care transitions between and among health
care providers and settings, including referrals to other clinicians;
follow-up after an emergency department visit; and follow-up after
discharges from hospitals, skilled nursing facilities, or other health
care facilities. Electronic transmission of a clinical summary created
using certified health IT to support care transitions.
Coordination with home-based and community-based clinical
service providers required to support the patient's psychosocial needs
and functional deficits. Communication to and from home-based and
community-based providers regarding these patient needs must be
documented in the patient's medical record.
Enhanced opportunities for the beneficiary and any
caregiver to communicate with the practitioner regarding the
beneficiary's care through not only telephone access, but also through
the use of secure messaging, internet, or other asynchronous non-face-
to-face consultation methods.
Lastly, with respect to the EHR, for CY 2016 and subsequent years,
we proposed to adopt the requirements set forth in the CY 2015 MPFS
final rule with comment period (79 FR 67723 through 67724) and detailed
below for billing services described by CPT code 99490 under the OPPS.
Specifically, for CY 2016 and subsequent years, we proposed to require
the use of EHR technology that has been certified under the ONC Health
Information Technology (IT) Certification Program as requisite for
hospitals furnishing and receiving payment under the OPPS for the
clinical staff portion of CCM services, to ensure that hospitals have
adequate capabilities to allow members of the interdisciplinary care
team to have timely access to the most updated information informing
the care plan. We proposed, for hospital payment under the OPPS, that
the CCM services as described by CPT code 99490 must be furnished
using, at a minimum, the Edition(s) of certification criteria that is
acceptable for purposes of the EHR Incentive Programs as of December 31
of the calendar year preceding each MPFS payment year to meet the
following core technology capabilities: Structured recording of
demographics, problems, medications, medication allergies, and the
creation of a structured clinical summary. We also proposed to require
hospitals to use certified IT to fulfill the CCM scope of service
requirements whenever the requirements reference a health or medical
record. This would ensure that requirements for billing CCM services
under the MPFS and the OPPS are consistent throughout each MPFS and
OPPS payment year, and are automatically updated according to the
certification criteria required for the EHR Incentive Programs. For
payment for CCM services under the OPPS in CY 2016, this policy would
allow hospitals to use EHR technology certified to, at a minimum, the
2014 Edition of certification criteria to meet the final core
capabilities for CCM services and to fulfill the scope of service
requirements for CCM services whenever the requirements reference a
health or medical record. The CY 2015 MPFS final rule with comment
period (79 FR 67728) includes a detailed table summarizing when
certified health IT is required to support the scope of service
requirements. We remind stakeholders that, for all electronic sharing
of beneficiary information under our final CCM services policies, HIPAA
standards apply in the usual manner.
Comment: One commenter urged CMS to avoid placing overly burdensome
requirements for billing and payment for services described by CPT code
99490. The commenter recommended that CMS eliminate the requirement for
use of certified EHRs because current certified EHRs do not include
standards and capabilities supporting chronic care management that are
core services for CCM. Another commenter asked that CMS end its tacit
acceptance of information blocking in Federal programs. The commenter
encouraged CMS to create demand side pressure on vendors by limiting
billing for the CCM services to only those providers who use systems
that do not limit information exchange as defined in the ONC report to
Congress. Some commenters encouraged CMS to allow the care plan to be
shared with community providers through facsimile methods when
electronic options are not available.
Response: We disagree with the commenter's assertion that the
requirement for use of a certified EHR

[[Page 70453]]

when performing CCM services is overly burdensome and reiterate our
belief that the use of certified health IT is an important tool for
delivering several core elements of CCM services. We recognize that
certified health IT does not currently possess all of the capabilities
needed to deliver CCM services, and accordingly, we have restricted
requirements around the use of certified EHRs to a narrow set of
elements. We also have provided flexibility with respect to the
technology needed to support elements such as the transmission of
clinical summaries created using certified health IT.
We appreciate the comments regarding the challenges that
information blocking is likely to pose to providers furnishing CCM
services that are required to deliver care coordination services for
beneficiaries. While we did not include any proposal to tie the ability
to bill for CCM services to information blocking in the proposed rule,
we may consider such action in the future. For further information, we
refer readers to ONC's April 2015 Report to Congress on health
information blocking, which is available on the Web site at: http://www.healthit.gov/sites/default/files/reports/info_blocking_040915.pdf.
We believe it is important that providers furnishing CCM services
are able to share care plan information electronically with other
providers to support robust care coordination. We note that we did not
identify any specific electronic tool or format for sharing care plan
information, and we encourage providers furnishing CCM services to
explore a range of innovative solutions in this area. In the future, we
may consider issuing subregulatory guidance providing an exception to
the requirement to transmit clinical summaries and care plan
information electronically by a means other than facsimile, when the
receiving practitioner or provider is not billing Medicare for the CCM
service and is only able or willing to receive the required information
by facsimile.
Comment: One commenter asked CMS to clarify whether the required
EHR system used for CCM is one that has been certified as an inpatient
EHR or as an ambulatory EHR. The commenter also asked CMS to clarify
whether the required EHR system must be able to generate a specific
form of the clinical summary (such as that specified for the
Transitions of Care--create and transmit transition of care/referral
summaries certification criterion--at 45 CFR 170.314(b)(2)) or if there
is discretion for a hospital to use a different format for and the
content of the clinical summary other than a summary that contains any
particular structured content. The commenter asked if there was any
particular prescription for the content and specification of the
clinical summary, including whether such are limited to those required
for certification under Sec. 170.314(b)(2).
Response: In the proposed rule, we did not identify a specific type
of certification for the system used by a provider furnishing CCM
services. We are clarifying that the technology certified for either
the inpatient setting or the outpatient setting may be used to furnish
CCM services, provided it meets the relevant requirements. Furthermore,
we proposed that providers must support care transitions using
electronic transmission of a clinical summary created using certified
health IT, but we did not identify the specific certification criteria
that provider technology must meet. We are clarifying that, as long as
the clinical summary has been created using certified health IT and is
electronically transmitted, providers can meet the CCM requirements.
For instance, the clinical summaries currently generated by EHR systems
in accordance with the 2014 Edition certification criterion for
inpatient settings at Sec. 170.314(b)(2) of the regulations would meet
the requirements to bill for CCM services.
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to require analogous
scope of service elements for the CCM services to be met in order for
hospitals to bill and receive OPPS payment for furnishing CCM services
described by CPT code 99490.

VIII. Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for individuals who have an acute mental
illness. Section 1861(ff)(1) of the Act defines partial hospitalization
services as the items and services described in paragraph (2)
prescribed by a physician and provided under a program described in
paragraph (3) under the supervision of a physician pursuant to an
individualized, written plan of treatment established and periodically
reviewed by a physician (in consultation with appropriate staff
participating in such program), which sets forth the physician's
diagnosis, the type, amount, frequency, and duration of the items and
services provided under the plan, and the goals for treatment under the
plan. Section 1861(ff)(2) of the Act describes the items and services
included in partial hospitalization services. Section 1861(ff)(3)(A) of
the Act specifies that a PHP is a program furnished by a hospital to
its outpatients or by a CMHC (as defined in subparagraph (B)), and
which is a distinct and organized intensive ambulatory treatment
service offering less than 24-hour-daily care other than in an
individual's home or in an inpatient or residential setting. Section
1861(ff)(3)(B) of the Act defines a CMHC for purposes of this benefit.
Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the
authority to designate the OPD services to be covered under the OPPS.
The Medicare regulations that implement this provision specify, under
42 CFR 419.21, that payments under the OPPS will be made for partial
hospitalization services furnished by CMHCs as well as Medicare Part B
services furnished to hospital outpatients designated by the Secretary,
which include partial hospitalization services (65 FR 18444 through
18445).
Section 1833(t)(2)(C) of the Act, in pertinent part, requires the
Secretary to establish relative payment weights for covered OPD
services (and any groups of such services described in subparagraph
(B)) based on median (or, at the election of the Secretary, mean)
hospital costs using data on claims from 1996 and data from the most
recent available cost reports. In pertinent part, subparagraph (B)
provides that the Secretary may establish groups of covered OPD
services, within a classification system developed by the Secretary for
covered OPD services, so that services classified within each group are
comparable clinically and with respect to the use of resources. In
accordance with these provisions, we have developed the PHP APCs.
Section 1833(t)(9)(A) of the Act requires the Secretary to review, not
less often than annually, and revise the groups, the relative payment
weights, and the wage and other adjustments described in paragraph (2)
to take into account changes in medical practice, changes in
technology, the addition of new services, new cost data, and other
relevant information and factors.
Because a day of care is the unit that defines the structure and
scheduling of partial hospitalization services, we established a per
diem payment methodology for the PHP APCs, effective for services
furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under
this methodology, the

[[Page 70454]]

median per diem costs have been used to calculate the relative payment
weights for PHP APCs.
From CY 2003 through CY 2006, the median per diem costs for CMHCs
fluctuated significantly from year to year, while the median per diem
costs for hospital-based PHPs remained relatively constant. We were
concerned that CMHCs may have increased and decreased their charges in
response to Medicare payment policies. Therefore, we began efforts to
strengthen the PHP benefit through extensive data analysis and policy
and payment changes finalized in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66670 through 66676). We made two refinements to
the methodology for computing the PHP median: The first remapped 10
revenue codes that are common among hospital-based PHP claims to the
most appropriate cost centers; and the second refined our methodology
for computing the PHP median per diem cost by computing a separate per
diem cost for each day rather than for each bill. We refer readers to a
complete discussion of these refinements in the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66670 through 66676).
In CY 2009, we implemented several regulatory, policy, and payment
changes, including a two-tiered payment approach for PHP services under
which we paid one amount for days with 3 services under APC 0172 (Level
1 Partial Hospitalization) and a higher amount for days with 4 or more
services under APC 0173 (Level 2 Partial Hospitalization). We refer
readers to section X.B. of the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68688 through 68693) for a full discussion of the two-
tiered payment system. In addition, for CY 2009, we finalized our
policy to deny payment for any PHP claims submitted for days when fewer
than 3 units of therapeutic services are provided (73 FR 68694).
Furthermore, for CY 2009, we revised the regulations at 42 CFR
410.43 to codify existing basic PHP patient eligibility criteria and to
add a reference to current physician certification requirements under
42 CFR 424.24 to conform our regulations to our longstanding policy (73
FR 68694 through 68695). These changes have helped to strengthen the
PHP benefit. We also revised the partial hospitalization benefit to
include several coding updates. We refer readers to section X.C.3. of
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695
through 68697) for a full discussion of these requirements.
For CY 2010, we retained the two-tiered payment approach for PHP
services and used only hospital-based PHP data in computing the PHP APC
per diem costs, upon which PHP APC per diem payment rates are based. We
used only hospital-based PHP data because we were concerned about
further reducing both PHP APC per diem payment rates without knowing
the impact of the policy and payment changes we made in CY 2009.
Because of the 2-year lag between data collection and rulemaking, the
changes we made in CY 2009 were reflected for the first time in the
claims data that we used to determine payment rates for the CY 2011
rulemaking (74 FR 60556 through 60559).
In CY 2011, in accordance with section 1301(b) of the Health Care
and Education Reconciliation Act of 2010 (HCERA 2010), we amended the
description of a PHP in our regulations to specify that a PHP must be a
distinct and organized intensive ambulatory treatment program offering
less than 24-hour daily care other than in an individual's home or in
an inpatient or residential setting. In addition, in accordance with
section 1301(a) of HCERA 2010, we revised the definition of a CMHC in
the regulations to conform to the revised definition now set forth
under section 1861(ff)(3)(B) of the Act. We discussed our finalized
policies for these two provisions of HCERA 2010 in section X.C. of the
CY 2011 OPPS/ASC final rule with comment period (75 FR 71990).
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
71994), we also established four separate PHP APC per diem payment
rates, two for CMHCs (for Level 1 and Level 2 services) and two for
hospital-based PHPs (for Level 1 and Level 2 services), based on each
provider's own unique data. As stated in the CY 2011 OPPS/ASC proposed
rule (75 FR 46300) and the final rule with comment period (75 FR
71991), for CY 2011, using CY 2009 claims data, CMHC costs had
significantly decreased again. We attributed the decrease to the lower
cost structure of CMHCs compared to hospital-based PHP providers, and
not the impact of the CY 2009 policies. CMHCs have a lower cost
structure than hospital-based PHP providers, in part, because the data
showed that CMHCs generally provide fewer PHP services in a day and use
less costly staff than hospital-based PHPs. Therefore, it was
inappropriate to continue to treat CMHCs and hospital-based providers
in the same manner regarding payment, particularly in light of such
disparate differences in costs. We also were concerned that paying
hospital-based PHPs at a lower rate than their cost structure reflects
could lead to hospital-based PHP closures and possible access problems
for Medicare beneficiaries because hospital-based PHPs are located
throughout the country and, therefore, offer the widest access to PHP
services. Creating the four payment rates (two for CMHCs and two for
hospital-based PHPs) based on each provider's data supported continued
access to the PHP benefit, while also providing appropriate payment
based on the unique cost structures of CMHCs and hospital-based PHPs.
In addition, separation of data by provider type was supported by
several hospital-based PHP commenters who responded to the CY 2011
OPPS/ASC proposed rule (75 FR 71992).
For CY 2011, we instituted a 2-year transition period for CMHCs to
the CMHC APC per diem payment rates based solely on CMHC data. For CY
2011, under the transition methodology, CMHC PHP APCs Level 1 and Level
2 per diem costs were calculated by taking 50 percent of the difference
between the CY 2010 final hospital-based PHP median costs and the CY
2011 final CMHC median costs and then adding that number to the CY 2011
final CMHC median costs. A 2-year transition under this methodology
moved us in the direction of our goal, which is to pay appropriately
for PHP services based on each provider type's data, while at the same
time allowing providers time to adjust their business operations and
protect access to care for beneficiaries. We also stated that we would
review and analyze the data during the CY 2012 rulemaking cycle and,
based on these analyses, we might further refine the payment mechanism.
We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule
with comment period (75 FR 71991 through 71994) for a full discussion.
After publication of the CY 2011 OPPS/ASC final rule with comment
period, a CMHC and one of its patients filed an application for a
preliminary injunction, challenging the OPPS payment rates for PHP
services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 71995). We refer readers to
the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, 2011 WL
3102049 (W.D.Tex. 2011), aff'd, 684 F.3d 527 (5th Cir. 2012) (Paladin).
The plaintiffs in the Paladin case challenged the agency's use of cost
data derived from both hospitals and CMHCs in determining the relative
payment weights for the OPPS payment rates for PHP services furnished
by CMHCs, alleging that section 1833(t)(2)(C) of the

[[Page 70455]]

Act requires that such relative payment weights be based on cost data
derived solely from hospitals. As discussed above, section
1833(t)(2)(C) of the Act requires CMS to establish relative payment
weights for covered OPD services (and any groups of such services)
based on hospital costs. Numerous courts have held that ``based on''
does not mean ``based exclusively on.'' On July 25, 2011, the District
Court dismissed the plaintiffs' complaint and application for a
preliminary injunction for lack of subject-matter jurisdiction, which
the plaintiffs appealed to the United States Court of Appeals for the
Fifth Circuit. On June 15, 2012, the Court of Appeals affirmed the
District Court's dismissal for lack of subject-matter jurisdiction and
found that the Secretary's payment rate determinations for PHP services
are not a facial violation of a clear statutory mandate (Paladin, 684
F.3d at 533).
For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74348 through 74352), we determined the relative
payment weights for PHP services provided by CMHCs based on data
derived solely from CMHCs and the relative payment weights for
hospital-based PHP services based exclusively on hospital data. The
statute is reasonably interpreted to allow the relative payment weights
for the OPPS payment rates for PHP services provided by CMHCs to be
based solely on CMHC data and relative payment weights for hospital-
based PHP services to be based exclusively on hospital data. Section
1833(t)(2)(C) of the Act requires the Secretary to establish relative
payment weights for covered OPD services (and any groups of such
services described in subparagraph (B)) based on hospital costs. In
pertinent part, subparagraph (B) provides that the Secretary may
establish groups of covered OPD services so that services classified
within each group are comparable clinically and with respect to the use
of resources. In accordance with subparagraph (B), we developed the PHP
APCs, as set forth in Sec. 419.31 of the regulations (65 FR 18446 and
18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed
above, PHP services are grouped into APCs.
Based on section 1833(t)(2)(C) of the Act, we believe that the word
``establish'' can be interpreted as applying to APCs at the inception
of the OPPS in 2000 or whenever a new APC is added to the OPPS. In
creating the original APC for PHP services (APC 0033), we did
``establish'' the initial relative payment weight for PHP services,
provided in both hospital-based and CMHC-based settings, only on the
basis of hospital data. Subsequently, from CY 2003 through CY 2008, the
relative payment weights for PHP services were based on a combination
of hospital and CMHC data. For CY 2009, we established new APCs for PHP
services based exclusively on hospital data. Specifically, we adopted a
two-tiered APC methodology (in lieu of the original APC 0033) under
which CMS paid one rate for days with 3 services (APC 0172) and a
different payment rate for days with 4 or more services (APC 0173).
These two new APCs were established using only hospital data. For CY
2011, we added two new APCs (APCs 0175 and 0176) for PHP services
provided by hospitals and based the relative payment weights for these
APCs solely on hospital data. APCs 0172 and 0173 were designated for
PHP services provided by CMHCs and were based on a mixture of hospital
and CMHC data. As the Secretary argued in the Paladin case, the courts
have consistently held that the phrase ``based on'' does not mean
``based exclusively on.'' Thus, the relative payment weights for the
two APCs for PHP services provided by CMHCs in CY 2011 were ``based
on'' hospital data, no less than the relative payment weights for the
two APCs for hospital-based PHP services.
Although we used hospital data to establish the relative payment
weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we
believe that we have the authority to discontinue the use of hospital
data in determining the OPPS relative payment weights for PHP services
provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make
plain that the data source for the relative payment weights is subject
to change from one period to another. Section 1833(t)(2)(C) of the Act
provides that, in establishing the relative payment weights, the
Secretary shall use data on claims from 1996 and use data from the most
recent available cost reports. We used 1996 data (in addition to 1997
data) in determining only the original relative payment weights for
2000. In the ensuing calendar year updates, we continually used more
recent cost report data.
Moreover, section 1833(t)(9)(A) of the Act requires the Secretary
to review not less often than annually and revise the groups, the
relative payment weights, and the wage and other adjustments described
in paragraph (2) to take into account changes in medical practice,
changes in technology, the addition of new services, new cost data, and
other relevant information and factors. For purposes of the CY 2012
update, we exercised our authority under section 1833(t)(9)(A) of the
Act to change the data source for the relative payment weights for PHP
services provided by CMHCs based on new cost data, and other relevant
information and factors.
In the CY 2014 OPPS/ASC final rule with comment period, we
finalized our proposal to base the relative payment weights that
underpin the OPPS APCs, including the four PHP APCs, on geometric mean
costs rather than on the median costs. For CY 2014, we established the
four PHP APC per diem payment rates based on geometric mean cost levels
calculated using the most recent claims and cost data for each provider
type. We refer readers to the CY 2014 OPPS/ASC final rule with comment
period for a more detailed discussion (78 FR 75047 through 75050).
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66902
through 66908), we continued to apply our established policies to
calculate the four PHP APC per diem payment rates based on PHP APC
geometric mean per diem costs using the most recent claims and cost
data for each provider type.

B. PHP APC Update for CY 2016

1. PHP APC Geometric Mean per Diem Costs
In the CY 2016 OPPS/ASC proposed rule (80 FR 39290 through 39299),
for CY 2016, we proposed to continue to apply our established policies
to calculate the four PHP APC per diem payment rates based on geometric
mean per diem costs using the most recent claims and cost data for each
provider type. We proposed to compute CMHC PHP APC geometric mean per
diem costs for Level 1 (3 services per day) and Level 2 (4 or more
services per day) PHP services using only CY 2014 CMHC claims data and
the most recent cost data, and hospital-based PHP APC geometric mean
per diem costs for Level 1 and Level 2 PHP services using only CY 2014
hospital-based PHP claims data and the most recent cost data. These
proposed geometric mean per diem costs were shown in Tables 50 and 51
of the CY 2016 OPPS/ASC proposed rule (80 FR 39295). To prevent
confusion, we referred to the per diem information listed in Tables 50
and 51 of the CY 2016 OPPS/ASC proposed rule as the proposed PHP APC
per diem costs or the proposed PHP APC geometric mean per diem costs,
and the per diem information listed in Addendum A to the CY 2016 OPPS/
ASC proposed rule as the proposed PHP APC per diem payment rates or the
proposed PHP APC geometric mean per diem

[[Page 70456]]

payment rates. The PHP APC per diem costs are the provider-specific
costs derived from the most recent claims and cost data. The PHP APC
per diem payment rates are the national unadjusted payment rates
calculated after applying the OPPS budget neutrality adjustments
described in sections II.A.4. and II.B. of the CY 2016 OPPS/ASC
proposed rule and this final rule with comment period.
As part of the effort to increase the accuracy of the PHP per diem
costs, we completed an extensive analysis of the claims and cost data,
which included provider service usage, coding practices, and the
ratesetting methodology. As part of our analysis, we also identified
aberrant data from several providers that impacted the calculation of
the proposed PHP geometric mean per diem costs. Aberrant data are
claims and/or cost data that are so abnormal that they skew the
resulting geometric mean per diem costs. For example, we found claims
with excessive CMHC charges resulting in CMHC geometric mean costs per
day that were approximately the same as or more than the daily payment
for inpatient psychiatric facility services. For an outpatient program
like PHP, because it does not incur room and board costs such as an
inpatient stay would, these costs per day were excessive. In addition,
we found some CMHCs had very low costs per day (less than $25 per day).
We stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39293) that
without using a trimming process, the data from these providers would
inappropriately skew the geometric mean per diem cost for Level 2 CMHC
PHP services. Without the trim, the CMHC PHP APC geometric mean per
diem cost was $172.62 for Level 2 services, which significantly
diverges from the median cost per day of $148.14. When data are not
skewed and are normally distributed, measures of central tendency such
as the median and geometric mean will be very similar to each other.
The differences between these two measures for CMHCs suggested skewing.
Further analysis of the data confirmed that there were a few providers
with extreme cost per day values, which led us to propose using a
2 standard deviation trim.
During our claims and cost data analysis, we also found aberrant
data from some hospital-based PHP providers. Nearly all hospital-based
PHPs recorded their costs using cost center 9000 (``Clinic'') as the
source for the CCR for individual or group therapy services,
psychiatric testing, and education/training services. These services
comprise the majority of the PHP services provided. The existing OPPS
3 standard deviation trim removed very extreme CCRs for
cost center 9000, which were less than 0.0206 or greater than 28.3446,
by defaulting two providers that failed this trim to their overall
hospital ancillary CCR. However, the calculation of the 3
standard deviations used to define the trim for cost center 9000 was
influenced by these two providers, which had very extreme CCRs of
178.0224 and 272.4451. Because these two hospital-based PHP providers
remained in the data when we calculated the boundaries of the OPPS
3 standard deviation trim, the upper limit of the trim
boundaries was fairly high, at 28.3446. As such, some aberrant CCRs for
cost center 9000 were not trimmed out, and still had high values
ranging from 6.3840 to 19.996. We note in section II.D. of the CY 2016
OPPS/ASC proposed rule that OPPS defines a biased CCR as one that falls
outside the predetermined ceiling threshold for a valid CCR; using CY
2014 cost report data, that threshold is 1.5. The hospital CCR ceiling
thresholds or upper limits are available online at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files-Items/2015-Annual-Policy-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39293), we stated that
we are concerned that including aberrant data in the calculation of the
hospital-based PHP per diem payment rates would inappropriately skew
these payment rates. When we included these aberrant CCRs, which ranged
from 6.3840 to 19.996, in hospital-based PHP cost modeling, the
geometric mean per diem costs were $267.04 for Level 1 services and
$223.39 for Level 2 services. We noted that the geometric mean per diem
cost of the hospital-based PHP Level 1 APC was greater than that of the
hospital-based PHP Level 2 APC, despite fewer services being provided.
This occurred because a relatively higher share of high-CCR service
days was reported for hospital-based PHP Level 1 services compared to
hospital-based PHP Level 2 services. Due to the low volume of hospital-
based PHP Level 1 services, the effect of the high-CCR service days on
the resulting proposed geometric mean per diem costs was relatively
greater than the effect of the high-CCR service days on the resulting
proposed Level 2 geometric mean per diem costs. As such, the hospital-
based Level 1 PHP APC geometric mean per diem costs were higher than
the proposed geometric mean per diem costs for the hospital-based Level
2 PHP APC.
In order to reduce or eliminate the impact of including aberrant
data received from a few CMHCs and hospital-based PHP providers in the
claims data used for ratesetting, in the CY 2016 OPPS/ASC proposed rule
(80 FR 39293), we proposed to use a 2 standard deviation
trim for CMHCs and to apply a CCR greater than five (CCR>5) hospital
service day trim for hospital-based PHP providers for CY 2016 and
subsequent years.
Under the 2 standard deviation trim proposal, we
proposed to exclude any CMHC when the CMHC's cost per day is more than
2 standard deviations from the geometric mean cost per day
for all CMHCs. Our proposed trim on total CMHC costs per day is
performed before stratifying the data by payment tiers (Level 1 and
Level 2 CMHC PHP APCs), and affects both CMHC payment tiers. For
example, based on our CY 2014 claims data used for the proposed CY 2016
ratesetting, the geometric mean cost per day for all CMHCs before
trimming is $168.16. Using the 2 standard deviation trim,
three providers with geometric mean costs per day ranging from as low
as $23.50 to as high as $996.71 were excluded from the ratesetting for
CY 2016. Excluding providers with extremely low or extremely high costs
per day protects CMHCs from having those extreme costs per day
inappropriately skew the CMHC PHP APC geometric mean per diem costs. In
addition, we proposed to use a 2 standard deviation trim
because, when we used this methodology, it aligned the geometric mean
and median per diem costs for the CMHC Level 2 PHP APC payment tier,
which also indicates that the trim removed the skewing in the data
caused by the inclusion of aberrant data received from the three
providers. We stated that we believe that the 2 standard
deviation trim would exclude CMHCs with aberrant data from the
ratesetting process while allowing for the use of as much data as
possible. In addition, we stated that implementing a 2
standard deviation trim on CMHCs would target these aberrancies without
limiting overall per diem cost increases. A 2 standard
deviation trim also is an accepted statistical approach for objectively
mitigating extreme data. For normally distributed data, 2
standard deviations from the mean capture approximately 95 percent of
the data.
In the proposed rule, we applied the 2 standard
deviation trim to the geometric mean costs per day at the CMHC level.
This application would exclude those CMHCs with costs per

[[Page 70457]]

day 2 standard deviations from the geometric mean cost per
day for all CMHCs. Under this proposal, three CMHCs with aberrant data
would be removed from the ratesetting calculations. The exclusion of
these three CMHCs removed from modeling 2,296 CMHC claims out of 25,383
total CMHC claims. We believe that removing aberrant data from modeling
helps prevent inappropriate fluctuations in the payment rates. The
resulting proposed CMHC Level 2 PHP APC geometric mean per diem costs
would be $147.51. The CMHC Level 1 PHP APC geometric mean per diem
costs actually increased slightly when the trim was applied, from
$103.10 to $105.82.
We determined that proposing to use a higher trim level, such as
2.5 or 3 standard deviations from the geometric
mean, did not reduce the skewing caused by the inclusion of data from a
few CMHC providers. In other words, using a higher trim level did not
remove the CMHCs with aberrant data from the ratesetting process.
Further, we stated that we believe that using a trim level lower than
2 standard deviations would remove too much data. If a data
distribution is approximately normally distributed, approximately 68
percent of the data fall within 1 standard deviation of the
mean, and approximately 95 percent of the data fall within 2 standard deviations of the mean. Our goal was to remove
outliers while using as much of the CMHC data as possible.
We did not propose the CCR>5 service day trim for CMHCs, because
longstanding PHP OPPS methodology defaults any CMHC CCR>1 to the
statewide hospital ancillary CCR (we refer readers to the following
section for a review of the PHP OPPS ratesetting methodology). Hospital
statewide CCRs have been less than 1 and are available on the CMS Web
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files-Items/2015-Annual-Policy-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending. In our
CY 2016 proposed ratesetting process, we identified only one CMHC that
had a CCR>1. This CMHC's CCR was 1.019, and was defaulted to its
appropriate hospital statewide CCR for CY 2016 ratesetting purposes.
We considered applying the 2 standard deviation trim to
hospital-based PHP providers as well. However, the 2
standard deviation trim would have removed 25 hospital-based PHP
providers with aberrant data out of 387 hospital-based PHP providers.
We were concerned about removing data from that many providers, and
sought an alternative that allowed for use of more of the data.
Therefore, we proposed a trim on CCRs, which we believe would be more
effective in removing aberrant data and allowing the use or retention
of more data. Trims on hospital and CMHC CCRs are already used with the
OPPS system, but due to the two very extreme outlier CCRs for cost
center 9000 previously mentioned, the OPPS 3 standard
deviation trim on hospital cost center 9000 CCRs had a higher upper
limit than usual, and therefore did not trim all the claims with
aberrant CCRs. As such, claims with aberrant data remained for some
hospital-based PHPs. Therefore, for hospital-based PHPs, we proposed to
apply a trim on hospital service days when the CCR>5 at the cost center
level.
Under our proposal, the CCR>5 hospital service day trim would
remove hospital-based PHP service days that use a CCR>5 to calculate
costs for at least one of their component services. Unlike the 2 standard deviation trim, which excludes CMHC providers that
fail the trim, the CCR>5 trim would exclude any hospital-based PHP
service day where any of the services on that day are associated with a
CCR>5. For example, assume a hospital-based PHP had a claim with a
service day with one individual therapy service, two group therapy
services, and one occupational therapy service. Assume that the
hospital-based PHP's cost center CCRs associated with these services
were 0.6, 0.6, 0.6, and 6.7, respectively. Because the CCR associated
with the occupational therapy service is greater than 5, this
particular day, and all other days for this provider where occupational
therapy services were provided, would be excluded from the data used in
ratesetting. Applying this trim removed service days from seven
hospital-based PHP providers. After applying the CCR>5 trim, the Level
1 hospital-based PHP APC geometric mean per diem cost changed from
$267.04 to $195.73, and the Level 2 hospital-based PHP geometric mean
per diem cost changed from $223.39 to $218.93. Without including the
aberrant CCR service days in the data used to calculate the proposed
hospital-based PHP APC geometric mean per diem costs, the Level 1
hospital-based PHP APC geometric mean per diem cost is less than the
Level 2 hospital-based PHP APC geometric mean per diem cost.
As an alternative to these proposals for CMHCs and hospital-based
PHPs, we considered proposing a 15-percent cap on changes in the
geometric mean per diem costs. This cap would limit the increase or the
decrease in the geometric mean per diem costs from one year to the next
by capping the change at 15 percent. This cap also would protect
providers from fluctuations in PHP APC per diem payment rates due to
large increases or declines in the geometric mean per diem costs.
However, we did not propose this alternative because we believe that
establishing such a cap would not specifically target aberrant data
from a minority of providers, which was the purpose of our proposals.
Targeting aberrant data is important in order to help stabilize the
PHP APC geometric mean per diem costs for both CMHCs and hospital-based
PHP services. As we receive updated claims and cost files, and as we
continue analyzing PHP data, it is possible that the PHP trims that we
proposed may need refinement. We stated in the CY 2016 OPPS/ASC
proposed rule (80 FR 39294) that we would propose any changes to the
methodology that we finalize later this year through future notice-and-
comment rulemaking.
Therefore, for CY 2016 and subsequent years, we proposed to exclude
any CMHC when the CMHC's costs per day are more than 2
standard deviations from the geometric mean cost per day for all CMHCs
(Level 1 and Level 2), and to exclude hospital-based PHP service days
when a CCR>5 is used to calculate costs for at least one of their
component services (Level 1 and Level 2).
The CY 2016 proposed PHP APC geometric mean per diem costs for
CMHCs calculated under the proposed CY 2016 methodology using CY 2014
claims data and the most recent cost data were $105.82 for Level 1 (3
services per day) CMHC PHP services, and were $147.51 for Level 2 (4 or
more services per day) CMHC PHP services.
The CY 2016 proposed PHP APC geometric mean per diem costs for
hospital-based PHPs calculated under the proposed CY 2016 methodology
using CY 2014 claims data and the most recent cost report data were
$195.73 for Level 1 (3 services per day) hospital-based PHP services,
and were $218.93 for Level 2 (4 or more services per day) hospital-
based PHP services. As we stated in the CY 2016 OPPS/ASC proposed rule
(80 FR 39295), we recognize that several factors may cause a
fluctuation in the PHP APC per diem payment rates, including direct
changes to the PHP APC per diem costs (for example, establishing
separate APCs and associated per diem payment rates for CMHCs and
hospital-based providers based on the provider type's costs), changes
to the OPPS (for example, basing the relative payment weights on

[[Page 70458]]

geometric mean costs), and provider-driven changes (for example, a
provider's decision to change its mix of services or to change its
charges and clinical practice for some services). We refer readers to a
more complete discussion of this issue in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75049).
The proposed CY 2016 PHP APC geometric mean per diem costs for the
CMHC and hospital-based PHP APCs were shown in Tables 50 and 51 of the
CY 2016 OPPS/ASC proposed rule (80 FR 39295). We noted that Tables 50
and 51 of the proposed rule displayed the proposed PHP APC renumbering
that is part of the proposed reorganization of OPPS APCs described in
section III.D. of the proposed rule. Specifically, we proposed to
renumber the four PHP APCs, that is, APCs 0172, 0173, 0175, and 0176,
as APCs 5851, 5852, 5861, and 5862, respectively. As noted earlier in
this section, we referred readers to Addendum A to the proposed rule
(which is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html) for the proposed PHP APC payment rates. We invited
public comments on these proposals.
Comment: Commenters supported the proposed increase in the PHP
payment rates based on the geometric mean per diem costs calculated
using CY 2014 claims data. One commenter validated the accuracy of the
payment rates by replicating CMS' cost calculations using the CY 2014
claims data. The commenter agreed with the proposed trimming
methodologies to remove aberrant data and believed that these
methodologies would help mitigate inappropriate fluctuations in payment
rates which have occurred in recent years. One commenter noted that
service utilization seems to have stabilized after several years of
decrease, and thanked CMS for the work it has done on PHP payment
policies. Another commenter supported removing aberrant data, but
believed that the same trims should have been used for determining the
geometric mean per diem costs for both CMHCs and hospital-based PHPs.
Response: We appreciate the commenters' support of the proposed PHP
APC payment rates based on the geometric mean per diem costs calculated
using the most recent claims and cost report data and the proposed
trimming methodologies. As discussed below, we are finalizing our
proposed trimming methodologies without modification for CY 2016 and
subsequent years. We also are finalizing our methodology for
calculating the two CMHC PHP APC geometric mean per diem costs without
modification, but are finalizing our methodology for calculating the
two hospital-based PHP APC geometric mean per diem costs with
modification so that we pay a higher payment rate for the PHP APC for
Level 2 services than the PHP APC for Level 1 services, as discussed
below.
We agree with the commenter that PHP utilization has stabilized,
and that the trimming methodologies we proposed and are finalizing in
this final rule with comment period may help to stabilize the PHP APC
payment rates by mitigating fluctuations in payment rates caused by
extremely low or high costs that inappropriately skew the geometric
mean per diem costs. We believe that our inclusion of the detailed PHP
ratesetting methodology in the CY 2016 OPPS/ASC proposed rule (80 FR
39295 through 39299) and in this final rule with comment period will
lead to greater accuracy in provider reporting of claims and cost data,
and thereby lead to greater accuracy in ratesetting and more stability
in the PHP APC per diem costs. We encourage all PHP providers to review
their accounting and billing processes to ensure that their costs are
included in the data used for PHP ratesetting.
With regard to the commenter's concern that the same trims should
be used for both CMHCs and hospital-based PHPs, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39293), we proposed to use a 2
standard deviation trim for CMHCs and to apply a CCR>5 hospital service
day trim for hospital-based PHP providers for CY 2016 and subsequent
years. As noted in section VIII.B.2. of this final rule with comment
period, there are differences in the ratesetting process between
hospital-based PHPs and CMHCs, which are largely due to differences
between the hospital cost reports and the CMHC cost reports, and we
believe that having different trims more appropriately targets aberrant
data for each provider type. We did not propose the CCR>5 service day
trim for CMHCs because the longstanding PHP OPPS methodology defaults
any CMHC CCR>1 to the statewide hospital ancillary CCR, and hospital
statewide CCRs have been less than 1. In our CY 2016 final ratesetting
process, we identified only one CMHC that had a CCR>1. This CMHC's CCR
was 1.019, and was defaulted to its appropriate hospital statewide CCR
for CY 2016 ratesetting purposes. We considered applying the 2 standard deviation trim to hospital-based PHP providers.
However, as stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39294),
the 2 standard deviation trim would have removed 25
hospital-based PHP providers with aberrant data out of 387 hospital-
based PHP providers. Using updated data for this final rule with
comment period, this 2 standard deviation trim would have
removed 22 hospital-based PHP providers with aberrant data out of 388
hospital-based PHP providers. We are concerned about removing data from
that many providers, and the alternative we proposed and are finalizing
allows for use of more data from hospital-based providers. We believe
the trim on CCRs will be more effective in removing aberrant data and
will allow for the use and retention of more data. For these reasons,
we continue to believe the trims that we proposed and are finalizing in
this final rule with comment period are appropriate and effective for
each provider type. We plan to review the trims annually, and would
propose any changes to the trimming methodologies in future rulemaking
as needed.
For this CY 2016 OPPS/ASC final rule with comment period, we used
updated claims and cost data from the final June 2015 update of the CY
2014 Standard Analytic File (SAF) outpatient claims, the June 2015
update of the HCRIS (for development of hospital and statewide CCRs),
and the July 2015 update of the OPSF (for development of CMHC CCRs).
There were 66 CMHCs based on updated CY 2014 claims data in these
files, and all 66 of these providers had CCR data reported in the July
2015 OPSF. We used each CMHC's most recent CCR from the OPSF. As stated
previously, only one CMHC was defaulted to its statewide ancillary CCR
because it had a CCR greater than 1. Two CMHCs were excluded from
modeling because their CCRs failed the OPPS-wide 3 standard
deviation trim. These two providers had CCRs that were extremely low
(CCRs of 0.001 and 0).
The CMHC per diem cost calculations were based upon the actual
charges CMHCs reported on their claims, multiplied by the CCRs
calculated from the actual costs reported on their cost reports. The
data showed that there were some extreme costs per day that ranged from
a low of $10.50 per day to a high of $2,213.83 per day. The 2 standard deviation trim removed CMHCs with costs below $39.47
per day or above $640.29 per day from the cost calculations, resulting
in the exclusion of two CMHCs. In addition, three CMHCs were removed
because all of these CMHCs' service days had zero payments reported.
The final CY 2016 geometric mean per diem costs are

[[Page 70459]]

$98.88 for CMHCs Level 1 PHP services and $149.64 for CMHC Level 2 PHP
services, after we apply the 2 standard deviation trim and
follow the existing OPPS ratesetting procedures.
For this CY 2016 OPPS/ASC final rule with comment period, there
were 400 hospital-based PHPs based on updated claims and cost data. We
used the CCRs calculated at the departmental level from the most recent
hospital cost reports, following the revenue-code-to-cost-center
crosswalk described in section VIII.B.2 of the CY 2016 OPPS/ASC
proposed rule and of this final rule with comment period. Hospital-
based PHPs without a valid CCR calculated from costs in the primary,
secondary, or tertiary cost centers of the crosswalk were defaulted to
their hospital's overall ancillary CCR. Ninety-eight hospital-based
PHPs had at least one PHP revenue center CCR defaulted to the overall
ancillary CCR. We excluded service days for 6 hospital-based PHPs that
failed the proposed CCR>5 trim (before the trim, the CCRs ranged
between 0.0116 and 19.9996), which resulted in excluding all of these 6
providers' service days. We also excluded service days for 2 hospital-
based PHPs that failed the longstanding OPPS trim based on service days
with costs per day greater than 3 standard deviations from
the geometric mean. Again, this resulted in excluding all the service
days for 2 hospital-based PHPs. Finally, 12 hospital-based PHPs were
excluded because all their service days had zero payments reported,
reducing the total population by 20 providers. As a result, 380 total
hospital-based PHPs were used for modeling.
The hospital-based PHP per diem cost calculations were based upon
the actual charges hospital-based PHPs reported on their claims,
multiplied by the CCRs calculated from the actual costs reported on
their cost reports, after applying the proposed trim based on service
days with a CCR>5 and following the usual OPPS ratesetting procedures.
Using the most updated data, the resulting hospital-based PHP geometric
mean per diem costs showed an inversion, with the hospital-based PHP
Level 1 geometric mean per diem costs equaling $218.46 and the
hospital-based PHP Level 2 geometric mean per diem costs equaling
$198.43. While our proposed trim of service days with a CCR>5 was
effective in removing service days associated with aberrant CCRs, it
does not address low or high costs per day that result when a non-
aberrant CCR is multiplied by low or high charges. The inverted
geometric mean per diem costs were influenced by two large-volume
hospital-based PHP providers of Level 2 PHP services, which had low
costs of $93 per day, and three large-volume hospital-based PHP
providers of Level 1 PHP services, which had high costs ranging between
$631 and $1,732 per day. We evaluated the hospital-based Level 1 and
Level 2 service day utilization to determine if Level 1 services
included more individual therapy, which is more costly than group
therapy, and which could explain higher Level 1 costs in spite of
providing fewer services. However, based on updated data, we found that
hospital-based PHP Level 2 services had a slightly higher percentage of
more costly individual therapy days than hospital-based PHP Level 1
services. The percentage of hospital-based PHP Level 1 group therapy
days was nearly identical to the percentage of hospital-based PHP Level
2 group therapy days. Therefore, we believe that the inversion is due
to the influence of a few large volume providers.
We also examined the data without applying any trim and after
applying the 2 standard deviation trim to the updated
hospital-based PHP data as we did for CMHCs. Under both of these
scenarios, the inversion existed. When we did not apply any trim, we
continued to have a problem with aberrant data significantly skewing
the geometric mean per diem costs. When we applied the 2
standard deviation trim, the resulting geometric mean per diem costs
were not as extreme, but the trim would have removed 22 hospital-based
PHPs from the data, which we believe would have removed too many
providers. Further, the five large volume providers discussed above
with low or high costs were still present in the data after these
adjustments had been made.
Therefore, we believe that our proposed CCR>5 trim is the most
appropriate and effective methodology for removing aberrant data while
allowing for the use and retention of data from hospital-based PHP
providers. Although the inversion in the rates exists with this trim,
we believe it was due to five hospital-based PHPs that had costs per
day that were either low or high relative to other providers, but these
costs are not what we would consider aberrant. Therefore, we are
finalizing this policy without modification. We encourage all hospital-
based PHP providers to review the revenue to cost-center crosswalk to
ensure accurate recording of their PHP costs and to ensure that the
relationship between hospital-based PHP charges and hospital-based PHP
costs is accurately reflected in the hospital-based PHP CCRs.
However, we are concerned about the PHP APC geometric mean per diem
costs, which are the basis for the PHP APC payment rates, being lower
for the provision of more services. As such, we are making an
adjustment to the hospital-based PHP APC geometric mean per diem costs
to more equitably and appropriately pay for hospital-based PHP
services. Section 1833(t)(2)(E) of the Act states that the Secretary
shall establish, in a budget neutral manner, other adjustments as
determined to be necessary to ensure equitable payments. The authority
granted to the Secretary under this provision is broad. We believe that
it is not appropriate or equitable to pay a lower payment rate for the
hospital-based PHP APC for Level 2 services, under which 4 or more
services are provided, than for the hospital-based PHP APC for Level 1
services, under which 3 PHP services are provided. Using the authority
set forth in section 1833(t)(2)(E) of the Act, we are making an
equitable adjustment to correct the inversion in the data for CY 2016.
While we considered various methods to equitably adjust these
rates, we ultimately decided to adjust the inverted per diem costs by
first calculating the average percent difference between Level 1 and
Level 2 per diem costs for the last 3 years. The method we chose is
equitable in that it adjusts the inverted Level 1 and Level 2 per diem
costs by the same factor, to result in a percent difference between
these two per diem costs that is the same as the historical 3-year
average. To make the adjustment, we first calculated the average
percent difference between the hospital-based PHP APC per diem costs
for Level 1 and Level 2 services from CY 2013 to CY 2015. We believe a
3-year timeframe is sufficient to reflect recent cost trends. We
calculated the percent difference in hospital-based per diem costs for
Level 1 and for Level 2 services using the per diem costs presented in
the CY 2013, CY 2014, and CY 2015 OPPS/ASC final rules with comment
period. For each of these 3 calendar years, we subtracted the hospital-
based PHP Level 1 per diem cost from the hospital-based PHP Level 2 per
diem cost, and then divided that result by the hospital-based PHP Level
1 per diem cost to calculate the percent difference. We then took the
average of these three percent differences, which equaled 15.96
percent, based on the CY 2013 to CY 2015 final per diem costs. We then
decreased the actual CY 2016 hospital-based PHP APC geometric mean per
diem costs for Level 1 and increased the actual CY 2016 hospital-

[[Page 70460]]

based PHP APC geometric mean per diem costs for Level 2 hospital-based
by the same factor, to result in a 15.96 percent difference.
To equitably adjust the inverted per diem costs, we calculate this
unknown factor by which to increase or decrease the inverted per diem
costs to result in a 15.96 percent difference between those per diem
costs. We used the following formula to solve for this factor:
[GRAPHIC] [TIFF OMITTED] TR13NO15.000

When we use the above formula with the hospital-based PHP APC
geometric mean per diem costs with the inversion and the equitable
adjustment factor ``x'' to correct the inversion, the formula and
resulting calculation become:
[GRAPHIC] [TIFF OMITTED] TR13NO15.001

We then solve for the value of ``x'' using algebra, to result in a
factor of 12.1525 percent. If we increase the CY 2016 inverted
hospital-based PHP APC geometric mean per diem costs for Level 2
services by 12.1525 percent, and decrease the CY 2016 hospital-based
PHP hospital-based PHP APC geometric mean per diem costs for Level 1
services by 12.1525 percent, the resulting CY 2016 hospital-based PHP
APC per diem cost for Level 1 services is $191.91 and the resulting CY
2016 hospital-based PHP APC per diem cost for Level 2 services is
$222.54. The percentage difference between these two equitably adjusted
per diem costs is 15.96 percent. We are finalizing these equitably
adjusted hospital-based PHP APC per diem costs for CY 2016.
Comment: One commenter was concerned about the small sample size of
CMHCs and data used for calculating the geometric mean per diem costs,
and noted that CMHCs with annual revenues of less than $100,000 are not
required to file a full cost report. The commenter also stated that CMS
does not collect salary information from CMHCs on their cost reports.
One commenter believed that CMHCs are being unfairly penalized for
providing more cost effective services than hospital-based PHPs.
Another commenter expressed concern regarding the continued
establishment of CMHC payment rates at levels that are below average
geometric mean costs.
Response: As discussed previously in this final rule with comment
period, there were 66 CMHCs based on updated CY 2014 claims data in
these files, and all 66 of these providers had entries with CCR data
reported in the July 2015 OPSF. We used each CMHC's most recent CCR
from the OPSF. As stated previously, only one CMHC was defaulted to its
statewide ancillary CCR because it had a CCR greater than 1. Two CMHCs
were excluded from modeling because their CCRs failed the OPPS-wide
3 standard deviation trim. These two providers had CCRs
that were extremely low (CCRs of 0.001 and 0). The 2
standard deviation trim removed CMHCs with costs below $39.47 per day
or above $640.29 per day from the cost calculations, resulting in the
exclusion of two CMHCs. In addition, three CMHCs were removed because
all of the CMHCs' service days had zero payments reported. Therefore,
we removed a total of seven CMHCs from the ratesetting modeling. We do
not believe that the exclusion of these seven providers with aberrant
data excessively reduced the CMHC population, but rather it allowed for
the per diem cost determination to be based upon reasonable costs from
nearly all CMHCs. Further, only two of these CMHCs were excluded based
on the 2 standard deviation trim; the others were removed
under our current policies.
We acknowledge that, although all facilities must file a cost
report, MACs have established thresholds that they use in determining a
facility's eligibility to file less than a full cost report. MACs may
authorize a CMHC to file less than a full cost report when they
experience low or no Medicare utilization in a reporting period and
receive correspondingly low interim payment which, in the aggregate,
appears to justify making a final settlement for that period based on
less than a normally required full cost report. In these instances, the
MAC will require the CMHC to furnish the applicable information in
accordance with 42 CFR 413.24(h) and Section 110, Chapter 1 of the
Provider Reimbursement Manual--Part 2 (CMS Pub. 15-2). However, because
CMHC geometric mean per diem costs are the basis for CMHC ratesetting,
we encourage any CMHC that has been authorized by its MAC to file less
than a full cost report to instead file a full cost report.
In response to the comment that CMHCs are being unfairly penalized
for providing more cost effective services than hospital-based PHPs, we
disagree. We consider the effects of exclusions on the modeling
population for both CMHCs and hospital-based PHPs, and we review the
data that we receive to ensure that we pay appropriately for PHP
services furnished by both types of providers. We do not favor either
provider type. Our cost determinations are based upon the data provided
by hospitals and CMHCs using objective mathematical methods. The PHP
APC per diem rates based on PHP APC per diem costs, and because CMHC
PHP APC costs are lower than hospital-based PHP APC costs, CMHC
geometric mean per diem rates are lower than hospital-based PHP
geometric mean per diem rates.
With respect to the commenters' concerns that the CMHC per diem
payment rates are below the geometric mean per diem costs, the CMHC
calculated per diem rates are based on the actual reported costs of
CMHCs used in modeling. Those actual reported costs are used to
calculate the CMHC CCRs, which are applied to the charges CMHCs report
on their claims, and that result in estimated CMHC costs. Therefore,
the rates reflect the data provided by CMHCs. Those costs should
include allowable salary costs. The commenter who stated that CMS does
not collect salary costs on CMHC cost reports is mistaken. The CMHC
cost report provides a column for salaries for the following
categories: Drugs & Biologicals; Occupational Therapy; Psychiatric/
Psychological Services; Individual Therapy; Group Therapy;
Individualized Activity Therapies; Family Counseling; Diagnostic
Services; Patient Training & Education; and Other. These categories may
include salaries for a nurse or social worker, but we do not identify
these specific

[[Page 70461]]

practitioners with their own cost centers. However, the CMHC cost
report must not include the professional services of physicians,
physician assistants, or clinical psychologists if those services are
separately billable. CMHCs should review the cost reporting
instructions, which are available online in CMS Pub. 15-2, Chapter 18,
at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals.html.
Our review of the updated data for calculating the final geometric
mean per diem costs highlights the importance of all PHPs following the
cost reporting and claims accounting procedures discussed in section
VIII.B.2. of this final rule with comment period. CMHCs that do not
include allowable salary costs in their cost reports are inadvertently
removing appropriate costs from the ratesetting process. Likewise,
hospital-based PHPs that do not follow the revenue-code-to-cost-center
crosswalk when determining their costs may inadvertently remove
appropriate costs from the ratesetting process, as the OPPS modeling
for hospitals follows the crosswalk hierarchy. Finally, we note that
errors in revenue and HCPCS coding on claims, which occurred almost
exclusively on hospital-based PHP claims, also may result in removing
appropriate costs from ratesetting. We estimate that, overall,
hospital-based PHP costs were approximately $1.50 per day less than the
costs would have been if PHP providers had used the proper coding as
specified in the Claims Processing Manual.
Comment: Several commenters expressed concern regarding beneficiary
access to PHP services. One commenter questioned whether the proposed
changes would ensure continued beneficiary access and strengthen the
PHP benefit when most CMHCs have ceased providing PHP services and many
CMHCs have ceased doing business altogether. Two commenters stated that
CMS' expressed concern for paying hospital-based PHPs at a lower rate
than their cost structure could lead to closures and possible access
problems. These two providers stated that CMS statement about hospital-
based PHPs offering the widest access to PHP services because they are
located throughout the country implies a strong bias on behalf of
hospitals and a discriminatory stance towards CMHCs.
Response: We acknowledge the commenters' concerns regarding
beneficiary access to PHP services. The final PHP APC per diem costs
for CY 2016 reflect the costs of what providers expend to maintain such
programs, as reported on their claims and cost reports. In comparison
to the CY 2015 geometric mean per diem costs, the final CY 2016
geometric mean per diem costs decreased by 1.3 percent for Level 1 PHP
services provided by CMHCs. However, only 5 percent of CMHC service
days are billed as Level 1 PHP services. The final CY 2016 geometric
mean per diem costs increased substantially for Level 2 PHP services
provided by CMHCs, by 26.2 percent. Compared to the CY 2015 geometric
mean per diem costs for hospital-based PHPs, the final CY 2016
equitably adjusted hospital-based PHP per diem costs increased by 3.2
percent for Level 1 PHP services, and increased by 9.6 percent for
Level 2 PHP services. We believe that these per diem costs, which are
the basis for the payment rates, support continued beneficiary access
and strengthen the PHP benefit. Our PHP methodology provides for a
stable rate structure, and we do not believe that it favors one
provider type over another or diminishes access to PHP services. While
we recognize that CMHCs and hospital-based PHPs provide the same
services, our payment methodology requires that we make payments based
upon provider costs. Hospital-based PHPs have higher costs than CMHCs,
as evidenced by their cost report data, which is the reason hospital-
based PHPs have higher geometric mean per diem costs than CMHCs.
We disagree with the commenters who believed CMS is demonstrating
bias against CMHCs with respect to access to PHP services by
referencing CMS' language in the proposed rule regarding hospital-based
PHPs offering the widest access to care because they are located across
the country. While it is true that hospital-based PHPs offer the widest
access to PHP services because they are located across the country, we
greatly value the access to PHP services provided by CMHCs as well. We
want to ensure that CMHCs remain a viable option as providers of mental
health care. We are concerned if any payment rate would contribute to
providers ceasing operations. We have demonstrated our commitment to
stabilize and ensure accuracy in payment for PHP services in part by
our extensive analysis of the PHP payment data, and our publishing a
detailed review of the PHP payment methodology for both CMHCs and
hospital-based PHPs. We appreciate the services that all PHPs provide
to those individuals with mental health issues, and remain committed to
strengthening access to both CMHC PHP services and hospital-based PHP
services.
Comment: One commenter expressed concern and objections regarding
the continuing use of four PHP APC per diem payment rates based on
geometric mean per diem costs for each provider type, and the adverse
impact the proposed rates for CY 2016 will have again on few remaining
CMHC providers across the country.
Response: The OPPS system pays for outpatient services provided,
such as and including partial hospitalization services. This system
bases payment on the geometric mean costs of providing services using
provider data from claims and cost reports. We calculate the PHP APC
per diem payment rates based on the data provided for each type of
provider in order to pay for services. We believe this system provides
appropriate payment for partial hospitalization services based on
provider costs. The final PHP APC per diem costs for CY 2016 reflect
the costs of what providers expend to maintain such programs, as
reported on their claims and cost reports. With regard to CMHC rates
specifically, as stated previously, in comparison to the CY 2015
geometric mean per diem costs, the final CY 2016 geometric mean per
diem costs decreased by 1.3 percent for Level 1 PHP services provided
by CMHCs. However, only 5 percent of CMHC service days are billed as
Level 1 PHP services. The final CY 2016 geometric mean per diem costs
increased substantially for Level 2 PHP services provided by CMHCs, by
26.2 percent. Therefore, we believe that the CY 2016 rates will be
viewed positively by CMHCs across the country.
With respect to the continued use of four PHP APC per diem payment
rates, we refer readers to the CY 2011 OPPS/ASC final rule with comment
period (75 FR 71991 through 71994) where we implemented this policy.
Because the cost of providing PHP services differs significantly by
site of service, we implemented differing PHP payment rates for
hospital-based PHPs and CMHCs. The resulting rates reflect the cost of
what providers expend to maintain such programs based on data provided
by these types of providers, which we believe is an improvement over
the two-tiered methodology calculated using only hospital-based data.
With respect to rates based on geometric mean per diem costs, we
refer readers to the CY 2013 OPPS/ASC final rule with comment period
(77 FR 68406 through 68412) where we established the geometric mean
rather than the median as the measure upon which to

[[Page 70462]]

base the relative payment weights that underpin the OPPS APCs,
including the four PHP APCs. We believe that the use of geometric mean
costs represents an improvement to our cost estimation process compared
to the median. The geometric mean compared to the median allows
inclusion of some extreme but not aberrant observations in developing
the relative payment weights and captures a wider range of service
costs, which we believe leads to more accurate relative payment
weights. In addition to better incorporating those cost values that
surround the median and, therefore, describing a broader range of cost
patterns, basing the relative payment weight on geometric mean costs
also may promote better stability in the payment system by making OPPS
payments more reflective of the range of costs associated with
providing services. Further, applying the geometric mean to the PHP
APCs helps ensure that the relativity of the OPPS payment weights is
properly aligned.
Comment: One commenter suggested that CMS consider paying PHPs
using a quality-based payment system, and that CMS use value-based
purchasing.
Response: We responded to a similar public comment in the CY 2015
OPPS/ASC final rule with comment period (79 FR 66906) and refer readers
to a summary of that comment and our response. Sections 1833(t)(2) and
1833(t)(9) of the Act set forth the requirements for establishing and
adjusting OPPS rates, which include PHP rates. Section 1833(t)(17) of
the Act authorizes the Hospital OQR Program, which applies a payment
reduction to subsection (d) hospitals that fail to meet program
requirements. In the CY 2015 OPPS/ASC proposed rule (79 FR 41040), we
considered future inclusion of, and requested comments on, the
following quality measures addressing PHP issues that would apply in
the hospital outpatient setting: (1) 30-Day Readmissions; (2) Group
Therapy; and (3) No Individual Therapy. We refer readers to the CY 2015
OPPS/ASC final rule with comment period (79 FR 66957 through 66959) for
a more detailed discussion of PHP measures considered for inclusion in
the Hospital OQR Program in future years. The Hospital OQR Program does
not apply to CMHCs. Further, currently, there is no statutory language
explicitly authorizing a value-based purchasing program for PHPs.
After consideration of the public comments we received, we are
finalizing our proposals to update the four PHP APC per diem costs and
payment rates based on geometric mean cost levels calculated using the
most recent claims and cost data for each provider type. However, for
hospital-based PHP APCs, we are making an equitable adjustment to the
actual geometric mean per diem costs by increasing the Level 2 per diem
costs and decreasing the Level 1 per diem costs by the same factor, to
result in a percentage difference equal to the average percent
difference between hospital-based PHP Level 1 and Level 2 services from
CY 2013 through CY 2015. For CY 2016 and subsequent years, we also are
finalizing the proposed trimming methodologies. Specifically, we are
excluding any CMHC when the CMHC's costs per day are more than 2 standard deviations from the geometric mean cost per day (Level
1 and Level 2), and excluding hospital-based PHP service days when a
CCR>5 is used to calculate costs for at least one of their component
services (Level 1 and Level 2). We plan to review the trims annually,
and would propose any changes to the trimming methodologies in future
rulemaking as needed.
The CMHC PHP Level 1 geometric mean per diem costs are $98.88, and
the CMHC PHP Level 2 geometric mean per diem costs are $149.64, after
applying the 2 standard deviation trim to CMHCs. The
equitably adjusted hospital-based PHP Level 1 per diem costs are
$191.91, and the equitably adjusted hospital-based PHP Level 2 per diem
costs are $222.54, after applying the CCR>5 trim to affected service
days.
Table 54 below displays the final CY 2016 PHP APC geometric mean
per diem costs for CMHC PHP services, and Table 55 below displays the
final PHP APC equitably adjusted geometric mean per diem costs for
hospital-based PHP services.

Table 54--CY 2016 PHP APC Geometric Mean per Diem Costs for CMHC PHP
Services
------------------------------------------------------------------------
PHP APC
geometric
Renumbered CY 2016 APC Group title mean per diem
costs
------------------------------------------------------------------------
5851....................... Level 1 Partial $98.88
Hospitalization (3
services) for CMHCs.
5852....................... Level 2 Partial 149.64
Hospitalization (4 or more
services) for CMHCs.
------------------------------------------------------------------------

Table 55--CY 2016 PHP APC Equitably Adjusted Geometric Mean per Diem
Costs for Hospital-Based PHP Services
------------------------------------------------------------------------
PHP APC
equitably
adjusted
Renumbered CY 2016 APC Group title geometric
mean per diem
costs
------------------------------------------------------------------------
5861....................... Level 1 Partial $191.91
Hospitalization (3
services) for hospital-
based PHPs.
5862....................... Level 2 Partial 222.54
Hospitalization (4 or more
services) for hospital-
based PHPs.
------------------------------------------------------------------------

2. PHP Ratesetting Process
While PHP services are part of the OPPS, PHP ratesetting has some
unique aspects. To foster understanding and transparency, as we did in
the CY 2016 OPPS/ASC proposed rule (80 FR 39295 through 39299), we are
providing the following detailed explanation of the PHP APC ratesetting
process. The OPPS ratesetting process includes various steps as part of
its data development process, such as CCR determination and calculation
of geometric mean per diem costs, identification of allowable charges,
development of the APC relative payment weights, calculation of the APC
payment rates, and establishment of outlier thresholds. We refer
readers to section II. of the proposed rule and this final rule with

[[Page 70463]]

comment period and encourage readers to review these discussions to
increase their overall understanding of the entire OPPS ratesetting
process. We also refer readers to the OPPS Claims Accounting narrative,
which is a supporting document to the CY 2016 OPPS/ASC proposed rule
and this final rule with comment period, available on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html;
click on the link to the CY 2016 OPPS/ASC proposed rule or the final
rule with comment period to find the Claims Accounting narrative. We
encourage CMHCs and hospital-based PHPs to review their accounting and
billing processes to ensure that they are following these procedures,
which should result in greater accuracy in setting the PHP payment
rates.
We limit our discussion here primarily to the data development
process and calculation of PHP APC geometric mean per diem costs used
for PHP ratesetting. Our discussions focus on five major phases in
modeling the data, which result in the development of PHP APC geometric
mean per diem costs, and on the importance of correct coding and
reasonable charges for PHP services, and include: (a) Development of
PHP claims; (b) determination of CCRs for CMHCs and hospital-based
PHPs; (c) identification of PHP allowable charges; (d) determination of
PHP APC per diem costs; (e) development of service days and cost
modeling; and (f) issues regarding correct coding and reasonable
charges.
a. Development of PHP Claims
We use outpatient claims from the national claims history file for
the most recent available calendar year that were processed through
December 31 of that year (that is, the calendar year that is 2 years
before the calendar year at issue) to calculate the geometric mean per
diem costs of APCs that underpin the relative payment weights for the
calendar year at issue. It is important to note that this is not the
population of claims paid under the OPPS, but all outpatient claims as
explained in further detail in section II.A.2.a. of this final rule
with comment period.
We then exclude the following claims from OPPS ratesetting. These
are claims where:
No payment is made;
There are more than 300 lines; or
Services were furnished in Maryland, Guam, the U.S. Virgin
Islands, American Samoa, or the Northern Mariana Islands (these
providers are not paid under the OPPS).
From these outpatient claims, we extract all hospital outpatient
PHP claims and all CMHC claims. PHP claims are extracted based on their
specific bill types: 12X or 13X, with condition code 41, for hospital-
based PHPs; and 76X for CMHCs. For example, for the CY 2016 OPPS/ASC
proposed rule, we used data from the CY 2014 hospital outpatient PHP
and CMHC PHP claims from the national claims history file that were
processed through December 31, 2014, to calculate the PHP APC geometric
mean per diem costs that underpin the proposed PHP APC relative payment
weights for CY 2016. For this final rule with comment period, we used
the final CY 2014 SAF outpatient claims as of June 2015, the June 2015
update of HCRIS (for development of hospital and statewide CCRs), and
the July 2015 update of the OPSF (for the development of CMHC CCRs).
As noted in section II.A.2.c. of the CY 2016 OPPS/ASC proposed rule
and this final rule with comment period and in the Claims Accounting
narrative, we exclude hospital-based PHP claims if--
They were submitted by critical access hospitals;
They reported obviously erroneous units (for example, more
than 100,000 units for a single service);
They reported charge amounts equal to the payment
received;
They did not report at least one HCPCS code, because OPPS
APCs are based upon HCPCS codes; or
They only contained flu or pneumonia vaccine services,
which are paid separately outside of OPPS.
At the end of this process, we identified the PHP claims that are
appropriate and available to use to calculate PHP APC geometric mean
per diem costs. These claims include data on dates of service, revenue
codes, HCPCS codes for services provided, charges, and the payments
Medicare made (the PHP APC geometric mean per diem rates).
b. Determination of CCRs for CMHCs and Hospital-Based PHPs
Next, we determine and assess each provider's CCR. This ratio,
along with the charges from the claims, is used to estimate the costs,
which are then used to determine the geometric mean per diem costs.
There are specific policies we follow in determining which CCR to use
in estimating costs, which differ for CMHCs and for hospital-based
PHPs, largely due to differences in the data required for claims and
cost reports for these two types of PHP providers. We encourage PHP
providers to review section II.A.1.c. of the CY 2016 OPPS/ASC proposed
rule and this final rule with comment period rule and section 10.11,
Chapter 4, of the Medicare Claims Processing Manual (internet-only
manual (IOM), Pub. 100-04), which is available on the CMS Web site at:
http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf) for more specific discussion of CCRs used in PHP
ratesetting.
(1) Calculation and Assessment of CMHC CCRs
As noted in section VIII.A. of the CY 2016 OPPS/ASC proposed rule
and this final rule with comment period and section 10.11.9, Chapter 4
of the Medicare Claims Processing Manual (Pub. 100-04), the CMHC CCR is
calculated using the provider's most recent full year cost report, Form
CMS 2088-92, and Medicare cost and charges from Worksheet C, Page 2. We
divide costs from line 39.01, Column 3 by charges from line 39.02,
Column 3 to calculate an overall CMHC CCR. The CMHC cost report forms
and cost reporting instructions are available on the CMS Web site at:
http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1&DLSort=0&DLSortDir=ascending.
The most recent CMHC CCRs are posted to the OPSF. We assess those
CMHC CCRs within that file in preparation for use in cost estimation in
the following manner:
We use the most recent CMHC-specific CCR from the OPSF. If
the CCR is not available (for example, the CMHC is a new provider with
less than 12 months data), we use the hospital ancillary CCR associated
with the provider's urban/rural designation and their state location.
The statewide urban and rural hospital CCRs are available on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.html.
As described in Section 10.11.9, Chapter 4, of the
Medicare Claims Processing Manual, for any CMHC with a CCR greater than
1, we use the hospital ancillary CCR associated with its urban/rural
designation and its State location.
Once we have a CCR for each CMHC, we calculate the geometric mean
of all CMHC CCRs. As described in the OPPS Claims Accounting narrative,
we apply the existing OPPS 3 standard deviation trim to the
CMHC CCRs; this trim excludes any CMHC with a CCR that is
3 standard deviations from the geometric mean of all CMHC CCRs. At

[[Page 70464]]

the end of this process, we identified a CCR for all CMHCs that have
not been excluded.
(2) Calculation and Assessment of Hospital-Based PHP CCRs
Unlike CMHCs where there is one CCR calculated for each CMHC,
hospital-based PHPs have CCRs for each cost center that is associated
with PHP services. For hospital-based PHPs, we use the provider's most
recent full year hospital cost report, whether tentatively settled or
final settled, to identify CCRs, using the HCRIS file. The CCRs for
hospital-based PHPs are calculated by cost center on hospital cost
report Worksheet C, Part I, Column 9. The overall hospital CCR is
calculated by the MAC, and is posted in the Provider-Specific File. The
hospital cost report form CMS-2552-10 and cost reporting instructions
are in Chapter 40 of the Provider Reimbursement Manual--Part 2, which
is available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1&DLSort=0&DLSortDir=ascending.
We assess the hospital-based PHP CCRs as described in section
II.A.2.a. of the CY 2016 OPPS/ASC proposed rule and this final rule
with comment period and in the OPPS Claims Accounting narrative, by
applying the existing OPPS 3 standard deviation trim to
hospital-based PHP CCRs within each cost center and to the overall
hospital ancillary CCR. To perform this 3 standard
deviation trim, we follow the following process. Each PHP revenue code
is associated with particular cost centers on the cost report. The
revenue-to-cost center crosswalk identifies the primary, secondary (if
any), and tertiary (if any) cost centers that are associated with each
PHP revenue code, and which are the source for the CCRs used in PHP
ratesetting. The PHP portion of that OPPS crosswalk is shown in Table
56 below (Table 52 of the proposed rule). Based on the revenue code, we
first look for a CCR calculated from the primary cost center; if none
exists or the CCR fails the 3 standard deviation trim, we
look for a CCR calculated from the secondary cost center. If there is
no CCR calculated from the secondary cost center or the CCR fails the
3 standard deviation trim, we look for a CCR calculated
from the tertiary cost center. If there is no CCR calculated from the
tertiary cost center or the CCR fails the 3 standard
deviation trim, we look to the hospital's overall ancillary CCR. If the
hospital's overall ancillary CCR fails the 3 standard
deviation trim, we exclude the hospital from ratesetting.
For example, for revenue code 0900, the primary cost center is 3550
``Psychiatric/Psychological Services.'' If the CCR associated with this
cost center passes the 3 standard deviation trim, we retain
that CCR for use in ratesetting. If the CCR associated with primary
cost center 3550 fails the trim, it is deleted, and we then move to
cost center 9000 ``Clinic'' to assess the provider's CCR. If that CCR
passes the 3 standard deviation trim, it is retained for
use in ratesetting. If the CCR fails the 3 standard
deviation trim, it is deleted, and we then would consider the CCR
calculated from the tertiary cost center. However, for revenue code
0900, there is no tertiary cost center. If the primary, secondary (if
any), and tertiary (if any) cost centers' CCRs fail the trim, we assess
the hospital's overall ancillary CCR. If that overall ancillary CCR
passes the 3 standard deviation trim, we retain it for use
in ratesetting. If the overall ancillary CCR fails the 3
standard deviation trim, we exclude the provider from ratesetting. This
process of assessing the CCRs with a 3 standard deviation
trim is repeated for each revenue code's associated cost centers. After
applying this 3 standard deviation trim, we obtain a file
with trimmed CCRs for use in ratesetting.
The revenue-to-cost center crosswalk for all services paid under
the OPPS is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.html. We are providing an excerpt of the PHP portion of
the OPPS crosswalk below.

Table 56--Revenue-to-Cost Center Crosswalk for PHP Allowable Revenue Codes
----------------------------------------------------------------------------------------------------------------
Secondary
Primary cost Primary cost cost center Secondary cost
Revenue code Description center source center name source for center name
for CCR CCR
----------------------------------------------------------------------------------------------------------------
0250......................... Pharmacy....... 7300 Drugs Charged
to Patients.
0430......................... Occupational 6700 Occupational
Therapy. Therapy.
0900, 0914, 0915, 0916, or Psychiatric/ 3550 Psychiatric/... 9000 Clinic.
0918. Psychological Psychological
Treatment: Services.
Individual,
Group, and
Family
Therapy;
Psychological
testing.
0904 *....................... Psychiatric/ 3580 Recreational 3550 Psychiatric/
Psychological Therapy. Psychological
Treatment: Services.
Activity
Therapy.
0942......................... Other 9000 Clinic.........
Therapeutic
Services:
Education/
Training.
----------------------------------------------------------------------------------------------------------------
* Although not listed in this table, revenue code 0904 is the only PHP revenue code with a tertiary cost center
serving as a source for the CCR, which is cost center 9000, ``Clinic.''

c. Identification of PHP Allowable Charges
We use the PHP claims derived under the methodology discussed in
section VIII.B.2.a. of this final rule with comment period to identify
which charges are allowable for PHP ratesetting. Each revenue code line
on the PHP claim must report a HCPCS code and a charge (except for
revenue code 0250, which only requires that the charge be reported).
Allowable charges are those charges for the HCPCS codes which are
associated with PHP allowable revenue codes; PHP allowable revenue
codes are revenue codes allowable for OPPS PHP ratesetting purposes. As
discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR
68412 to 68418), we updated the PHP allowable revenue codes and PHP
allowable HCPCS codes for CY 2013 and subsequent years. The allowable
revenue and PHP HCPCS codes are included in Section 260, Chapter 4, of
the Medicare Claims Processing Manual (IOM Pub. 100-04), which is
available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf) and are shown in
Table 57 below (Table 53 of the proposed rule, 80 FR 39297):

[[Page 70465]]

Table 57--PHP Allowable Revenue and HCPCS Codes
------------------------------------------------------------------------
Revenue code Description HCPCS code
------------------------------------------------------------------------
0250................... Drugs and Biologicals.. Not required.
043X................... Occupational Therapy... G0129.
0900................... Behavioral Health 90791 or 90792.
Treatment/Services.
0904................... Activity Therapy G0176.
(Partial
Hospitalization).
0914................... Individual 90785, 90832, 90833,
Psychotherapy. 90834, 90836, 90837,
90838, 90845, 90865,
or 90880.
0915................... Group Therapy.......... G0410 or G0411.
0916................... Family Psychotherapy... 90846 or 90847.
0918................... Psychiatric Testing.... 96101, 96102, 96103,
96116, 96118, 96119,
or 96120.
0942................... Education Training..... G0177.
------------------------------------------------------------------------

The HCPCS codes shown in Table 56 above are those which are used in
the four renumbered PHP APCs 5851, 5852, 5861, and 5862 (existing APCs
0172, 0173, 0175, and 0176), and are also shown in Appendix C-a and
Appendix P of the Integrated Outpatient Code Editor (IOCE)
Specifications. As described in section III.D. of this final rule with
comment period, as we proposed, we are finalizing our proposal to
renumber some of the OPPS APCs, and have shown both the renumbered APCs
and the existing APCs for partial hospitalization services above. The
IOCE is available on the CMS Web site at: http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/OCEQtrReleaseSpecs.html.
d. Determination of PHP APC Per Diem Costs
The PHP CCRs described in section VIII.B.2.b. of this final rule
with comment period are applied to the PHP claim charges described in
section VIII.B.2.c. of this final rule with comment period to determine
the PHP APC geometric mean per diem costs. Costs for each service line
reported on CMHC claims are calculated by multiplying each service line
charge by the CCR associated with the claim's provider. Costs for each
service line reported on the hospital-based PHP claims are calculated
by multiplying the service line charge by the CCR associated with the
provider's service line's revenue code (using the revenue-to-cost
center crosswalk hierarchy described in section VIII.B.2.b. of this
final rule with comment period). For both CMHCs and hospital-based
PHPs, charges are set to zero for services reporting revenue codes,
which are not included in the listing of PHP allowable revenue codes
shown in Table 57 above (Table 53 of the proposed rule (80 FR 39297)).
e. Development of Service Days and Cost Modeling
Only the claims service lines containing PHP allowable HCPCS codes
(shown in Table 57 above; Table 53 of the proposed rule (80 FR 39297))
from the remaining hospital-based PHP and CMHC claims are retained for
PHP cost determination. The costs, payments, and service units for all
service lines occurring on the same service date, by the same provider,
and for the same beneficiary are summed to calculate the PHP APC
geometric mean per diem cost, per diem payment rate, and per diem
service volume for each PHP service day. Any service days with zero per
diem payments are removed.
Because the PHP costs calculated above include the effects of
geographic variation in wages, we use the wage index data to wage
neutralize PHP APC per diem costs prior to the APC geometric mean per
diem cost calculation. This removes the effects of geographic variation
in costs used in the OPPS APC ratesetting process. Service days with no
per diem costs or with no wage index values are removed. PHP service
days with fewer than 3 service units are deleted and not considered for
PHP cost modeling.
As discussed in section VIII.B.1. of the CY 2016 OPPS/ASC proposed
rule and this final rule with comment period, there were several PHP
providers with aberrant data. As such, we proposed and are finalizing a
trimming methodology to exclude CMHCs that have a per diem cost that is
2 standard deviations from the overall CMHC geometric mean
per diem cost, beginning in CY 2016. This trim excluded from the
ratesetting process any CMHCs with extreme costs per day. We also
proposed and are finalizing a trimming methodology to exclude service
days with extreme hospital-based PHP CCR values which were not removed
by the 3 standard deviation trim discussed above, if those
service days have a CCR>5, beginning in CY 2016. Therefore, we excluded
hospital-based PHP service days where the CCR>5.
PHP service days from CMHCs and from hospital-based PHPs with
exactly 3 service units, or with 4 or more service units (based on
allowable HCPCS codes shown in Table 53 of the proposed rule (80 FR
39297); Table 57 of this final rule with comment period) are assigned
to Level 1 or Level 2 PHP APCs as follows: (We note that we are
finalizing our proposal to renumber some of the OPPS APCs, and are
showing both the renumbered APCs and the existing APCs for partial
hospitalization services below.)
Level 1 Partial Hospitalization, renumbered APC 5851
(existing APC 0172): CMHC service days with exactly 3 service units;
Level 2 Partial Hospitalization, renumbered APC 5852
(existing APC 0173): CMHC service days with 4 or more service units;
Level 1 Partial Hospitalization, renumbered APC 5861
(existing APC 0175): hospital-based PHP service days with exactly 3
service units; and
Level 2 Partial Hospitalization, renumbered APC 5862
(existing APC 0176): hospital-based PHP service days with 4 or more
service units.
PHP service days with costs 3 standard deviations from
the geometric mean costs within each APC are deleted and removed from
modeling. The remaining PHP service days are used to calculate the
geometric mean per diem cost for each PHP APC.
For CY 2016, we also made an equitable adjustment to the hospital-
based PHP geometric mean per diem costs, to remove an inversion in the
per diem costs. The finalized PHP APC geometric mean per diem costs or
PHP APC equitably adjusted per diem costs undergo several more steps,
as noted below, before becoming budget neutral PHP APC per diem payment
rates. The PHP APCs are part of the larger OPPS. As discussed in
section II.A. of the CY 2016 OPPS/ASC proposed rule and this final rule
with comment period, OPPS APC geometric mean per diem costs

[[Page 70466]]

(including PHP APC geometric mean per diem costs) are divided by the
geometric mean per diem costs for renumbered APC 5012 (Level 2
Examinations and Related Services) to calculate each PHP APC's unscaled
relative payment weight. An unscaled relative payment weight is one
that is not yet adjusted for budget neutrality. Budget neutrality is
required under section 1833(t)(9)(B) of the Act, and ensures that the
estimated aggregate weight under the OPPS for a calendar year is
neither greater than nor less than the estimated aggregate weight that
would have been made without the changes. To adjust for budget
neutrality (that is, to scale the weights), we compare the estimated
aggregated weight using the scaled relative payment weights from the
previous calendar year at issue. For example, to adjust for budget
neutrality (that is, to scale the weights) in the CY 2016 OPPS/ASC
proposed rule and this final rule with comment period, we compared the
estimated aggregated weight using the CY 2015 scaled relative payment
weights to the estimated aggregate weight using the CY 2016 unscaled
relative payment weights. We refer readers to the ratesetting
procedures described in Part 2 of the OPPS Claims Accounting narrative
and in section II. of this final rule with comment period for more
information on scaling the weights, and for details on the final steps
of the process that lead to PHP APC per diem payment rates.
f. Issues Regarding Correct Coding and Reasonable Charges
PHP claims with revenue codes other than those listed as allowable
in Table 57 above (Table 53 of the proposed rule (80 FR 39297)), but
which are associated with allowable PHP HCPCS codes, may still be paid,
as described in the OPPS Claims Accounting narrative. The OPPS does not
include charges associated with revenue codes that are not allowable
for ratesetting purposes. In reviewing CY 2013 and CY 2014 claims, we
noticed CMHCs were using correct revenue coding for nearly all claims,
but hospital-based PHPs were occasionally using other revenue codes,
particularly revenue codes 0912 and 0913. Revenue codes 0912 and 0913
are not on the allowable list of PHP revenue codes. As such, the
charges associated with those two revenue codes are not included in
ratesetting, even when revenue code 0912 or 0913 is associated with a
PHP allowable HCPCS code. For the most accurate ratesetting, it is
imperative that providers follow coding guidelines for all revenue
codes and all CPT and Level 2 HCPCS codes in a manner consistent with
their descriptors, instructions, and correct coding principles. We also
refer readers to the coding instructions given in the Claims Processing
Manual. Following the correct coding guidelines will help ensure that
we include all PHP costs in ratesetting.
Finally, it appears that a few PHPs may not be reporting reasonable
charges for their services on their claims. When this occurs with CMHCs
or hospital-based PHPs that provide a high number of services during
the year, the data used for ratesetting may be inappropriately skewed.
Therefore, we remind PHPs of the regulations at 42 CFR 413.53 and
existing CMS guidance related to charges, which is found in Chapter 22
of the Provider Reimbursement Manual, Part 1, which is available on the
CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.html?DLPage=1&DLSort=0&DLSortDir=ascending.
In section 2202.4, we define ``Charges,'' as the regular rates
established by the provider for services rendered to both beneficiaries
and to other paying patients. Charges should be related consistently to
the cost of the services and uniformly applied to all patients whether
inpatient or outpatient. We also state in section 2204, ``Medicare
Charges,'' that the Medicare charge for a specific service must be the
same as the charge made to non-Medicare patients (including Medicaid,
CHAMPUS, private, etc.) must be recorded in the respective income
accounts of the facility, and must be related to the cost of the
service. In section 2203, ``Provider Charge Structure as Basis for
Apportionment,'' we state that each facility should have an established
charge structure which is applied uniformly to each patient as services
are furnished to the patient, and which is reasonably and consistently
related to the cost of providing the services, so that its charges may
be allowable for use in apportioning costs under the program. The
Medicare program cannot dictate to a provider what its charges or
charge structure may be. However, the program may determine whether or
not the charges are allowable for use in apportioning costs under the
program. We received one comment regarding the ratesetting process.
Comment: One commenter supported the CMS recommendation that CMHCs
and hospital-based PHPs review their accounting and billing processes
to ensure that they are following procedures properly, with the goal of
obtaining greater accuracy in setting PHP payment rates. The commenter
committed to working with its members to help ensure correct recording
of costs and claims coding.
Response: We appreciate the commenter's support and commitment.

C. Separate Threshold for Outlier Payments to CMHCs

As discussed in the CY 2004 OPPS final rule with comment period (68
FR 63469 through 63470), after examining the costs, charges, and
outlier payments for CMHCs, we believed that establishing a separate
OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific
outlier policy would direct OPPS outlier payments towards the genuine
cost of outlier cases, and address situations where charges were being
artificially increased to enhance outlier payments.
We created a separate outlier policy that would be specific to the
estimated costs and OPPS payments provided to CMHCs. We note that, in
the CY 2009 OPPS/ASC final rule with comment period, we established an
outlier reconciliation policy to comprehensively address charging
aberrations related to OPPS outlier payments (73 FR 68594 through
68599). Therefore, beginning in CY 2004, we designated a portion of the
estimated OPPS outlier target amount specifically for CMHCs, consistent
with the percentage of projected payments to CMHCs under the OPPS each
year, excluding outlier payments, and established a separate outlier
threshold for CMHCs.
The separate outlier threshold for CMHCs resulted in $1.8 million
in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier
payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30
million was paid to CMHCs in outlier payments. We believe that this
difference in outlier payments indicates that the separate outlier
threshold for CMHCs has been successful in keeping outlier payments to
CMHCs in line with the percentage of OPPS payments made to CMHCs.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39299), we proposed to
continue to designate a portion of the estimated 1.0 percent outlier
target amount specifically for CMHCs, consistent with the percentage of
projected payments to CMHCs under the OPPS in CY 2016, excluding
outlier payments. In the CY 2016 OPPS/ASC proposed rule, we stated that
CMHCs are projected to receive 0.04 percent of total OPPS payments in
CY 2016, excluding outlier payments. Therefore, we proposed to
designate 0.49 percent of the estimated 1.0 percent outlier

[[Page 70467]]

target amount for CMHCs, and establish a threshold to achieve that
level of outlier payment. Based on our simulations of CMHC payments for
CY 2016, in the CY 2016 OPPS/ASC proposed rule (80 FR 39299), we
proposed to continue to set the threshold for CY 2016 at 3.40 times the
highest CMHC PHP APC payment rate (that is, renumbered APC 5852 (Level
2 Partial Hospitalization) (existing APC 0173). We continue to believe
that this approach would neutralize the impact of inflated CMHC charges
on outlier payments and better target outlier payments to those truly
exceptionally high-cost cases that might otherwise limit beneficiary
access.
In addition, we proposed to continue to apply the same outlier
payment percentage that applies to hospitals. Therefore, for CY 2016,
we proposed to continue to pay 50 percent of CMHC APC geometric mean
per diem costs over the threshold. In section II.G. of the CY 2016
OPPS/ASC proposed rule, for the hospital outpatient outlier payment
policy, we proposed to set a dollar threshold in addition to an APC
multiplier threshold. Because the PHP APCs are the only APCs for which
CMHCs may receive payment under the OPPS, we would not expect to
redirect outlier payments by imposing a dollar threshold. Therefore, we
did not propose to set a dollar threshold for CMHC outlier payments.
In summary, in the CY 2016 OPPS/ASC proposed rule, we proposed to
establish that if a CMHC's cost for partial hospitalization services,
paid under either renumbered APC 5851 (existing APC 0172) or renumbered
APC 5852 (existing APC 0173), exceeds 3.40 times the payment rate for
renumbered APC 5852, the outlier payment is calculated as 50 percent of
the amount by which the cost exceeds 3.40 times the renumbered APC 5852
payment rate. We invited public comments on these proposals.
We did not receive any public comments on our proposed outlier
policy. Therefore, we are finalizing our proposal for CY 2016 to set a
separate outlier threshold for CMHCs without modification. As discussed
in section II.G. of this final rule with comment period, using more
recent data for this final rule with comment period, we set the target
for hospital outpatient outlier payments at 1.00 percent of total
estimated OPPS payments. We allocated a portion of the 1.00 percent, an
amount equal to 0.36 percent of outlier payments, or 0.0036 percent of
total estimated OPPS payment, to CMHCs for PHP outlier payments. For CY
2016, as proposed, we are setting the CMHC outlier threshold at 3.40
multiplied by renumbered APC 5852 (existing APC 0173) payment rate and
the CY 2016 outlier percentage applicable to costs in excess of the
threshold at 50 percent. In other words, if a CMHC's cost for partial
hospitalization services paid under either renumbered APC 5851
(existing APC 0172) or APC 5852 (existing APC 0173) exceeds 3.40 times
the payment rate for renumbered APC 5852 (existing APC 0173), the
outlier payment will be calculated as 50 percent of the amount by which
the cost exceeds 3.40 times the renumbered APC 5852 (existing APC 0173)
payment rate.

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

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

B. Changes to the Inpatient Only List

In the CY 2016 OPPS/ASC proposed rule (80 FR 39299 through 39300),
for the CY 2016 OPPS, we proposed to use the same methodology
(described in the November 15, 2004 final rule with comment period (69
FR 65834)) of reviewing the current list of procedures on the inpatient
only list to identify any procedures that may be removed from the list.
The established criteria upon which we make such a determination are as
follows:
1. Most outpatient departments are equipped to provide the services
to the Medicare population.
2. The simplest procedure described by the code may be performed in
most outpatient departments.
3. The procedure is related to codes that we have already removed
from the inpatient only list.
4. A determination is made that the procedure is being performed in
numerous hospitals on an outpatient basis.
5. A determination is made that the procedure can be appropriately
and safely performed in an ASC, and is on the list of approved ASC
procedures or has been proposed by us for addition to the ASC list.
Using this methodology, for the proposed rule, we identified seven
procedures that could potentially be removed from the inpatient only
list for CY 2016. We reviewed the clinical characteristics and related
evidence for these procedures for removal from the inpatient only list
and found them to be appropriate candidates.
In the CY 2016 OPPS/ASC proposed rule, for CY 2016, we proposed to
remove the following procedures from the inpatient only list:
CPT code 0312T (Vagus nerve blocking therapy (morbid
obesity); laparoscopic implantation of neurostimulator electrode array,
anterior and posterior vagal trunks adjacent to esophagogastric
junction (EGJ), with implantation of pulse generator, includes
programming);
CPT code 20936 (Autograft for spine surgery only (includes
harvesting the graft); local (e.g., ribs, spinous process, or laminar
fragments) obtained from the same incision);
CPT code 20937 (Autograft for spine surgery only (includes
harvesting the graft); morselized (through separate skin or fascial
incision));
CPT code 20938 (Autograft for spine surgery only (includes
harvesting the graft); structural, bicortical or tricotical (through
separate skin or fascial incision));
CPT code 22552 (Arthrodesis, anterior interbody, including
disc space preparation, discectomy, osteophytectomy and decompression
of spinal cord and/or nerve roots; cervical below C2, each additional
interspace);
CPT code 54411(Removal and replacement of all components
of a multi-component inflatable penile prosthesis through an infected
field at the same operative session, including the irrigation and
debridement of infected tissue); and
CPT code 54417 (Removal and replacement of non-inflatable
(semi-rigid) or inflatable (self-contained) penile prosthesis through
an infected field at the same operative sessions, including irrigation
and debridement of infected tissue).
The seven procedures that we proposed to remove from the inpatient
only list for CY 2016 and their CPT codes, long descriptors, proposed
APC assignments, and proposed status indictors were displayed in Table
54 of the proposed rule (80 FR 39300). We invited public comments on
the proposed removal of these seven procedures from the inpatient only
list.
Comment: Several commenters supported CMS' proposal to remove CPT
codes 0312T, 20936, 20937, 20938,

[[Page 70468]]

22552, 54411, and 54417 from the inpatient only list.
Response: We appreciate the commenters' support.
Comment: One commenter requested that the procedures described by
CPT codes 27477 (Arrest, epiphyseal, any method (e.g., epiphysiodesis);
tibia and fibula, proximal) and 27485 (Arrest, hemiepiphyseal, distal
femur or proximal tibia or fibula (e.g., genu varus or valgus)) also be
removed from the inpatient only list based on the similarity of these
procedures to CPT codes 27475 (Arrest, epiphyseal, any method (e.g.,
epiphysiodesis); distal femur) and 27479 (Arrest, epiphyseal, any
method (e.g., epiphysiodesis); combined distal femur, proximal tibia
and fibula), which are not on the inpatient only list.
Response: We agree with the commenter that procedures described by
CPT codes 27477 and 27485 are similar to the procedures described by
CPT codes 27475 and 27479. CPT codes 27477 and 27485 also describe
procedures that stop leg growth. However, these procedures either are
performed on a different part of the leg (CPT code 27477) or utilize a
variation of the surgical method used to perform this type of procedure
(CPT code 27485). The differences between these two procedures do not
prevent either of the procedures from being performed safely in the
outpatient setting. Therefore, we agree with the commenter that the
procedures described by CPT codes 27477 and 27485 meet the criterion of
being a procedure that is related to codes that we have already removed
from the inpatient only list (criterion 3 listed above) and are
removing these two codes from the inpatient only list for CY 2016.
Comment: Another commenter requested that the procedures described
by CPT codes 22630 (Arthrodesis, posterior interbody technique,
including laminectomy and/or discectomy to prepare interspace (other
than for decompression), single interspace; lumbar), 22633
(Arthrodesis, combined posterior or posterolateral technique with
posterior interbody technique including laminectomy and/or discectomy
sufficient to prepare interspace (other than for decompression), single
interspace and segment; lumbar), and 63267 (Laminectomy for excision or
occlusion of arteriovenous malformation of spinal cord; lumber) be
removed from the inpatient only list. The commenter stated that, based
on its experience with these three procedures, the three procedures can
be safely performed in the outpatient setting and therefore should be
removed from the inpatient only list.
Response: While the commenters asserted that the procedures can be
safely performed in the outpatient setting, we are not confident that
an inpatient hospitalization would not be required for these
procedures. We examined the clinical characteristics of the procedures
described by CPT codes 63267, 22630, and 22633 and compared them to
other procedures both included on the inpatient only list and not
included on the inpatient only list. For the procedures described by
CPT codes 22630 and 22633, the interbody technique is more extensive
than the posterior or posterolateral described by CPT code 22612, which
is not on the inpatient only list. We believe that the associated
recovery and monitoring would also be more extensive for procedures
described by CPT codes 22630 and 22633 than for the procedure described
by CPT code 22612 and, therefore, the procedures described by CPT codes
22630 and 22633 should be retained on the inpatient only list for CY
2016. For the procedure described by CPT code 63267, we believe that
patients would likely require inpatient monitoring for possible
postoperative bleeding in the spinal canal, which could result in
paralysis (a devastating complication). We examined recent Medicare
utilization data for these codes by site of service. Based on our
examinations, we have determined that these three procedures do not
meet any of the criteria listed above for removal from the inpatient
only list. Therefore, we are not removing them from the inpatient only
list for CY 2016.
Comment: One commenter opposed the removal of the procedures
described by CPT codes 54411 and 54417 from the inpatient only list
based on the indication of the presence of an ``infected field'' in the
code description and the commenter's belief that patients on which
these procedures are performed will require close monitoring and a
period of IV antibiotics, and will likely need cultures obtained at the
time of surgery that require a minimum of 48 hours to return with the
sensitivity report to know the appropriate IV antibiotic(s). The
commenter believed that, for patient safety, the procedures described
by these two codes should not be performed in the outpatient setting.
Response: We disagree with the commenter that the procedures
described by CPT codes 54411 and 54417 should be retained on the
inpatient only list. After consulting with physicians who routinely
perform these procedures, we believe that properly trained surgeons can
safely perform these procedures in the outpatient setting. In addition,
the term ``infected field'' as used in the code descriptors encompasses
a range of infections from mild to severe. We remind the commenter and
the public that removal of a code from the inpatient only list does not
mean that all procedures described by the code or even a majority of
procedures must or should be performed in the outpatient setting.
Removal of a procedure from the inpatient only list only means that the
procedure is no longer precluded from being paid under the OPPS if it
is performed in the outpatient setting. Not all procedures described by
a code are the same, and we want to afford physicians and hospitals the
maximum flexibility in choosing the most clinically appropriate site of
service for the procedure, as long as the characteristics of the
procedure are consistent with the criteria listed above. In the case of
the procedures described by CPT codes 54411 and 54417, we believe that
it is possible for surgeons to perform them in the less severe cases in
the HOPD.
After consideration of the public comments we received, we are
finalizing our proposal to remove procedures described by CPT codes
0312T, 20936, 20937, 20938, 22552, 54411, and 54417 from the inpatient
only list for CY 2016. In addition, we are removing the procedures
described by CPT codes 27477 and 27485 from the inpatient only list for
CY 2016, as recommended by the commenter. The nine procedures and their
CPT codes, long descriptors, APC assignments, and status indictors for
CY 2016 are displayed in Table 58 below.
The complete list of codes that will be paid by Medicare in CY 2016
only as inpatient procedures is included as Addendum E to this final
rule with comment period (which is available via the Internet on the
CMS Web site).

[[Page 70469]]

Table 58--Procedures Removed From the Inpatient Only List for CY 2016
------------------------------------------------------------------------
CY 2016 APC CY 2016 status
CPT/HCPCS code Long descriptor assignment indicator
------------------------------------------------------------------------
0312T............ Vagus nerve blocking 5464 J1
therapy (morbid
obesity);
laparoscopic
implantation of
neurostimulator
electrode array,
anterior and
posterior vagal
trunks adjacent to
esophagogastric
junction (EGJ),
with implantation
of pulse generator,
includes
programming.
20936............ Autograft for spine N/A N
surgery only
(includes
harvesting the
graft); local
(e.g., ribs,
spinous process, or
laminar fragments)
obtained from same
incision.
20937............ Autograft for spine N/A N
surgery only
(includes
harvesting the
graft); morselized
(through separate
skin or fascial
incision).
20938............ Autograft for spine N/A N
surgery only
(includes
harvesting the
graft); structural
bicortical or
tricortical
(through separate
skin or fascial
incision).
22552............ Arthrodesis, N/A N
anterior interbody,
including disc
space preparation,
discectomy,
osteophytectomy and
decompression of
spinal cord and/or
nerve roots;
cervical below C2,
each additional
interspace.
27477............ Arrest epiphyseal, 5122 T
any method (e.g.,
epiphysiodesis);
tibia and fibula,
proximal.
27485............ Arrest, 5122 T
hemiepiphyseal,
distal femur or
proximal tibia or
fibula (e.g., genu
varus or valgus).
54411............ Removal and 5377 J1
replacement of all
components of a
multi-component
inflatable penile
prosthesis through
an infected field
at the same
operative session,
including
irrigation and
debridement of
infected tissue.
54417............ Removal and 5377 J1
replacement of non-
inflatable (semi-
rigid) or
inflatable (self-
contained) penile
prosthesis through
an infected field
at the same
operative session,
including
irrigation and
debridement of
infected tissue.
------------------------------------------------------------------------

X. Nonrecurring Policy Changes

A. Advance Care Planning Services

For CY 2015, the CPT Editorial Panel created two new codes
describing advance care planning (ACP) services: CPT code 99497
(Advance care planning including the explanation and discussion of
advance directives such as standard forms (with completion of such
forms, when performed), by the physician or other qualified health
professional; first 30 minutes, face-to-face with the patient, family
member(s) and/or surrogate) and an add-on CPT code 99498 (Advance care
planning including the explanation and discussion of advance directives
such as standard forms (with completion of such forms, when performed),
by the physician or other qualified health professional; each
additional 30 minutes (List separately in addition to code for primary
procedure)). In Addendum B of the CY 2015 OPPS/ASC final rule with
comment period, we assigned CPT codes 99497 and 99498 an OPPS interim
final status indicator of ``N'' (Paid under OPPS; payment is packaged
into payment for other services. Therefore, there is no separate APC
payment.). In Addendum B of the CY 2016 OPPS/ASC proposed rule (which
is available via the Internet on the CMS Web site), we also proposed to
continue assignment of status indicator ``N'' to CPT codes 99497 and
99498 for CY 2016.
Comment: Several commenters asked that separate OPPS payment be
made for the services described by CPT codes 99497 and 99498 when these
services are provided in the HOPD by auxiliary hospital staff. The
commenters noted that separate payment for services described by these
codes was proposed under the MPFS for CY 2016 (80 FR 41773). The
commenters believed that nurses and other medical staff currently
provide these services to hospital outpatients and that separate OPPS
payment is warranted because the hospital incurs additional costs when
it provides this counseling. The commenters also reported that some
hospitals are currently coding this service with HCPCS code G0463
(Hospital outpatient clinic visit for the assessment and management of
a patient). In addition, the Panel recommended at its summer 2015
meeting that CMS separately pay for advance care planning in the OPPS
and assign the service to an APC. The Panel agreed with a presenter
that if hospitals are providing this service to patients, separate
payment for the service is warranted.
Response: We agree in part with the commenters that separate OPPS
payment should be made for the service described by CPT code 99497, but
only under limited circumstances. We believe that payment for the
service described by CPT code 99497 is appropriately packaged in the
OPPS except when the service is the only service provided to the
patient. Therefore, we are modifying our proposal to unconditionally
package payment for CPT code 99497 and instead are conditionally
packaging payment for the service described by this code and assign it
status indicator ``Q1'' (instead of status indicator ``N''). The
service described by CPT code 99497 is assigned to APC 5011 (Level 1
Examinations and Related Services) based on expected similarity in
resource use to other services assigned to this APC. CPT code 99498 is
an add-on code and therefore payment for the service described by this
code is unconditionally packaged (assigned status indicator ``N'') in
the OPPS in accordance with 42 CFR 419.2(b)(18). We also note that the
CPT code descriptors for CPT code 99497 and 99498 describe advance care
planning as services provided by a ``physician or other qualified
health professional.'' Therefore, based on the code descriptors, we
expect that physicians or qualified nonphysician practitioners (as
defined at 42 CFR 410.27(g)) will be involved (beyond just providing
direct supervision of hospital staff) in providing these services to
patients in the hospital outpatient setting.
In the CY 2016 MPFS final rule, advance care planning (described by
CPT codes 99497 and 99498) is being added as an optional element of the
Annual Wellness Visit (AWV). We refer readers to the CY 2016 MPFS final
rule with comment period for a discussion of this policy. Payment for
the AWV, and the advance care planning described by CPT codes CPT codes
99497 and 99498 when furnished as a part of the AWV, is excluded under
the OPPS in accordance with 42 CFR 419.22(t). However, payment for the
AWV, and the advance care planning described by CPT codes 99497 and
99498 when furnished as a part of the AWV, is made under the MPFS when
these services are furnished in a hospital outpatient

[[Page 70470]]

department (75 FR 72016). (We refer readers to section 1833(a)(2)(H) of
the Act.)

B. Changes for Payment for Computed Tomography (CT)

Section 218(a)(1) of the Protecting Access to Medicare Act of 2014
(PAMA) (Pub. L. 113-93) amended section 1834 of the Act by establishing
a new subsection 1834(p). Effective for services furnished on or after
January 1, 2016, section 1834(p) of the Act reduces payment for the
technical component (TC) of applicable computed tomography (CT)
services paid under the MPFS and applicable CT services paid under the
OPPS (a 5-percent reduction in 2016 and a 15-percent reduction in 2017
and subsequent years). The applicable CT services are identified by
HCPCS codes 70450 through 70498; 71250 through 71275; 72125 through
72133; 72191 through 72194; 73200 through 73206; 73700 through 73706;
74150 through 74178; 74261 through 74263; and 75571 through 75574 (and
any succeeding codes) for services furnished using equipment that does
not meet each of the attributes of the National Electrical
Manufacturers Association (NEMA) Standard XR-29-2013, entitled
``Standard Attributes on CT Equipment Related to Dose Optimization and
Management.'' Section 1834(p)(4) of the Act specifies that the
Secretary may apply successor standards through rulemaking.
Section 1834(p)(6)(A) of the Act requires that information be
provided and attested to by a supplier and an HOPD that indicates
whether an applicable CT service was furnished using equipment that was
not consistent with the standard set forth in section 1834(p)(6) of the
Act (currently the NEMA CT equipment standard) and that such
information may be included on a claim and may be a modifier. Section
1834(p)(6)(A) of the Act also provides that such information must be
verified, as appropriate, as part of the periodic accreditation of
suppliers under section 1834(e) of the Act and hospitals under section
1865(a) of the Act. Section 218(a)(2) of the PAMA made a conforming
amendment to section 1833(t) of the Act by adding a new paragraph (20),
which provides that the Secretary shall not take into account reduced
expenditures that result from the application of section 1834(p) of the
Act in making any budget neutral adjustments under the OPPS.
To implement this provision, in the CY 2016 OPPS/ASC proposed rule
(80 FR 39300 through 39301), we proposed to establish a new modifier to
be used on claims that include CT services furnished using equipment
that does not meet each of the attributes of the NEMA Standard XR-29-
2013. We proposed that, beginning January 1, 2016, hospitals and
suppliers would be required to use this modifier on claims for CT scans
described by any of the HCPCS codes identified above (and any successor
codes) that are furnished on non-NEMA Standard XR-29-2013-compliant CT
scans. We stated that the use of the proposed modifier would result in
the applicable payment reduction for the CT service, as specified under
section 1834(p) of the Act.
We invited public comments on our proposal.
Comment: Many commenters endorsed the use of quality incentives to
improve patient safety and optimize the use of radiation when providing
CT diagnostic imaging services. Several commenters supported CMS'
proposal to establish a modifier to identify services furnished using
equipment that does not meet each of the attributes of the NEMA
Standard XR-29-2013.
Response: We appreciate the commenters' support.
Comment: Several commenters asked that CMS delay implementation of
section 1834(p)(2) of the Act to allow hospitals additional time to
comply with the statutory provision before the payment reduction
becomes effective.
Response: The statutory provision under section 1834(p)(2) of the
Act refers to computed tomography services that are furnished on or
after January 1, 2016. Given this statutory date, we believe that we
must implement this provision beginning January 1, 2016. Health care
providers have identified radiation overdose from CT scanners as a
public health problem. The payment reduction is 5 percent in CY 2016
and increases to 15 percent in subsequent years. Hospitals providing
services that are noncompliant as of January 1, 2016, will be subject
to a 5-percent payment reduction for those services during CY 2016, and
have the opportunity to upgrade their CT scanners before the 15-percent
reduction takes effect in CY 2017.
Comment: Several commenters requested clarification regarding the
reduction in the payment amount for CT services furnished with
equipment that does not meet the CT equipment standard. Commenters
specifically inquired about the application of the payment reduction to
CT services that are packaged into comprehensive or composite APCs.
Response: We will be applying the payment reduction to the services
described by the CT scan CPT codes (and any successor codes) listed in
the statutory provision when the modifier is included on the claim. We
cannot apply the payment reduction when the service described by an
applicable CT scan code is packaged because there is no payment amount
associated with the packaged CT scan code. Therefore, the payment
reduction will only be applied when the service for a code is paid
separately.
Comment: One commenter cited section 1834 (p)(4) of the Act, which
specifies that, through rulemaking, the Secretary may apply successor
standards for CT equipment and requested that CMS develop successor
standards that exempt CT scans performed on cone beam CT (CBCT)
scanners that are FDA cleared only for imaging of the head from the
requirement for Automatic Exposure Control (AEC) capability. The
commenter indicated that its request was based on the fact that AEC
capability is unavailable on CBCT scanners.
Response: Section 1834(p) of the Act is a new provision. Our
proposal was for the initial implementation of the NEMA Standard XR-29-
2013. We would like to gain some experience with the statutory standard
before adopting a successor standard. Therefore, we are not currently
planning to adopt a successor standard to the NEMA Standard XR-29-2013.
After consideration of the public comments we received, we are
finalizing the establishment of the new CT modifier. This 2-digit
modifier will be added to the HCPCS annual file as of January 1, 2016,
with the label ``CT'' and the long descriptor ``Computed tomography
services furnished using equipment that does not meet each of the
attributes of the National Electrical Manufacturers Association (NEMA)
XR-29-2013 standard''.
Beginning January 1, 2016, hospitals and suppliers will be required
to report the ``CT'' modifier on claims for CT scans described by any
of the HCPCS codes identified above (and any successor codes) that are
furnished on non-NEMA Standard XR-29-2013-compliant CT scanners. The
use of this modifier will result in the applicable payment reduction
for the CT service, as specified under section 1834(p) of the Act.

C. Lung Cancer Screening With Low Dose Computed Tomography

On February 5, 2015, CMS issued a National Coverage Determination
(NCD) for the coverage of lung cancer screening with low dose computed
tomography (LDCT) under Medicare.

[[Page 70471]]

This coverage includes a lung cancer screening counseling and shared
decision-making visit, and, for appropriate beneficiaries, annual
screening for lung cancer with LDCT as an additional preventive service
under Medicare if certain criteria are met. The decision memorandum
announcing the NCD is available on the CMS Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-decision-memo.aspx?NCAId=274.
The HCPCS codes that describe these services are HCPCS code G0296
(Counseling visit to discuss need for lung cancer screening (LDCT)
using low dose CT scan (service is for eligibility determination and
share decision making)) (listed as HCPCS code GXXX1 in the proposed
rule) and HCPCS code G0297 (Low dose CT scan (LDCT) for lung cancer
screening) (listed as HCPCS code GXXX2 in the proposed rule). In the CY
2016 OPPS/ASC proposed rule (80 FR 39301), for the CY 2016 OPPS, we
proposed to assign HCPCS code G0296 to APC 5822 (Level 2 Health and
Behavior Services) and HCPCS code G0297 to APC 5570 (Computed
Tomography without Contrast).
Comment: Commenters supported CMS' February 2015 NCD regarding
coverage of lung cancer screening with LDCT and the counseling visit to
discuss the need for lung cancer screening using LDCT, as well as CMS'
proposal to establish HCPCS codes for payment of these services under
the OPPS. However, the majority of the commenters recommended that CMS
make the new HCPCS G-codes for lung cancer screening effective on
February 5, 2015 (the effective date of the NCD) and extend the 1-year
claims filing deadline by at least an additional quarter in CY 2016 to
allow hospitals adequate time to file the claims.
One commenter supported CMS' proposed assignment of HCPCS code
G0297 to APC 5570. Other commenters believed that the proposed payment
rate amounts for the counseling visit and for LDCT lung cancer
screening were insufficient to cover the costs of this new preventive
health service. One commenter recommended that CMS assign the services
described by HCPCS code G0296 to APC 5012 (Level 2 Examinations and
Related Services), similar to the APC assignment of the services
described by HCPCS code G0402 (Initial preventive exam, 30 minute
intra-serve time).
Response: We appreciate the commenters' support. We agree that new
HCPCS codes G0296 and G0297 should be effective for services furnished
on or after the February 5, 2015 NCD effective date. We believe that
hospitals will have sufficient time to file claims prior to the 1-year
deadline.
We also appreciate the commenter's support of our proposed
assignment of HCPCS code G0297 to APC 5570, and continue to believe
that HCPCS codes G0296 and G0297 are appropriately assigned to APCs
5822 and 5570, respectively, based on clinical and expected resource
similarity with the procedures currently assigned to those APCs. As is
our standard practice, when claims data become available for these two
codes, we will evaluate the claims data in relation to the APC
assignment for services described by these codes and will propose a
different APC through future rulemaking if such a change is warranted
based on the claims data.
Comment: A few commenters asked CMS to clarify that a medically
necessary evaluation and management (E/M) service on the same day as a
shared counseling visit for lung cancer screening with LDCT is allowed
when it is clinically appropriate. Another commenter urged CMS to
clarify that, similar to the policy that cost-sharing does not apply to
lung cancer screening, the policy on cost-sharing will not apply to the
shared decision-making discussion on screening.
Response: We note that a medically necessary E/M service on the
same day as a shared counseling visit for lung cancer screening with
LDCT is allowed when it is clinically appropriate and the same day E/M
service should be separately reportable with modifier ``25'' to
identify a significant, separately identifiable E/M service on the same
day. We also note that OPPS cost-sharing (that is, the coinsurance or
deductible) does not apply to either the lung cancer screening with
LDCT or the counseling visit to discuss the need for lung cancer
screening using LDCT.
Comment: A few commenters also addressed issues on the following
subject-matter areas: Telemedicine; post-payment review; acceptable
provider types; practitioners who can provide the counseling services;
frequency limitations; and documentation requirements.
Response: These comments pertain to issues for which we did not
include any proposals in the proposed rule. Therefore, we believe these
comments are outside the scope of the proposed rule, and we are not
addressing them in this final rule with comment period.
After consideration of the public comments we received, we are
finalizing our proposal to assign HCPCS code G0296 (Counseling visit to
discuss need for lung cancer screening (LDCT) using low dose CT scan
(service is for eligibility determination and shared decision making)),
to APC 5822 (Level 2 Health and Behavior Services) and HCPCS code G0297
(Low dose CT scan (LDCT) for lung cancer screening), to APC 5570
(Computed Tomography without Contrast). These new codes and APC
assignments are effective as of the February 5, 2015 NCD effective date
and may be billed under the OPPS beginning January 1, 2016. A waiver of
the coinsurance and deductible applies to HCPCS codes G0296 and G0297
because the services described by these codes are identified as
additional preventive services, as stated in the NCD.

D. Payment for Procurement of Corneal Tissue Used in Procedures
Performed in the HOPD and the ASC

1. Background
We have a longstanding policy of making separate payment for the
acquisition or procurement of corneal tissue used in procedures
performed in both the HOPD and the ASC. When corneal tissue is used in
procedures performed in the HOPD, we make separate payment outside of
the OPPS based on hospitals' reasonable costs to procure corneal tissue
(65 FR 18448 through 18449). When corneal tissue is used in procedures
performed in the ASC, we pay separately for corneal tissue procurement
as a covered ancillary service when it is furnished integral to the
performance of an ASC-covered surgical procedure based on invoiced
costs for the acquisition costs of corneal tissue (72 FR 42508 through
42509 and 42 CFR 416.164(b)(3)). HCPCS code V2785 (Processing,
preserving and transporting corneal tissue) is used to report the
acquisition or procurement of corneal tissue used in procedures
performed in both the HOPD and the ASC.
The original use (and currently the primary use) of corneal tissue
is in corneal transplant surgery. Because corneal transplants are the
primary procedures in which corneal tissue is used, in prior rulemaking
discussions of the corneal tissue payment policy in both the HOPD and
the ASC, we focused on the costs associated with corneal tissue when
used in corneal transplants (65 FR 18448 through 18449 and 72 FR 42508
through 42509). However, we have not expressly limited the corneal
tissue payment policy to only corneal tissue used in corneal
transplants. When corneal tissue is used in procedures in the HOPD, we
have stated that we will make separate payment, based on the hospital's
reasonable costs incurred to acquire

[[Page 70472]]

corneal tissue (65 FR 18450). Moreover, corneal tissue acquisition
costs are excluded from the determination of OPPS payment rates under
42 CFR 419.2(c)(8). Section 419.2(c)(8) of the regulation was amended
in the CY 2002 OPPS final rule (66 FR 59922) and the phrase ``incurred
by hospitals that are paid on a reasonable cost basis'' was deleted.
For corneal tissue used in procedures performed in the ASC, as stated
above, we include corneal tissue procurement in the scope of ASC
services as a covered ancillary service when it is furnished integral
to the performance of an ASC covered surgical procedure and pay
separately for this service. Therefore, payment is not packaged into
the ASC payment for the associated covered surgical procedure (72 FR
42509).
In early 2015, a stakeholder asked whether the acquisition of
corneal tissue used as grafting material in glaucoma shunt surgery
could be reported with HCPCS code V2785 and separately paid under the
ASC payment system. In reviewing our longstanding policy on separate
payment for corneal tissue acquisition when furnished integral to a
covered ASC surgical procedure, we determined that the current language
does not limit separate payment for the acquisition of corneal tissue
to corneal transplants. Accordingly, we included an instruction in the
April 2015 ASC quarterly update (Transmittal 3234, Change Request 9100)
that states that ASCs can bill for the acquisition of corneal allograft
tissue used for coverage (using CPT code 66180) or revision (using CPT
code 66185) of a glaucoma aqueous shunt with HCPCS code V2785. In
Change Request 9100, we also stated that contractors pay for corneal
tissue acquisition reported with HCPCS code V2785 based on acquisition/
invoice cost. The April 2015 ASC Change Request is available on the CMS
Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R3234CP.pdf. Since the publication of the April
2015 ASC instruction, stakeholders have disagreed with the different
payment policies for corneal tissue used for patch grafting (which is
paid separately) versus noncorneal tissue (sclera and pericardium,
among others) used for patch grafting (which is packaged).
2. CY 2016 Change to Corneal Tissue Payment Policy in the HOPD and the
ASC
In the CY 2016 OPPS/ASC proposed rule (80 FR 39301 through 39302),
for CY 2016, we proposed to limit the separate payment policy for
acquisition costs of corneal tissue used in procedures performed in the
HOPD and the ASC to only corneal tissue that is used in a corneal
transplant procedure. Under our proposal, the acquisition costs for
corneal tissue used in procedures performed in the HOPD setting would
be separately paid only when the corneal tissue is used in a corneal
transplant procedure. Otherwise, the corneal tissue would be a packaged
surgical supply in the OPPS under the regulation at 42 CFR 419.2(b)(4).
We proposed that corneal tissue procurement for use in procedures
performed in the ASC would be included as a covered ancillary service
only when it is furnished integral to the performance of a corneal
transplant procedure that is an ASC covered surgical procedure, and we
pay separately for covered ancillary services under the ASC payment
system. We also stated that we would provide a specific list of corneal
transplant procedure HCPCS codes with which HCPCS code V2785 may be
reported in the January 2016 OPPS and ASC updates through change
requests. We stated that this would mean that, for corneal tissue used
in procedures performed in the HOPD and the ASC, we would not make
separate payment for corneal tissue when it is used in any
nontransplant procedure (payment for the corneal tissue in that
instance would be packaged with the surgical procedure). We also stated
that we would make packaged payment for all tissues used as patch
grafts in glaucoma shunt surgery. We did not propose to change any
other aspect of the policy for payment for corneal tissue used in
procedures performed in either the HOPD or the ASC.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39302), we stated that
we believe limiting separate payment for corneal tissue to corneal
transplants only is warranted for the following reasons:
The public comments summarized in the CY 2000 OPPS final
rule with comment period (65 FR 18448 through 18449) and referenced in
the CY 2008 ASC final rule (72 FR 42508 through 42509) by the Eye Bank
Association of America (EBAA) and the study report submitted by the
EBAA focused on corneal tissue acquisition for corneal transplants.
These comments and the study were significant factors in the finalized
corneal tissue separate payment policy that addressed corneal tissue
acquisition costs associated with corneal tissue used in corneal
transplants.
Corneal tissue for transplantation requires more
specialized and more costly processing than corneal tissue used as
glaucoma shunt-tube patch grafts because of the fragility and
importance of the corneal endothelium, of which the health and
preservation are necessary for successful transplantation but not for
scleral patch grafting.
Unlike corneas used for corneal transplantation, in which
there is currently no substitute, there are multiple different tissue
types, each with their own costs and relative benefits and detriments,
available for glaucoma shunt surgery patch grafting.
Given the numerous tissue options for patch grafting, we
believe that Medicare beneficiaries will continue to have access to
patch grafting in glaucoma shunt surgery in both the hospital setting
and the ASC setting.
In the proposed rule, we also proposed to revise the related
regulations at 42 CFR 416.164(b)(3) and 419.2(c)(8) to specify that
payment would be made for corneal tissue acquisition or procurement
costs for corneal transplant procedures.
We invited public comments on these proposals.
Comment: Many commenters supported the proposals. The commenters
believed that the payment for the glaucoma surgery described by HCPCS
code 66180 (Aqueous shunt to extraocular equatorial plate reservoir,
external approach; with graft) with any/all of the various grafting
materials (corneal tissue, sclera, or pericardium) that is packaged
into the payment for the surgery is adequate for payment for procedures
performed in both the HOPD and the ASC.
Response: We appreciate the commenters' support.
Comment: Several other commenters opposed the proposals. The
commenters urged CMS to continue separate payment for corneal tissue.
They believed that, without separate payment for corneal tissue for use
as a graft in glaucoma surgery, ASCs would not permit glaucoma surgeons
to perform this procedure in the ASC because the total cost of the
procedure, including the shunt and the grafting material, would exceed
the payment (if any or all grafting materials are packaged into the
surgical procedure).
Response: We disagree with these commenters. We believe that the
total payment for the procedure described by HCPCS 66180 (with any or
all grafting materials packaged) is adequate when procedures are
performed in both the HOPD and the ASC. Therefore, for CY 2016, we are
packaging payment for corneal tissue used in all applicable procedures
except when used in corneal transplant surgery. In addition, we believe
that our reassignment of some of

[[Page 70473]]

the intraocular procedures from APC 5492 (Level 2 Intraocular
Procedures) to APC 5491 (Level 1 Intraocular Procedures), as described
in section III.D.5 of this final rule with comment period, should help
alleviate the concerns of the commenters relating to the sufficiency of
payment for glaucoma surgery with patch grafting because this change
will result in an increase in the payment for this procedure.
After consideration of the public comments we received, we are
finalizing our proposals, without modification. Under the ASC payment
system, procurement or acquisition of corneal tissue for use in
procedures performed in the ASC will be included as a covered ancillary
service only when it is furnished integral to the performance of a
corneal transplant procedure that is an ASC covered surgical procedure.
Under the OPPS, procurement or acquisition of corneal tissue will be
paid separately only when it is used in corneal transplant procedures.
Specifically, corneal tissue will be separately paid when used in
procedures performed in the HOPD and the ASC only when the corneal
tissue is used in a corneal transplant procedure described by one of
the following CPT codes: 65710 (Keratoplasty (corneal transplant);
anterior lamellar); 65730 (Keratoplasty (corneal transplant);
penetrating (except in aphakia or pseudophakia)); 65750 (Keratoplasty
(corneal transplant); penetrating (in aphakia)); 65755 (Keratoplasty
(corneal transplant); penetrating (in pseudophakia)); 65756
(Keratoplasty (corneal transplant); endothelial); 65765 (Keratophakia);
65767 (Epikeratoplasty); and any successor code or new code describing
a new type of corneal transplant procedure that uses eye banked corneal
tissue. This list of corneal transplant procedures with which corneal
tissue is separately payable also will appear in the January 2016 OPPS
and ASC updates through change requests. We also are finalizing the
proposed changes to Sec. Sec. 416.164(b)(3) and 419.2(c)(8) of the
regulations, without modification.

XI. CY 2016 OPPS Payment Status and Comment Indicators

A. CY 2016 OPPS Payment Status Indicator Definitions

Payment status indicators (SIs) that we assign to HCPCS codes and
APCs serve an important role in determining payment for services under
the OPPS. They indicate whether a service represented by a HCPCS code
is payable under the OPPS or another payment system and also whether
particular OPPS policies apply to the code. The complete list of the
payment status indicators and their definitions for CY 2016 is
displayed in Addendum D1 to this final rule with comment period, which
is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The
CY 2016 payment status indicator assignments for APCs and HCPCS codes
are shown in Addendum A and Addendum B, respectively, to this final
rule with comment period, which are available on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39302), for CY 2016,
we proposed to create two new status indicators:
``J2'' to identify certain combinations of services that
we proposed to pay through new proposed C-APC 8011 (Comprehensive
Observation Services). We refer readers to section II.A.2.e. of this
final rule with comment period for a detailed discussion of this change
and any public comments that we received.
``Q4'' to identify conditionally packaged laboratory
tests. We refer readers to section II.A.3. of this final rule with
comment period for a detailed discussion of this new status indicator
and any public comments that we received.
We note that, as discussed in sections II.A.2.e. and II.A.3. of
this final rule with comment period, we are finalizing the two new
status indicators ``J2'' and ``Q4''.

B. CY 2016 Comment Indicator Definitions

In the CY 2016 OPPS/ASC proposed rule (80 FR 39302), for the CY
2016 OPPS, we proposed to use three comment indicators. Two comment
indicators, ``CH'' and ``NI,'' which were in effect in CY 2015, would
continue in CY 2016. In the proposed rule, we proposed to create new
comment indicator ``NP'' that would be used in the proposed rule to
identify a new code for the next calendar year or an existing code with
substantial revision to its code descriptor in the next calendar year
as compared to current calendar year proposed APC assignment, and would
also indicate that comments will be accepted on the proposed APC
assignment for the new code.
``CH''--Active HCPCS code in current and next calendar
year, status indicator and/or APC assignment has changed; or active
HCPCS code that will be discontinued at the end of the current calendar
year.
``NI''--New code for the next calendar year or existing
code with substantial revision to its code descriptor in the next
calendar year as compared to current calendar year, interim APC
assignment; comments will be accepted on the interim APC assignment for
the new code.
``NP''--New code for the next calendar year or existing
code with substantial revision to its code descriptor in the next
calendar year as compared to current calendar year proposed APC
assignment; comments will be accepted on the proposed APC assignment
for the new code.
We proposed to use the ``CH'' comment indicator in the CY 2016
OPPS/ASC proposed rule to indicate HCPCS codes for which the status
indicator or APC assignment, or both, are proposed for change in CY
2016 compared to their assignment as of June 30, 2015. We stated that
we believe using the ``CH'' indicator in the proposed rule would
facilitate the public's review of the changes that we proposed for CY
2016. We proposed to use the ``CH'' comment indicator in the CY 2016
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 2016 compared to their assignment as of December 31, 2015. Use of
the comment indicator ``CH'' in association with a composite APC
indicates that the configuration of the composite APC would be changed
in the CY 2016 OPPS/ASC final rule with comment period.
For CY 2016, we proposed that any existing HCPCS codes with
substantial revisions to the code descriptors for CY 2016 compared to
the CY 2015 descriptors would be labeled with comment indicator ``NI''
in Addendum B to the CY 2016 OPPS/ASC final rule with comment period
(80 FR 39302). However, in order to receive the comment indicator
``NI,'' the CY 2016 revision to the code descriptor (compared to the CY
2015 descriptor) must be significant such that the new code descriptor
describes a new service or procedure for which the OPPS treatment may
change. We proposed to use comment indicator ``NI'' to indicate that
these HCPCS codes would be open for comment as part of the CY 2016
OPPS/ASC final rule with comment period. Like all codes labeled with
comment indicator ``NI,'' we would respond to public comments and
finalize their OPPS treatment in the CY 2017 OPPS/ASC final rule with
comment period.

[[Page 70474]]

In accordance with our usual practice, we proposed that CPT and
Level II HCPCS codes that are new for CY 2016 and that are included in
Addendum B to the CY 2016 OPPS/ASC final rule with comment period also
would be labeled with comment indicator ``NI'' in Addendum B to the CY
2016 OPPS/ASC final rule with comment period.
We proposed that CPT codes that are new for CY 2016 and any
existing HCPCS codes with substantial revisions to the code descriptors
for CY 2016 compared to the CY 2015 descriptors that were included in
Addendum B to the CY 2016 OPPS/ASC proposed rule would be labeled with
new comment indicator ``NP'' in Addendum B to indicate that these CPT
codes would be open for comment as part of the CY 2016 OPPS/ASC
proposed rule. We would respond to public comments and finalize their
OPPS assignment in the CY 2016 OPPS/ASC final rule with comment period.
Comment: One commenter did not believe the comment indicator ``NP''
was necessary because CMS has already been using comment indicator
``NI.'' The commenter suggested that the two comment indicators were
redundant. Moreover, the commenter recommended that CMS pare back the
number of status and comment indicators, given the complexity that they
add to the claims process.
Response: We appreciate the commenter's recommendation to simplify
the claims process. However, we disagree that comment indicators ``NP''
and ``NI'' are redundant and complicate claims processing. The ``NP''
comment indicator was proposed to be used in OPPS Addendum B, which
also includes the proposed APC assignment of the code, to identify a
new code or an existing code with substantial revision to its code
descriptor in the next calendar year as compared to current calendar
year. The ``NP'' comment indicator is intended to notify the public in
the proposed rule that public comments will be accepted on the proposed
APC assignment for the new code and considered in that year's final
rule. On the other hand, comment indicator ``NI'' is only used in the
OPPS final rule with comment period Addendum B to identify a new code
or existing code with substantial revision to its code descriptor in
the next calendar year interim APC assignment for which comments will
be accepted on the interim APC assignment for the new code. We believe
that the creation of comment indicator ``NP'' will simplify the process
of identification of new codes added in time for the proposed rule, as
opposed to those that are new or substantially revised in the final
rule with comment period.
After consideration of the public comments we received, we are
finalizing, without modification, the proposed new comment indicator
``NP'' for CY 2016.
The CY 2015 definitions of comment indicators ``CH'' and ``NI''
continue to be appropriate, and we are continuing to use them for CY
2016.
The definitions of the OPPS comment indicators for CY 2016 are
listed in Addendum D2 to this final rule with comment period, which is
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
For further discussion on the treatment of new CY 2016 CPT codes
that will be effective January 1, 2016, for which we solicited public
comments in the CY 2016 OPPS/ASC proposed rule, we refer readers to
section III. of this final rule with comment period.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for
the ASC Payment System
For a detailed discussion of the legislative history and statutory
authority related to payments to ASCs under Medicare, we refer readers
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377
through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through
32292). For a discussion of prior rulemaking on the ASC payment system,
we refer readers to the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74378 through 74379), the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68434 through 68467), the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75064 through 75090), and the CY 2015
OPPS/ASC final rule with comment period (79 FR 66915 through 66940).
2. Policies Governing Changes to the Lists of Codes and Payment Rates
for ASC Covered Surgical Procedures and Covered Ancillary Services
Under 42 CFR 416.2 and 416.166 of the Medicare regulations, subject
to certain exclusions, covered surgical procedures in an ASC 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 for which standard medical practice dictates
that the beneficiary would not typically be expected to require active
medical monitoring and care at midnight following the procedure
(``overnight stay''). We adopted this standard for defining which
surgical procedures are covered under the ASC payment system as an
indicator of the complexity of the procedure and its appropriateness
for Medicare payment in ASCs. We use this standard only for purposes of
evaluating procedures to determine whether or not they are appropriate
to be furnished to Medicare beneficiaries in ASCs. We define surgical
procedures as those described by Category I CPT codes in the surgical
range from 10000 through 69999, as well as those Category III CPT codes
and Level II HCPCS codes that directly crosswalk or are clinically
similar to procedures in the CPT surgical range that we have determined
do not pose a significant safety risk, that we would not expect to
require an overnight stay when performed in ASCs, and that are
separately paid under the OPPS (72 FR 42478).
In the August 2, 2007 final rule (72 FR 42495), we also established
our policy to make separate ASC payments for the following ancillary
items and services when they are provided integral to ASC covered
surgical procedures: (1) Brachytherapy sources; (2) certain implantable
items that have pass-through payment status under the OPPS; (3) certain
items and services that we designate as contractor-priced, including,
but not limited to, procurement of corneal tissue; (4) certain drugs
and biologicals for which separate payment is allowed under the OPPS;
and (5) certain radiology services for which separate payment is
allowed under the OPPS. In the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66932 through 66934), we expanded the scope of ASC
covered ancillary services to include certain diagnostic tests within
the medicine range of CPT codes for which separate payment is allowed
under the OPPS when they are provided integral to an ASC covered
surgical procedure. Covered ancillary services are specified in Sec.
416.164(b) and, as stated previously, are eligible for separate ASC
payment. Payment for ancillary items and services that are not paid
separately under the ASC payment system is packaged into the ASC
payment for the covered surgical procedure.
We update the lists of, and payment rates for, covered surgical
procedures and covered ancillary services in ASCs in conjunction with
the annual proposed and final rulemaking process to update the OPPS and
the ASC payment system (Sec. 416.173; 72 FR

[[Page 70475]]

42535). We base ASC payment and policies for most covered surgical
procedures, drugs, biologicals, and certain other covered ancillary
services on the OPPS payment policies, and we use quarterly change
requests to update services covered under the OPPS. We also provide
quarterly update change requests (CRs) for ASC covered surgical
procedures and covered ancillary services throughout the year (January,
April, July, and October). CMS releases new and revised Level II HCPCS
codes and recognizes the release of new and revised CPT codes by the
AMA and makes these codes effective (that is, the codes are recognized
on Medicare claims) via these ASC quarterly update CRs. CMS releases
new and revised Category III CPT codes in the July and January CRs.
These updates implement newly created and revised Level II HCPCS and
Category III CPT codes for ASC payment and update the payment rates for
separately paid drugs and biologicals based on the most recently
submitted ASP data. New and revised Category I CPT codes, except
vaccine codes, are released only once a year, and are implemented only
through the January quarterly CR update. New and revised Category I CPT
vaccine codes are released twice a year and are implemented through the
January and July quarterly CR updates. We refer readers to Table 41 in
the CY 2012 OPPS/ASC proposed rule for an example of how this process
was used to update HCPCS and CPT codes (76 FR 42291).
In our annual updates to the ASC list of, and payment rates for,
covered surgical procedures and covered ancillary services, we
undertake a review of excluded surgical procedures (including all
procedures newly proposed for removal from the OPPS inpatient list),
new codes, and codes with revised descriptors, to identify any that we
believe meet the criteria for designation as ASC covered surgical
procedures or covered ancillary services. Updating the lists of ASC
covered surgical procedures and covered ancillary services, as well as
their payment rates, in association with the annual OPPS rulemaking
cycle is particularly important because the OPPS relative payment
weights and, in some cases, payment rates, are used as the basis for
the payment of many 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. Treatment of New and Revised Codes

1. Background on Current Process for Recognizing New and Revised
Category I and Category III CPT Codes and Level II HCPCS Codes
Category I CPT, Category III CPT, and Level II HCPCS codes are used
to report procedures, services, items, and supplies under the ASC
payment system. Specifically, we recognize the following codes on ASC
claims: (1) Category I CPT codes, which describe surgical procedures
and vaccine codes; (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 items, supplies, temporary
procedures, and services not described by CPT codes.
We finalized a policy in the August 2, 2007 final rule (72 FR 42533
through 42535) to evaluate each year all new and revised Category I and
Category III CPT codes and Level II HCPCS codes that describe surgical
procedures, and to make preliminary determinations during the annual
OPPS/ASC rulemaking process regarding whether or not they meet the
criteria for payment in the ASC setting as covered surgical procedures
and, if so, whether or not they are office-based procedures. In
addition, we identify new and revised codes as ASC covered ancillary
services based upon the final payment policies of the revised ASC
payment system. In prior rulemakings, we refer to this process as
recognizing new codes; however, this process has always involved the
recognition of new and revised codes. We consider revised codes to be
new when they have substantial revision to their code descriptors that
necessitate a change in the current ASC payment indicator. To clarify,
we refer to these codes as new and revised in the CY 2016 OPPS/ASC
proposed rule and this final rule with comment period.
We have separated our discussion below based on when the codes are
released and whether we proposed to solicit public comments in the
proposed rule (and respond to those comments in this CY 2016 OPPS/ASC
final rule with comment period) or whether we will be soliciting public
comments in this CY 2016 OPPS/ASC final rule with comment period (and
responding to those comments in the CY 2017 OPPS/ASC final rule with
comment period).
We note that we sought public comments in the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66918) on the new and revised
Category I and III CPT and Level II HCPCS codes that were effective
January 1, 2015. We also sought public comments in the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66918) on the new and revised
Level II HCPCS codes effective October 1, 2014. These new and revised
codes, with an effective date of October 1, 2014 or January 1, 2015,
were flagged with comment indicator ``NI'' in Addenda AA and BB to the
CY 2015 OPPS/ASC final rule with comment period to indicate that we
were assigning them an interim payment status and payment rate, if
applicable, which were subject to public comment following publication
of the CY 2015 OPPS/ASC final rule with comment period. In the proposed
rule (80 FR 39304), we stated that we will respond to public comments
and finalize the treatment of these codes under the ASC payment system
in this CY 2016 OPPS/ASC final rule with comment period.
2. Treatment of New and Revised Level II HCPCS Codes and Category III
CPT Codes Implemented in April 2015 and July 2015 for Which We
Solicited Public Comments in the CY 2016 OPPS/ASC Proposed Rule
In the April 2015 and July 2015 Change Requests (CRs), we made
effective for April 1, 2015 and July 1, 2015, respectively, a total of
13 new Level II HCPCS codes and two new Category III CPT codes that
describe covered ASC services that were not addressed in the CY 2015
OPPS/ASC final rule with comment period.
In the April 2015 ASC quarterly update (Transmittal 3234, CR 9100,
dated April 15, 2015), we added one new device Level II HCPCS code and
seven new drug and biological Level II HCPCS codes to the list of
covered ancillary services. Table 55 of the CY 2016 OPPS/ASC proposed
rule (80 FR 39304) listed the new Level II HCPCS codes that were
implemented April 1, 2015, along with their proposed payment indicators
for CY 2016.
In the July 2015 ASC quarterly update (Transmittal 3279, CR 9207,
dated June 5, 2015), we added one new device Level II HCPCS code and
four new drug and biological Level II HCPCS codes to the list of
covered ancillary services. Table 56 of the CY 2016 OPPS/ASC proposed
rule (80 FR 39305) listed the new Level II HCPCS codes that were
implemented July 1, 2015. The proposed payment rates, where applicable,
for these April and July codes can be found in Addendum BB to the
proposed rule (which is available via the Internet on the CMS Web
site).
Through the July 2015 quarterly update CR, we also implemented ASC
payment for two new Category III CPT

[[Page 70476]]

codes as ASC covered surgical procedures, effective July 1, 2015. These
codes are listed in Table 57 of the CY 2016 OPPS/ASC proposed rule (80
FR 39305), along with their proposed payment indicators. The proposed
payment rates for these new Category III CPT codes can be found in
Addendum AA to the proposed rule (which is available via the Internet
on the CMS Web site).
In the CY 2016 OPPS/ASC proposed rule (80 FR 39304), we invited
public comments on these proposed payment indicators and the proposed
payment rates for the new Category III CPT code and Level II HCPCS
codes that were newly recognized as ASC covered surgical procedures or
covered ancillary services in April 2015 and July 2015 through the
quarterly update CRs, as listed in Tables 55, 56, and 57 of the
proposed rule. We proposed to finalize their payment indicators and
their payment rates in this CY 2016 OPPS/ASC final rule with comment
period.
We did not receive any public comments regarding the proposed ASC
payment indicators and payment rates. Therefore, we are adopting as
final the CY 2016 proposed ASC payment indicators and payment rates for
the ASC covered surgical procedures and covered ancillary services
described by the new Level II HCPCS codes implemented in April 2015 and
July 2015 through the quarterly update CRs as shown below, in Tables
59, 60 and 61, respectively. The final CY 2016 ASC payment rates for
these codes can be found in ASC Addendum AA and BB of this OPPS/ASC
final rule with comment period.

Table 59--New Level II HCPCS Codes for Covered Surgical Procedures or Covered Ancillary Services Implemented in
April 2015
----------------------------------------------------------------------------------------------------------------
Final CY 2016
CY 2015 HCPCS code CY 2016 HCPCS code CY 2016 Long descriptor payment
indicator
----------------------------------------------------------------------------------------------------------------
C2623........................... C2623....................... Catheter, transluminal J7
angioplasty, drug-coated, non-
laser.
C9445........................... J0596....................... Injection, c1 esterase K2
inhibitor (recombinant),
Ruconest, 10 units.
C9448 *......................... J8655....................... Netupitant 300 mg and K2
palonosetron 0.5 mg.
C9449........................... J9039....................... Injection, blinatumomab, 1 K2
microgram.
C9450........................... J7313....................... Injection, fluocinolone K2
acetonide intravitreal
implant, 0.01 mg.
C9451........................... J2547....................... Injection, peramivir, 1 mg..... K2
C9452........................... J0695....................... Injection, ceftolozane 50 mg K2
and tazobactam 25 mg.
Q9975........................... J7205....................... Injection, factor viii fc K2
fusion (recombinant), per iu.
----------------------------------------------------------------------------------------------------------------
* HCPCS code C9448 was deleted June 30, 2015 and replaced with HCPCS code Q9978 effective July 1, 2015.

Table 60--New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2015
----------------------------------------------------------------------------------------------------------------
Final CY 2016
CY 2015 HCPCS code CY 2016 HCPCS code CY 2016 Long descriptor payment
indicator
----------------------------------------------------------------------------------------------------------------
C2613........................... C2613....................... Lung biopsy plug with delivery J7
system.
C9453........................... J9299....................... Injection, nivolumab, 1 mg..... K2
C9454........................... J2502....................... Injection, pasireotide long K2
acting, 1 mg.
C9455........................... J2860....................... Injection, siltuximab, 10 mg... K2
Q9978 *......................... J8655....................... Netupitant 300 mg and K2
palonosetron 0.5 mg.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q9978 replaced HCPCS code C9448 effective July 1, 2015.

Table 61--New Category III CPT Codes for Covered Surgical Procedures or Covered Ancillary Services Implemented
in July 2015
----------------------------------------------------------------------------------------------------------------
Final CY 2016
CY 2015 CPT code CY 2016 CPT code CY 2016 Long descriptor payment
indicator
----------------------------------------------------------------------------------------------------------------
0392T........................... 0392T....................... Laparoscopy, surgical, G2
esophageal sphincter
augmentation procedure,
placement of sphincter
augmentation device (ie,
magnetic band).
0393T........................... 0393T....................... Removal of esophageal sphincter G2
augmentation device.
----------------------------------------------------------------------------------------------------------------

3. Process for Recognizing New and Revised Category I and Category III
CPT Codes That Will Be Effective January 1, 2016
a. Current Process for Accepting Comments on New and Revised CPT Codes
That Are Effective January 1
Historically, we have not received new and revised Category I and
Category III CPT codes that take effect at the beginning of a calendar
year in time to include them in the proposed rule for that calendar
year. Therefore, under the ASC payment system, the current process we
have used is to incorporate new and revised Category I and Category III
CPT codes that are effective January 1 in the final rule with comment
period thereby updating the ASC payment system for the following
calendar year. These codes are released to the public by the AMA via
the annual CPT code books and electronic CPT code file. In addition, we
include these codes in the January ASC quarterly update CR, and we list
the codes in ASC Addendum AA and BB of the OPPS/ASC final rule with
comment period. All of the new codes are flagged with comment indicator
``NI'' in Addendum AA and Addendum BB to the OPPS/ASC final rule with
comment period to indicate that we are assigning them an interim
payment status which is subject to public comment. In addition,
existing CPT codes that have substantial revision

[[Page 70477]]

to their code descriptors that necessitate a change in the current ASC
payment indicator are assigned to comment indicator ``NI.'' The payment
indicator and payment rate, if applicable, for all such codes flagged
with comment indicator ``NI'' are open to public comment in the OPPS/
ASC final rule with comment period, and we respond to these comments in
the final rule with comment period for the next calendar year's OPPS/
ASC update. For example, the new CPT codes that were effective January
1, 2014 were assigned to comment indicator ``NI'' in Addendum AA and
Addendum BB to the CY 2014 OPPS/ASC final rule with comment period. We
responded to public comments received on the CY 2014 OPPS/ASC final
rule with comment period and finalized the payment indicator
assignments for these codes in the CY 2015 OPPS/ASC final rule with
comment period; and we included the final ASC payment indicator
assignments in Addendum AA and Addendum BB to that final rule with
comment period.
Several stakeholders, including consultants, device manufacturers,
drug manufacturers, as well as specialty societies and hospitals, have
expressed concern with the process we use to recognize new and revised
CPT codes. They believe that we should publish proposed ASC payment
indicators for the new and revised CPT codes that will be effective
January 1 in the OPPS/ASC proposed rule for the prior year, and request
public comments prior to finalizing them for the January 1
implementation date. Further, the stakeholders believe that seeking
public input on the ASC payment indicator assignments for these new and
revised codes would assist CMS in assigning the CPT codes to
appropriate payments under the ASC payment system. We were informed of
similar concerns regarding our process for assigning interim payment
values for revalued and new and revised codes under the MPFS and the
OPPS. Consequently, we included proposed policies to address those
concerns in the CY 2015 MPFS proposed rule (79 FR 40359 through 40364),
and in the CY 2015 OPPS/ASC proposed rule (79 FR 40977 through 40979).
Based on the comments that we received to the proposed rules, we
finalized the policies in the CY 2015 MPFS final rule (79 FR 67602
through 67609) and the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66841 through 66844).
Like the MPFS and the OPPS, the ASC payment system relies
principally upon the Current Procedural Terminology (CPT[supreg])
coding system maintained by the AMA for billing. CPT[supreg] is the
standard code set adopted under the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) for outpatient services. The AMA CPT
Editorial Panel's coding cycle occurs concurrently with our calendar
year rulemaking cycle for the OPPS and the ASC payment system. The
OPPS/ASC proposed rules have historically been published prior to the
publication of the CPT codes that are generally made public in the
fall, with a January 1 effective date, and therefore, we have not
historically been able to include these codes in the OPPS/ASC proposed
rules.
b. Modification of the Current Process for Accepting Comments on New
and Revised Category I and III CPT Codes That Are Effective January 1
In the CY 2016 OPPS/ASC proposed rule (80 FR 39305 through 39307),
we proposed to make changes in the process we use to establish ASC
payment indicators for new and revised Category I and Category III CPT
codes. As discussed above, we finalized similar revisions under the
MPFS and the OPPS for establishing payment indicators for new and
revised CPT codes that take effect each January 1. Because we are
following this new process for the OPPS where new and revised codes
that are received in time for the proposed rule are assigned proposed
payment indicators and proposed APC assignments in the OPPS, we also
needed to propose a corresponding process for payment rates and payment
indicators in the ASC for those codes that are ASC covered surgical
procedures and covered ancillary services. The proposed revised process
would eliminate our current practice of assigning interim payment
indicators for the vast majority of new and revised CPT codes that take
effect on January 1 each year.
Consequently, in the CY 2016 OPPS/ASC proposed rule (80 FR 39305
through 39307), we proposed that we would include new and revised
Category I and III CPT codes that we receive from the AMA CPT Editorial
Panel in time for the proposed rule and their proposed ASC payment
indicators in the OPPS/ASC proposed rule and finalize the ASC payment
indicator assignments in the OPPS/ASC final rule with comment period.
We proposed that, for new and revised Category I and III CPT codes that
can be cross-walked to current codes for which ASC payment assignments
are already established that we receive from the AMA CPT Editorial
Panel too late for inclusion in the proposed rule for a year, we would
delay adoption of these new and revised codes for that year and,
instead, adopt coding policies and payment rates that conform, to the
extent possible, to the policies and payment rates in place for the
previous year. We proposed to adopt these conforming coding and payment
policies (by creating G codes that mirror existing codes that are the
predecessor codes to the untimely new and revised CPT codes) on an
interim basis pending the result of our specific proposals for these
new and revised codes through notice--and--comment rulemaking in the
OPPS/ASC proposed rule for the following year. However, if certain CPT
codes are revised in a manner that would not affect the cost of inputs
(for example, a grammatical change to CPT code descriptors), we would
use these revised codes and continue to assign those codes to their
current ASC payment indicator and APC unless a policy change was being
proposed for the codes. For example, under this proposed process, if a
single CPT code was separated into two codes and we did not receive
those codes until May 2016, we would assign each of those codes to
interim payment indicator ``B5'' (Alternative code may be available; no
payment made) in the final rule with comment period, to indicate that
an alternate code is recognized under the ASC payment system. ASCs
could not use those two new CPT codes to bill Medicare for ASC services
the first year after the effective date of the codes. Instead, we would
create a HCPCS G-code with the same descriptor as the single
predecessor CPT code, and continue to use the same ASC payment
indicator for that code during the year. We would propose payment
indicators for the two new CPT codes during rulemaking in CY 2017 for
payment beginning in CY 2018. We recognize that the use of HCPCS G-
codes may place an administrative burden on those ASCs that bill for
services under the ASC payment system. We are optimistic based on what
has occurred in CY 2015 that the AMA CPT Editorial Panel ultimately
will be able to adjust its timelines and processes so that most, if not
all, of the annual coding changes can be addressed in the OPPS/ASC
proposed rule.
As stated previously, for new or revised codes, including new codes
that describe wholly new services, we would make every effort to work
with the AMA CPT Editorial Panel to ensure that we received the codes
in time to propose payment rates in the proposed rule. However, if we
do not receive the code for a wholly new service in time to

[[Page 70478]]

include proposed ASC payment indicator assignments in the proposed rule
for a year, we would establish interim ASC payment indicator
assignments for the initial year. We proposed to establish the initial
ASC payment indicator assignments for wholly new services as interim
final assignments, and to follow our current process to solicit and
respond to public comments and finalize the ASC payment indicator
assignments in the subsequent year. We proposed to finalize and
implement the revised CMS process for establishing ASC payment
indicator assignments for new and revised codes for CY 2016.
In summary, we proposed to include in the OPPS/ASC proposed rule
the proposed ASC payment indicators for the vast majority of new and
revised CPT codes before they are used for payment purposes under the
ASC payment system. We would address new and revised CPT codes for the
upcoming year that are available in time for the proposed rule by
proposing ASC payment indicators for the codes. Otherwise, we would
delay adoption of the new and revised codes that can be cross-walked to
current codes for which ASC payment assignments are already established
for a year while using methods (including creating G-codes that
describe the predecessor codes) to maintain the existing ASC payment
indicators until the following year when we would include proposed
assignments for the new and revised codes in the proposed rule. In the
case of a new CPT code that describes a wholly new service (such as a
new technology or new surgical procedure) that has not previously been
addressed under the ASC payment system for which we do not receive
timely information from the AMA, we proposed to establish interim ASC
payment indicators in that year's OPPS/ASC final rule with comment
period, as is our current process, and to follow our current process to
respond to public comments and finalize the ASC payment indicator
assignments in the OPPS/ASC final rule with comment period for the
subsequent year. The proposed revised process would eliminate our
current practice of assigning interim ASC payment indicators for the
vast majority of new and revised CPT codes that take effect on January
1 each year. We invited public comment on these proposals.
As stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39306), for
the CY 2016 ASC update, we received the CY 2016 Category I and III CPT
codes from the AMA in time for inclusion in the CY 2016 OPPS/ASC
proposed rule. The new and revised CY 2016 Category I and III CPT codes
were included in ASC Addenda AA and BB to the CY 2016 OPPS/ASC proposed
rule (which are available via the Internet on the CMS Web site) and
were assigned to proposed new comment indicator ``NP'' to indicate that
the code is new for the next calendar year or the code is an existing
code with substantial revision to its code descriptor in the next
calendar year as compared to current calendar year with a proposed ASC
payment indicator and that comments will be accepted on the proposed
payment indicator. In the CY 2016 OPPS/ASC proposed rule, we solicited
public comments on the proposed CY 2016 ASC payment indicators for the
new and revised Category I and III CPT codes that would be effective
January 1, 2016.
Comment: One commenter recommended that CMS refrain from creating
temporary HCPCS G-codes when CPT codes are available in order to avoid
confusion and parallel coding inconsistencies. The commenter further
recommended that CMS rely solely on the use of CPT codes for procedures
and services under both the OPPS and the ASC payment system.
Response: We appreciate the commenter's recommendations. However,
we do not agree that we should refrain from creating temporary HCPCS G-
codes when CPT codes are available or that we should rely solely on the
use of CPT codes for procedures and services under both the OPPS and
the ASC payment system. We intend to the extent possible to include new
and revised Category I and III CPT codes and their proposed payment
indicators in a proposed rule and finalize the payment indicators in
the final rule with comment period for the same year. We will delay the
adoption of new and revised Category I and III CPT codes that can be
cross-walked to current codes for which ASC payment assignments are
already established that are available too late for a current proposed
rule for a year. Instead, we will use G-codes that mirror the
predecessor CPT codes that are scheduled for deletion in the upcoming
year to maintain the existing ASC payment indicators until the
following year. In the following year, we will include proposed
assignments for these new and revised Category I and III CPT codes in
the OPPS/ASC proposed rule, and finalize the payment indicators for
these codes in the OPPS/ASC final rule with comment period. In the case
of a new Category I or III CPT code that describes a wholly new service
(such as a new technology or new surgical procedure) that has not
previously been addressed under the ASC payment system for which we do
not receive timely information from the AMA, we will establish interim
ASC payment indicators in that year's OPPS/ASC final rule with comment
period, as is our current process, and follow our current process to
respond to public comments and finalize the ASC payment indicator
assignments in the OPPS/ASC final rule with comment period for the
subsequent year. We believe this new process aligns the reporting
requirements for the same codes under all three payment systems: MPFS,
OPPS, and the ASC payment system. This creates coding consistency and
less confusion amongst all three Medicare payment systems.
Comment: Some commenters supported and commended CMS for proposing
a comment period for new CPT codes before they are used for payment
purposes under the ASC payment system. The commenters stated that
requesting public input prior to use of new and revised codes will
encourage reliable and accurate payments. One commenter believed that
the inclusion of new and revised CPT codes in the proposed rule
represents a significant improvement. The commenters requested that CMS
adopt its proposal to allow for comments on new and revised CPT codes
prior to usage for payment purposes.
Response: We appreciate the commenters support for our proposal. We
believe that publishing our proposed ASC payment indicators for the new
and revised Category I and III CPT codes prior to their implementation
on January 1 whenever possible will help ensure that correct ASC
payment indicators for new and revised codes are effective January 1,
and that ASCs are paid appropriately when the codes are implemented.
After consideration of the public comments we received, we are
finalizing our proposal without any modification. First, for new and
revised Category I and III CPT codes that we receive timely from the
AMA CPT Editorial Panel, we are finalizing our proposal to include
these codes that will be effective January 1 in the OPPS/ASC proposed
rules with proposed ASC payment indicators, and finalize their
assignments in the OPPS/ASC final rules with comment period. Secondly,
for those new and revised Category I and III CPT codes that can be
cross-walked to current codes for which ASC payment assignments are
already established that cannot be included in the OPPS/ASC proposed
rules, we are finalizing our proposal to delay adoption of these codes
for a year while

[[Page 70479]]

using methods, including creating G-codes that describe the predecessor
codes, to maintain the existing ASC payment indicators as interim ASC
payment indicator assignments until the following year when we will
include proposed payment indicator assignments for the codes in the
OPPS/ASC proposed rule, and finalize these payment indicator
assignments in the OPPS/ASC final rule with comment period. We note
that we will assign the HCPCS G-codes to interim ASC payment indicator
assignments for one year, and assign the Category I and III CPT codes
to ASC payment indicator ``B5'' to indicate that another HCPCS code
should be reported to Medicare. However, if certain Category I and III
CPT codes are revised in a manner that would not affect the cost of
inputs (for example, a grammatical change to CPT code descriptors), we
will use these revised codes and continue to assign those codes to
their current ASC payment indicator and APC unless a policy change was
being proposed for the codes. Thirdly, for Category I and III CPT codes
that describe wholly new services that have not previously been
addressed under the ASC payment system for which we do not receive
timely information from the AMA, we will establish interim ASC payment
indicators for these CPT codes for the initial year in the OPPS/ASC
final rule with comment period in which we will solicit public comments
on these interim payment indicators, and respond to those comments and
finalize the ASC payment indicator assignments in the subsequent year
OPPS/ASC final rule with comment period, as is our current practice.
4. Process for New and Revised Level II HCPCS Codes That Are Effective
October 1, 2015 and January 1, 2016 for Which We Are Soliciting Public
Comments in This CY 2016 OPPS/ASC Final Rule With Comment Period
In the CY 2016 OPPS/ASC proposed rule (80 FR 39307), although we
proposed to revise our process for requesting public comments on the
new and revised Category I and III CPT codes, we did not propose any
change to the process for requesting public comments on the new and
revised Level II HCPCS codes that would be effective October 1 and
January 1.
As has been our practice in the past, we incorporate those new and
revised Level II HCPCS codes that are effective January 1 in the final
rule with comment period, thereby updating the ASC payment system for
the following calendar year. These codes are released to the public via
the CMS HCPCS Web site, and also through the January ASC quarterly
update CRs. In the past, we also released new and revised Level II
HCPCS codes that are effective October 1 through the October ASC
quarterly update CRs and incorporated these new and revised codes in
the final rule with comment period, thereby updating the ASC for the
following calendar year. All of these codes are flagged with comment
indicator ``NI'' in Addenda AA and BB to the OPPS/ASC final rule with
comment period to indicate that we are assigning them an interim
payment status which is subject to public comment. The payment
indicator and payment rate, if applicable, for all such codes flagged
with comment indicator ``NI'' are open to public comment in the OPPS/
ASC final rule with comment period, and we respond to these comments in
the final rule with comment period for the next calendar year's OPPS/
ASC update.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39307), we proposed to
continue this process for CY 2016. Specifically, the Level II HCPCS
codes that will be effective October 1, 2015 and January 1, 2016 would
be flagged with comment indicator ``NI'' in Addendum AA and BB to the
CY 2016 OPPS/ASC final rule with comment period to indicate that we
have assigned the codes an interim ASC payment status for CY 2016. We
also stated that we will be inviting public comments on the proposed
payment indicators and payment rates for these codes, if applicable,
that would be finalized in the CY 2017 OPPS/ASC final rule with comment
period.
In Table 62 below, we summarize the CY 2016 process described in
section XII.B. of the proposed rule for updating codes through our ASC
quarterly update CRs, seeking public comments, and finalizing the
treatment of these new and revised codes under the ASC payment system.

Table 62--Proposed Comment Timeframe for CY 2016 for New or Revised Category I and III CPT Codes and Level II
HCPCS Codes
----------------------------------------------------------------------------------------------------------------
ASC quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2015................... Level II HCPCS April 1, 2015..... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
July 1, 2015.................... Level II HCPCS July 1, 2015...... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
Category I July 1, 2015...... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT codes.
October 1, 2015................. Level II HCPCS October 1, 2015... CY 2016 OPPS/ASC CY 2017 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
January 1, 2016................. Level II HCPCS January 1, 2016... CY 2016 OPPS/ASC CY 2017 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
Category I and III January 1, 2016... CY 2016 OPPS/ASC CY 2016 OPPS/ASC
CPT Codes. proposed rule. final rule with
comment period.
----------------------------------------------------------------------------------------------------------------

We invited public comments on this proposed process. We did not
receive any public comments related to our proposal. Therefore, we are
finalizing our proposal to assign the Level II HCPCS codes that will be
effective October 1, 2015 and January 1, 2016 to comment indicator
``NI'' in Addendum AA and BB of this CY 2016 OPPS/ASC

[[Page 70480]]

final rule with comment period to indicate that we have assigned the
codes an interim ASC payment indicator for CY 2016. We note that the
payment indicator and payment rate, if applicable, for all such codes
flagged with comment indicator ``NI'' are open to public comment in the
OPPS/ASC final rule with comment period, and we respond to these
comments in the final rule with comment period for the next calendar
year's OPPS/ASC update.

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

1. Covered Surgical Procedures
a. Covered Surgical Procedures Designated as Office-Based
(1) Background
In the August 2, 2007 ASC final rule, we finalized our policy to
designate as ``office-based'' those procedures that are added to the
ASC list of covered surgical procedures in CY 2008 or later years that
we determine are performed predominantly (more than 50 percent of the
time) in physicians' offices based on consideration of the most recent
available volume and utilization data for each individual procedure
code and/or, if appropriate, the clinical characteristics, utilization,
and volume of related codes. In that rule, we also finalized our policy
to exempt all procedures on the CY 2007 ASC list from application of
the office-based classification (72 FR 42512). The procedures that were
added to the ASC list of covered surgical procedures beginning in CY
2008 that we determined were office-based were identified in Addendum
AA to that rule by payment indicator ``P2'' (Office-based surgical
procedure added to ASC list in CY 2008 or later with MPFS nonfacility
PE RVUs; payment based on OPPS relative payment weight); ``P3''
(Office-based surgical procedures added to ASC list in CY 2008 or later
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on
OPPS relative payment weight), depending on whether we estimated the
procedure would be paid according to the standard ASC payment
methodology based on its OPPS relative payment weight or at the MPFS
nonfacility PE RVU-based amount.
Consistent with our final policy to annually review and update the
list of covered surgical procedures eligible for payment in ASCs, each
year we identify covered surgical procedures as either temporarily
office-based (these are new procedure codes with little or no
utilization data that we have determined are clinically similar to
other procedures that are permanently office-based), permanently
office-based, or nonoffice-based, after taking into account updated
volume and utilization data.
(2) Changes for CY 2016 to Covered Surgical Procedures Designated as
Office-Based
In developing the CY 2016 OPPS/ASC proposed rule, we followed our
policy to annually review and update the covered 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 2014 volume and utilization data and
the clinical characteristics for all covered surgical procedures that
are assigned payment indicator ``G2'' (Nonoffice-based surgical
procedure added in CY 2008 or later; payment based on OPPS relative
payment weight) in CY 2015, as well as for those procedures assigned
one of the temporary office-based payment indicators, specifically
``P2,'' ``P3,'' or ``R2'' in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66921 through 66923).
Our review of the CY 2014 volume and utilization data resulted in
our identification of two covered surgical procedures, CPT codes 43197
(Esophagoscopy, flexible, transnasal; diagnostic, including collection
of specimen(s) by brushing or washing, when performed (separate
procedure)) and 43198 (Esophagoscopy, flexible, transnasal; with
biopsy, single or multiple) that we believe meet the criteria for
designation as office-based. The data indicate that these procedures
are performed more than 50 percent of the time in physicians' offices
and we believe the services are of a level of complexity consistent
with other procedures performed routinely in physicians' offices. The
two CPT codes we proposed to permanently designate as office-based are
listed in Table 59 of the CY 2016 OPPS/ASC proposed rule (80 FR 39308).
We invited public comment on this proposal.
We did not receive any public comments on this proposal. Therefore,
we are finalizing our proposal, without modification, to designate the
procedures described by CPT codes 43197 and 43198 as permanently
office-based for CY 2016, as set forth in Table 63 below.

Table 63--ASC Covered Surgical Procedures Newly Designated as Permanently Office-Based for CY 2016
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2015 ASC 2016 ASC Final CY 2016
CY 2016 CPT code CY 2016 long descriptor payment payment ASC payment
indicator indicator indicator *
----------------------------------------------------------------------------------------------------------------
43197......................... Esophagoscopy, flexible, G2 P3 P3
transnasal; diagnostic,
including collection of
specimen(s) by brushing or
washing, when performed
(separate procedure).
43198......................... Esophagoscopy, flexible, G2 P3 P3
transnasal; with biopsy,
single or multiple.
----------------------------------------------------------------------------------------------------------------
* Final payment indicators are based on a comparison of the final rates according to the ASC standard
ratesetting methodology and the MPFS final rates. Current law specifies a 0.5 percent update to the MPFS
payment rates for CY 2016. For a discussion of the MPFS rates, we refer readers to the CY 2016 MPFS final rule
with comment period.

We also reviewed CY 2014 volume and utilization data and other
information for six procedures finalized for temporary office-based
status in Table 47 in the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66922 through 66923). Among these six procedures, there
were very few claims in our data or no claims data for five procedures:
CPT code 0099T (Implantation of intrastromal corneal ring segments);
CPT code 0299T (Extracorporeal shock wave for integumentary wound
healing, high energy, including topical application and dressing care;
initial wound); CPT code C9800 (Dermal injection procedure(s) for
facial lipodystrophy syndrome (LDS) and provision of Radiesse or
Sculptra dermal filler, including all items and supplies); CPT

[[Page 70481]]

code 10030 (Image-guided fluid collection drainage by catheter (e.g.,
abscess, hematoma, seroma, lymphocele, cyst), soft tissue (e.g.,
extremity, abdominal wall, neck), percutaneous); and CPT code 67229
(Treatment of extensive or progressive retinopathy, one or more
sessions; preterm infant (less than 37 weeks gestation at birth),
performed from birth up to 1 year of age (e.g., retinopathy of
prematurity), photocoagulation or cryotherapy). Consequently, in the CY
2016 OPPS/ASC proposed rule (80 FR 39308 through 39309) we proposed to
maintain the temporary office-based designations for these five codes
for CY 2016. We listed all of these codes in Table 60 of the proposed
rule (80 FR 39309), except for HCPCS code 0099T. HCPCS code 0099T was
assigned payment indicator ``R2'' in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66922), but this code is being replaced with
a new CPT code currently identified with a CMS 5-digit placeholder code
of 657XG. Table 61 of the proposed rule (80 FR 39309) reflected the new
CY 2016 codes for ASC covered surgical procedures with proposed
temporary office-based designations.
For CPT code 64617 (Chemodenervation of muscle(s); larynx,
unilateral, percutaneous (e.g., for spasmodic dysphonia), includes
guidance by needle electromyography, when performed), claims data
indicate these procedures are performed more than 50 percent of the
time in physicians' offices, and we believe the services are of a level
of complexity consistent with other procedures performed routinely in
physicians' offices. Therefore, we proposed to make the office-based
designation for CPT code 64617 permanent.
The proposed CY 2016 payment indicator designations for the
procedures that were temporarily designated as office-based in CY 2015
were displayed in Table 60 of the proposed rule. The procedures for
which the proposed office-based designations for CY 2016 are temporary
also are indicated by asterisks in Addendum AA to the proposed rule
(which is available via the Internet on the CMS Web site).
We invited public comment of these proposals.
Comment: One commenter supported CMS' proposal to designate HCPCS
code C9800 as temporarily rather than permanently office-based,
allowing for additional utilization data to be collected.
Response: We appreciate the commenter's support.
After consideration of the public comments we received, for CY 2016
we are finalizing our proposal, without modification, to designate the
four procedures listed in Table 64 as temporarily office-based and one
procedure listed in Table 64 as permanently office-based.

Table 64--CY 2016 Payment Indicators for ASC Covered Surgical Procedures Designated as Temporarily Office-Based
in the CY 2015 OPPS/ASC Final Rule With Comment Period
----------------------------------------------------------------------------------------------------------------
CY 2015 ASC CY 2016 ASC
CY 2016 CPT code CY 2016 long descriptor payment payment
indicator indicator **
----------------------------------------------------------------------------------------------------------------
0299T................................. Extracorporeal shock wave for R2 * R2 *
integumentary wound healing, high
energy, including topical application
and dressing care; initial wound.
C9800................................. Dermal injection procedure(s) for R2 * R2 *
facial lipodystrophy syndrome (LDS)
and provision of Radiesse or Sculptra
dermal filler, including all items
and supplies.
10030................................. Image-guided fluid collection drainage P2 * P2 *
by catheter (e.g., abscess, hematoma,
seroma, lymphocele, cyst), soft
tissue (e.g., extremity abdominal
wall, neck), percutaneous.
64617................................. Chemodenervation of muscle(s); larynx, P3 * P3
unilateral, percutaneous (e.g., for
spasmodic dysphonia), includes
guidance by needle electromyography,
when performed.
67229................................. Treatment of extensive or progressive R2 * R2 *
retinopathy, one or more sessions;
preterm infant (less than 37 weeks
gestation at birth), performed from
birth up to 1 year of age (e.g.,
retinopathy of prematurity),
photocoagulation or cryotherapy.
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.
** Final payment indicators are based on a comparison of the final rates according to the ASC standard
ratesetting methodology and the MPFS final rates. Current law specifies a 0.5 percent update to the MPFS
payment rates for CY 2016. For a discussion of the MPFS rates, we refer readers to the CY 2016 MPFS final rule
with comment period.

For CY 2016, we also proposed to designate certain new CY 2016
codes for ASC covered surgical procedures as temporary office-based,
displayed in Table 61 of the proposed rule (80 FR 39309). After
reviewing the clinical characteristics, utilization, and volume of
related codes, we determined that the procedures described by these new
CPT codes would be predominantly performed in physicians' offices.
However, because we had no utilization data for the procedures
specifically described by these new CPT codes, we proposed that the
office-based designations be temporary rather than permanent and we
will reevaluate the procedures when data become available. The
procedures for which the proposed office-based designations for CY 2016
are temporary also are indicated by asterisks in Addendum AA to the
proposed rule (which is available via the Internet on the CMS Web
site).
We invited public comment on these proposals.
We did not receive any public comment on our proposal. Therefore,
for CY 2016, we are finalizing our proposal without modification to
designate the four procedures listed in Table 65 as temporarily office-
based.

[[Page 70482]]

Table 65--CY 2016 Payment Indicators for New CY 2016 CPT Codes for ASC
Covered Surgical Procedures Designated as Temporarily Office-Based
------------------------------------------------------------------------
Final CY 2016 OPPS/
ASC Proposed Rule CY 2016 CPT Final CY 2016 Final CY 2016
5-digit CMS code long descriptor ASC payment
placeholder code *** indicator **
------------------------------------------------------------------------
6446A............... 64461........... Paravertebral P3 *
block (PVB)
(paraspinous
block),
thoracic;
single
injection site
(includes
imaging
guidance, when
performed).
6446C............... 64463........... Paravertebral P3 *
block (PVB)
(paraspinous
block),
thoracic;
continuous
infusion by
catheter
(includes
imaging
guidance, when
performed).
03XXB............... 0402T........... Collagen cross- R2 *
linking of
cornea
(including
removal of the
corneal
epithelium and
intraoperative
pachymetry
when
performed).
657XG............... 65785........... Implantation of R2 *
intrastromal
corneal ring
segments.
------------------------------------------------------------------------
* If designation is temporary.
** Final payment indicators are based on a comparison of the final rates
according to the ASC standard ratesetting methodology and the MPFS
final rates. Current law specifies a 0.5 percent update to the MPFS
payment rates for CY 2016. For a discussion of the MPFS rates, we
refer readers to the CY 2016 MPFS final rule with comment period.
*** New CPT codes (with CMS 5-digit placeholder codes) that will be
effective January 1, 2016. The final ASC payment rate for this code
can be found in ASC Addendum AA, which is available via the Internet
on the CMS Web site.

b. ASC Covered Surgical Procedures Designated as Device-Intensive--
Finalized Policy for CY 2015 and Finalized Policy for CY 2016
(1) Background
As discussed in the August 2, 2007 final rule (72 FR 42503 through
42508), we adopted a modified payment methodology for calculating the
ASC payment rates for covered surgical procedures that are assigned to
the subset of OPPS device-dependent APCs with a device offset
percentage greater than 50 percent of the APC cost under the OPPS, in
order to ensure that payment for the procedure is adequate to provide
packaged payment for the high-cost implantable devices used in those
procedures. According to that modified ASC payment methodology, we
apply the device offset percentage based on the standard OPPS APC
ratesetting methodology to the OPPS national unadjusted payment to
determine the device cost included in the OPPS payment rate for a
device-intensive ASC covered surgical procedure, which we then set as
equal to the device portion of the national unadjusted ASC payment rate
for the procedure. We then calculate the service portion of the ASC
payment for device-intensive procedures by applying the uniform ASC
conversion factor to the service (nondevice) portion of the OPPS
relative payment weight for the device-intensive procedure. Finally, we
sum the ASC device portion and ASC service portion to establish the
full payment for the device-intensive procedure under the revised ASC
payment system. For CY 2015, we implemented a comprehensive APC policy
under the OPPS under which we created C-APCs to replace most of the
then-current device-dependent APCs and a few nondevice-dependent APCs
under the OPPS, which discontinued the device-dependent APC policy (79
FR 66798 through 66810). We did not implement C-APCs in the ASC payment
system.
Therefore, in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66925), we provided that all separately paid covered ancillary
services that are provided integral to covered surgical procedures that
mapped to C-APCs continue to be separately paid under the ASC payment
system instead of being packaged into the payment for the C-APC as
under the OPPS. To avoid duplicating payment, we provided that the CY
2015 ASC payment rates for these C-APCs are based on the CY 2015 OPPS
relative payments weights that had been calculated using the standard
APC ratesetting methodology for the primary service instead of the
relative payment weights that are based on the comprehensive bundled
service. For the same reason, under the ASC payment system, we also
used the standard OPPS APC ratesetting methodology instead of the
comprehensive methodology to calculate the device offset percentage for
C-APCs for purposes of identifying device-intensive procedures and to
calculate payment rates for device-intensive procedures assigned to C-
APCs. Because we implemented the C-APC policy and, therefore,
eliminated device-dependent APCs under the OPPS in CY 2015, we revised
our definition of ASC device-intensive procedures to be those
procedures that are assigned to any APC (not only an APC formerly
designated as device-dependent) with a device offset percentage greater
than 40 percent based on the standard OPPS APC ratesetting methodology.
We also provided that we would update the ASC list of covered
surgical procedures that are eligible for payment according to our
device-intensive procedure payment methodology, consistent with our
modified definition of device-intensive procedures, reflecting the APC
assignments of procedures and APC device offset percentages based on
the CY 2013 OPPS claims and cost report data available for the CY 2015
OPPS/ASC proposed rule and final rule with comment period.
(2) Changes to List of ASC Covered Surgical Procedures Designated as
Device-Intensive for CY 2016
In the CY 2016 OPPS/ASC proposed rule (80 FR 39310), for CY 2016,
we proposed to continue our CY 2015 policies. Specifically, for CY
2016, we proposed to update the ASC list of covered surgical procedures
that are eligible for payment according to our device-intensive
procedure payment methodology, consistent with our proposed modified
definition of device-intensive procedures, reflecting the proposed APC
assignments of procedures and APC device offset percentages based on
the CY 2014 OPPS claims and cost report data available for the proposed
rule.
The ASC covered surgical procedures that we proposed to designate
as device-intensive and that would be subject to the device-intensive
procedure payment methodology for CY 2016 are listed in Table 62 of the
proposed rule (80 FR 39311 through 39314). The CPT code, the CPT code
short descriptor, the proposed CY 2016 ASC payment indicator, the
proposed CY 2016 OPPS

[[Page 70483]]

APC assignment, the proposed CY 2016 OPPS APC device offset percentage,
and an indication if the full credit/partial credit (FB/FC) device
adjustment policy would apply are also listed in Table 62 of the
proposed rule. All of these procedures are included in Addendum AA to
the proposed rule (which is available via the Internet on the CMS Web
site).
We invited public comment on these proposals.
Comment: One commenter requested that CMS make ASC payment for CPT
code 19296 (Placement of radiotherapy afterloading expandable catheter
(single or multichannel) into the breast for interstitial radioelement
application following partial mastectomy, includes imaging guidance; on
date separate from partial mastectomy) under a device-intensive
designation. The commenter noted that the code, due to prior
designation as an office-based procedure, continued to be assigned an
office-based ASC payment indicator, even though the other procedures
assigned to the same OPPS APC would qualify for device-intensive status
in CY 2016. The commenter further requested that codes that qualify for
both device-intensive and office-based status be designated as device-
intensive prior to application of the office-based payment comparison.
Response: Our current policy, as described in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74409), is for the device-
intensive status to supersede the assignment of the office-based
designation. Therefore, CPT code 19296 will be a device-intensive
procedure and will be assigned ASC payment indicator ``J8'' (device-
intensive procedure; paid at adjusted rate) for CY 2016 under the ASC
payment system.
Comment: Commenters supported CMS' assignment of the procedure
described by CPT code C9740 (Cystourethroscopy, with insertion of
transprostatic implant; 4 or more implants) to a device-intensive APC,
which they believed would lead to more appropriate payment. One
commenter also requested that the procedure described by CPT code C9739
be designated a device-intensive procedure.
Response: We appreciate the commenters' support. An ASC device-
intensive procedure is a procedure that is assigned to any APC (not
only an APC formerly designated as device-dependent) with a device
offset percentage greater than 40 percent based on the standard OPPS
APC ratesetting methodology. CPT code C9739 is not assigned to an APC
with a device offset percentage greater than 40 percent based on the
standard OPPS APC ratesetting methodology. Therefore, it will not be
considered a device-intensive procedure for CY 2016 under the ASC
payment system. For a more detailed discussion of these codes, we refer
readers to section III.D.13. of this final rule with comment period.
Comment: Commenters noted that APC 0105 (Level 1 Pacemaker and
Similar Procedures), which was proposed to be renumbered to APC 5221,
was designated as a device-intensive APC even though the APC only
consists of device removal, revision, or repair procedures and,
therefore, would not necessarily include a device. The commenters
believed that the designation was inaccurately applied because it would
inaccurately apply edits for device codes to procedures that would not
require them. The commenters requested that the device designation for
the APC and its procedure be removed.
Response: As stated previously, an ASC device-intensive procedure
is a procedure that is assigned to any APC (not only an APC formerly
designated as device-dependent) with a device offset percentage greater
than 40 percent based on the standard OPPS APC ratesetting methodology.
For the CY 2016 OPPS/ASC proposed rule, APC 5221 had a device offset
percentage greater than 40 percent. Using CY 2016 OPPS/ASC final rule
claims and cost report data, APC 5221 does not have a final device
offset percentage of greater than 40 percent. Therefore, any procedure
assigned to APC 5221 will not be an ASC device-intensive procedure. For
a discussion of device-intensive procedures under the OPPS, we refer
readers to section IV.B. of this final rule with comment period.
After consideration of the public comments we received, we are
designating the ASC covered surgical procedures displayed in Table 66
below as device-intensive and subject to the device-intensive procedure
payment methodology for CY 2016. The CPT code, the CPT code short
descriptor, the final CY 2016 ASC payment indicator (PI), the final CY
2016 OPPS APC assignment, the final CY 2016 OPPS APC device offset
percentage, and an indication if the full credit/partial credit (FB/FC)
device adjustment policy will apply also are listed in Table 66 below.
All of these procedures are included in Addendum AA to this final rule
with comment period (which is available via the Internet on the CMS Web
site).
(3) Solicitation of Comments on Device-Intensive Policy for ASCs
As discussed previously, prior to CY 2015, ASC device-intensive
procedures were defined as those procedures that are assigned to
device-dependent APCs with a device offset percentage greater than 50
percent of the APC cost under the OPPS. Because we implemented the
comprehensive APC policy and, therefore, eliminated device-dependent
APCs under the OPPS in CY 2015, we redefined ASC device-intensive
procedures for CY 2015 as those procedures that are assigned to any APC
with a device offset percentage greater than 40 percent based on the
standard OPPS APC ratesetting methodology (79 FR 66923 through 66925).
Payment rates for ASC device-intensive procedures are based on a
modified payment methodology. As described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66829), under that modified
payment methodology, we apply the device offset percentage based on the
standard OPPS APC ratesetting methodology to the OPPS national
unadjusted payment to determine the device cost included in the
noncomprehensive OPPS unadjusted payment rate for a device-intensive
ASC covered surgical procedure, which we then set as equal to the
device portion of the national unadjusted ASC payment rate for the
procedure. We then calculate the service portion of the ASC payment for
device-intensive procedures by applying the uniform ASC conversion
factor to the service (non-device) portion of the OPPS relative payment
weight for the device-intensive procedure, which is then scaled for ASC
budget neutrality. Finally, we sum the ASC device portion and the ASC
service portion to establish the full payment for the device-intensive
procedure under the revised ASC payment system.
We recognize that, in some instances, there may be a procedure that
contains high-cost devices but is not assigned to a device-intensive
APC. Where an ASC covered surgical procedure is not designated as
device-intensive, the procedure would be paid under the ASC methodology
established for that covered surgical procedure, through either an MPFS
nonfacility PE RVU-based amount or an OPPS relative payment weight
based methodology, depending on the ASC status indicator assignment.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39310), in response to
stakeholder concerns regarding the situation where procedures with
high-cost devices are not classified as device-

[[Page 70484]]

intensive under the ASC payment system, we solicited public comments
for alternative methodologies for establishing device-intensive status
for ASC covered surgical procedures.
Comment: Several commenters requested that CMS calculate device
intensity at the HCPCS level. The commenters believed that designating
device intensity at the HCPCS level would be appropriate because the
current method of calculating device intensity at the APC level does
not take into account device similarity within an APC. Other commenters
requested that CMS adopt additional changes to the device-intensive
policy to encourage the migration of services to ASCs from other
settings. Another commenter requested that CMS lower the threshold for
device intensity such that the estimated device cost of 30 percent or
greater of the procedural cost. One commenter suggested that correctly
coded claims be used to calculate device intensity, codes assigned to
New Tech APCs be allowed designation of an interim device-intensity
percentage, and comments be solicited on codes with fluctuations of
greater than 10 percent in device intensity from year-to-year as
measured by the estimated device cost relative to the estimated APC
cost.
Response: We appreciate the thoughtful comments that stakeholders
have provided and will take them into consideration for future
rulemaking.
c. 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/full credit or partial credit, as set forth in Sec.
416.179, is consistent with the OPPS policy that was in effect until CY
2014. The established ASC policy reduces payment to ASCs when a
specified device is furnished without cost or with full credit or
partial credit for the cost of the device for those ASC covered
surgical procedures that are assigned to APCs under the OPPS to which
this policy applies. We refer readers to the CY 2009 OPPS/ASC final
rule with comment period for a full discussion of the ASC payment
adjustment policy for no cost/full credit and partial credit devices
(73 FR 68742 through 68744).
As discussed in section IV.B. of the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75005 through 75006), we finalized our
proposal to modify our former policy of reducing OPPS payment for
specified APCs when a hospital furnishes a specified device without
cost or with a full or partial credit. Formerly, under the OPPS, our
policy was to reduce OPPS payment 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 (but less than 100 percent) of the cost for the specified device.
In the CY 2014 OPPS/ASC final rule with comment period, we finalized
our proposal to reduce OPPS payment for applicable APCs by the full or
partial credit a provider receives for a replaced device, capped at the
device offset amount.
Although we finalized our proposal to modify the policy of reducing
payments when a hospital furnishes a specified device without cost or
with full or partial credit under the OPPS, in that final rule with
comment period (78 FR 75076 through 75080), we finalized our proposal
to maintain our ASC policy for reducing payments to ASCs for specified
device-intensive procedures when the ASC furnishes a device without
cost or with full or partial credit. Unlike the OPPS, there is
currently no mechanism within the ASC claims processing system for ASCs
to submit to CMS the actual amount received when furnishing a specified
device at full or partial credit. Therefore, under the ASC payment
system, we finalized our proposal in the CY 2014 OPPS/ASC final rule
with comment period to continue to reduce ASC payments by 100 percent
or 50 percent of the device offset amount when an ASC furnishes a
device without cost or with full or partial credit, respectively.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39310 through 39314),
we proposed to update the list of ASC covered device-intensive
procedures, based on the revised device-intensive definition finalized
last year, which would be subject to the no cost/full credit and
partial credit device adjustment policy for CY 2016. Table 62 of the
proposed rule (80 FR 39311 through 39314) displayed the ASC covered
device-intensive procedures that we proposed would be subject to the no
cost/full credit or partial credit device adjustment policy for CY
2016. Specifically, when a procedure that is listed in Table 62 is
subject to the no cost/full credit or partial credit device adjustment
policy and is performed to implant a device that is furnished at no
cost or with full credit from the manufacturer, the ASC would append
the HCPCS ``FB'' modifier on 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 continue to believe that the reduction of ASC payment in
these circumstances is necessary to pay appropriately for the covered
surgical procedure being furnished by the ASC.
For partial credit, we proposed to reduce the payment for
implantation procedures listed in Table 62 of the proposed rule that
are subject to the no cost/full credit or partial credit device
adjustment policy by one-half of the device offset amount that would be
applied if a device was provided at no cost or with full credit, if the
credit to the ASC is 50 percent or more (but less than 100 percent) of
the cost of the new device. The ASC would append the HCPCS ``FC''
modifier to the HCPCS code for a surgical procedure listed in Table 62
that is subject to the no cost/full credit or partial credit device
adjustment policy, when the facility receives a partial credit of 50
percent or more (but less than 100 percent) of the cost of a device. In
order to report that they received a partial credit of 50 percent or
more (but less than 100 percent) of the cost of a new device, ASCs
would have the option of either: (1) Submitting the claim for the
device replacement procedure to their Medicare contractor after the
procedure's performance but prior to manufacturer acknowledgment of
credit for the device, and subsequently contacting the contractor
regarding a claim adjustment once the credit determination is made; or
(2) holding the claim for the device implantation procedure until a
determination is made by the manufacturer on the partial credit and
submitting the claim with the ``FC'' modifier appended to the
implantation procedure HCPCS code if the partial credit is 50 percent
or more (but less than 100 percent) of the cost of the replacement
device. Beneficiary coinsurance would continue to be based on the
reduced payment amount. As finalized in the CY 2015 OPPS/ASC final rule
with comment period, in order to ensure that our policy covers any
situation involving a device-intensive procedure where an ASC may
receive a device at no cost/full credit or partial credit, we apply our
FB/FC policy to all device-intensive procedures (79 FR 66926).
We invited public comment on these proposals.
We did not receive any public comments on these proposals.
Therefore, we are finalizing our proposals without modification.
Specifically, we will apply our FB/FC

[[Page 70485]]

policy to all device-intensive procedures in CY 2016. The device-
intensive procedures for CY 2016 are listed in Table 66 below. For CY
2016, we will reduce the payment for the procedures listed in Table 66
by the full device offset amount if a device is furnished without cost
or with full credit. ASCs must append the HCPCS modifier ``FB'' to the
HCPCS code for a surgical procedure listed in Table 66 below when the
device is furnished without cost or with full credit. In addition, for
CY 2016, we will reduce the payment for the procedures listed in Table
66 below by one-half of the device offset amount if a device is
provided with partial credit, if the credit to the ASC is 50 percent or
more (but less than 100 percent) of the device cost. The ASC must
append the HCPCS ``FC'' modifier to the HCPCS code for a surgical
procedure listed in Table 66 when the facility receives a partial
credit of 50 percent or more (but less than 100 percent) of the cost of
a device.

Table 66--ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2016, Including ASC Covered
Surgical Procedures for Which the No Cost/Full Credit or Partial Credit Device Adjustment Policy Will Apply
----------------------------------------------------------------------------------------------------------------
Final CY 2016 Final CY 2016 Final FB/FC
HCPCS code Short descriptor ASC payment Final CY 2016 device offset policy will
indicator OPPS APC percentage apply
----------------------------------------------------------------------------------------------------------------
0100T................ Prosth retina J8 1599 91.62 Y
receive&gen.
0171T................ Lumbar spine proces J8 5125 53.97 Y
distract.
0238T................ Trluml perip athrc J8 5193 60.36 Y
iliac art.
0282T................ Periph field stimul J8 5462 56.19 Y
trial.
0283T................ Periph field stimul J8 5464 86.79 Y
perm.
0302T................ Icar ischm mntrng sys J8 5223 68.66 Y
compl.
0303T................ Icar ischm mntrng sys J8 5222 73.05 Y
eltrd.
0304T................ Icar ischm mntrng sys J8 5222 73.05 Y
device.
0308T................ Insj ocular telescope J8 5494 84.55 Y
prosth.
0316T................ Replc vagus nerve pls J8 5464 86.79 Y
gen.
0387T................ Leadless c pm ins/rpl J8 5193 60.36 Y
ventr.
0408T *.............. Insj/rplc cardiac J8 5231 77.67 Y
modulj sys.
0409T *.............. Insj/rplc cardiac J8 5231 77.67 Y
modulj pls gn.
0410T *.............. Insj/rplc car modulj J8 5222 73.05 Y
atr elt.
0411T *.............. Insj/rplc car modulj J8 5222 73.05 Y
vnt elt.
0414T *.............. Rmvl & rpl car modulj J8 5231 77.67 Y
pls gn.
19296................ Place po breast cath J8 5093 40.84 Y
for rad.
19298................ Place breast rad tube/ J8 5093 40.84 Y
caths.
19325................ Enlarge breast with J8 5093 40.84 Y
implant.
19342................ Delayed breast J8 5093 40.84 Y
prosthesis.
19357................ Breast reconstruction J8 5093 40.84 Y
20696................ Comp multiplane ext J8 5125 53.97 Y
fixation.
21243................ Reconstruction of jaw J8 5125 53.97 Y
joint.
22551................ Neck spine fuse&remov J8 5125 53.97 Y
bel c2.
22554................ Neck spine fusion.... J8 5125 53.97 Y
23616................ Treat humerus J8 5125 53.97 Y
fracture.
24361................ Reconstruct elbow J8 5125 53.97 Y
joint.
24362................ Reconstruct elbow J8 5125 53.97 Y
joint.
24363................ Replace elbow joint.. J8 5125 53.97 Y
24366................ Reconstruct head of J8 5125 53.97 Y
radius.
24370................ Revise reconst elbow J8 5125 53.97 Y
joint.
24371................ Revise reconst elbow J8 5125 53.97 Y
joint.
24410................ Revision of humerus.. J8 5125 53.97 Y
24435................ Repair humerus with J8 5125 53.97 Y
graft.
24545................ Treat humerus J8 5125 53.97 Y
fracture.
24546................ Treat humerus J8 5125 53.97 Y
fracture.
24587................ Treat elbow fracture. J8 5125 53.97 Y
25441................ Reconstruct wrist J8 5125 53.97 Y
joint.
25442................ Reconstruct wrist J8 5125 53.97 Y
joint.
25444................ Reconstruct wrist J8 5125 53.97 Y
joint.
25446................ Wrist replacement.... J8 5125 53.97 Y
27279................ Arthrodesis J8 5125 53.97 Y
sacroiliac joint.
27356................ Remove femur lesion/ J8 5125 53.97 Y
graft.
27438................ Revise kneecap with J8 5125 53.97 Y
implant.
27440................ Revision of knee J8 5125 53.97 Y
joint.
27441................ Revision of knee J8 5125 53.97 Y
joint.
27442................ Revision of knee J8 5125 53.97 Y
joint.
27446................ Revision of knee J8 5125 53.97 Y
joint.
27870................ Fusion of ankle joint J8 5125 53.97 Y
open.
28420................ Treat/graft heel J8 5125 53.97 Y
fracture.
28705................ Fusion of foot bones. J8 5125 53.97 Y
28715................ Fusion of foot bones. J8 5125 53.97 Y
28735................ Fusion of foot bones. J8 5125 53.97 Y
29889................ Knee arthroscopy/ J8 5125 53.97 Y
surgery.
33206................ Insert heart pm J8 5223 68.66 Y
atrial.
33207................ Insert heart pm J8 5223 68.66 Y
ventricular.
33208................ Insrt heart pm atrial J8 5223 68.66 Y
& vent.

[[Page 70486]]

33210................ Insert electrd/pm J8 5222 73.05 Y
cath sngl.
33211................ Insert card J8 5222 73.05 Y
electrodes dual.
33212................ Insert pulse gen sngl J8 5222 73.05 Y
lead.
33213................ Insert pulse gen dual J8 5223 68.66 Y
leads.
33214................ Upgrade of pacemaker J8 5223 68.66 Y
system.
33216................ Insert 1 electrode pm- J8 5222 73.05 Y
defib.
33217................ Insert 2 electrode pm- J8 5222 73.05 Y
defib.
33221................ Insert pulse gen mult J8 5224 72.72 Y
leads.
33224................ Insert pacing lead & J8 5223 68.66 Y
connect.
33227................ Remove&replace pm gen J8 5222 73.05 Y
singl.
33228................ Remv&replc pm gen J8 5223 68.66 Y
dual lead.
33229................ Remv&replc pm gen J8 5224 72.72 Y
mult leads.
33230................ Insrt pulse gen w/ J8 5231 77.67 Y
dual leads.
33231................ Insrt pulse gen w/ J8 5232 80.72 Y
mult leads.
33233................ Removal of pm J8 5222 73.05 Y
generator.
33240................ Insrt pulse gen w/ J8 5231 77.67 Y
singl lead.
33249................ Insj/rplcmt defib w/ J8 5232 80.72 Y
lead(s).
33262................ Rmvl& replc pulse gen J8 5231 77.67 Y
1 lead.
33263................ Rmvl & rplcmt dfb gen J8 5231 77.67 Y
2 lead.
33264................ Rmvl & rplcmt dfb gen J8 5232 80.72 Y
mlt ld.
33270................ Ins/rep subq J8 5232 80.72 Y
defibrillator.
33271................ Insj subq impltbl dfb J8 5222 73.05 Y
elctrd.
33282................ Implant pat-active ht J8 5222 73.05 Y
record.
37221................ Iliac revasc w/stent. J8 5192 50.76 Y
37225................ Fem/popl revas w/ J8 5192 50.76 Y
ather.
37226................ Fem/popl revasc w/ J8 5192 50.76 Y
stent.
37227................ Fem/popl revasc stnt J8 5193 60.36 Y
& ather.
37228................ Tib/per revasc w/tla. J8 5192 50.76 Y
37229................ Tib/per revasc w/ J8 5193 60.36 Y
ather.
37230................ Tib/per revasc w/ J8 5193 60.36 Y
stent.
37231................ Tib/per revasc stent J8 5193 60.36 Y
& ather.
37236................ Open/perq place stent J8 5192 50.76 Y
1st.
37238................ Open/perq place stent J8 5192 50.76 Y
same.
37241................ Vasc embolize/occlude J8 5192 50.76 Y
venous.
37242................ Vasc embolize/occlude J8 5192 50.76 Y
artery.
37243................ Vasc embolize/occlude J8 5192 50.76 Y
organ.
50080................ Removal of kidney J8 5376 53.73 Y
stone.
50081................ Removal of kidney J8 5376 53.73 Y
stone.
50557................ Kidney endoscopy & J8 5376 53.73 Y
treatment.
53440................ Male sling procedure. J8 5376 53.73 Y
53444................ Insert tandem cuff... J8 5376 53.73 Y
53445................ Insert uro/ves nck J8 5377 69.61 Y
sphincter.
53447................ Remove/replace ur J8 5377 69.61 Y
sphincter.
54112................ Treat penis lesion J8 5376 53.73 Y
graft.
54400................ Insert semi-rigid J8 5376 53.73 Y
prosthesis.
54401................ Insert self-contd J8 5377 69.61 Y
prosthesis.
54405................ Insert multi-comp J8 5377 69.61 Y
penis pros.
54410................ Remove/replace penis J8 5377 69.61 Y
prosth.
54416................ Remv/repl penis J8 5377 69.61 Y
contain pros.
55873................ Cryoablate prostate.. J8 5376 53.73 Y
61885................ Insrt/redo neurostim J8 5463 85.68 Y
1 array.
61886................ Implant neurostim J8 5464 86.79 Y
arrays.
61888................ Revise/remove J8 5462 56.19 Y
neuroreceiver.
62360................ Insert spine infusion J8 5471 80.14 Y
device.
62361................ Implant spine J8 5471 80.14 Y
infusion pump.
62362................ Implant spine J8 5471 80.14 Y
infusion pump.
63650................ Implant J8 5462 56.19 Y
neuroelectrodes.
63655................ Implant J8 5463 85.68 Y
neuroelectrodes.
63663................ Revise spine eltrd J8 5462 56.19 Y
perq aray.
63664................ Revise spine eltrd J8 5462 56.19 Y
plate.
63685................ Insrt/redo spine n J8 5464 86.79 Y
generator.
64553................ Implant J8 5462 56.19 Y
neuroelectrodes.
64555................ Implant J8 5462 56.19 Y
neuroelectrodes.
64561................ Implant J8 5462 56.19 Y
neuroelectrodes.
64565................ Implant J8 5462 56.19 Y
neuroelectrodes.
64568................ Inc for vagus n elect J8 5464 86.79 Y
impl.
64569................ Revise/repl vagus n J8 5462 56.19 Y
eltrd.
64575................ Implant J8 5462 56.19 Y
neuroelectrodes.

[[Page 70487]]

64580................ Implant J8 5463 85.68 Y
neuroelectrodes.
64581................ Implant J8 5462 56.19 Y
neuroelectrodes.
64590................ Insrt/redo pn/gastr J8 5463 85.68 Y
stimul.
69714................ Implant temple bone w/ J8 5125 53.97 Y
stimul.
69715................ Temple bne implnt w/ J8 5125 53.97 Y
stimulat.
69930................ Implant cochlear J8 5166 83.04 Y
device.
C9740................ Cysto impl 4 or more. J8 1565 65.18 Y
----------------------------------------------------------------------------------------------------------------
* New CPT codes that will be effective January 1, 2016.

d. Adjustment to ASC Payments for Discontinued Device-Intensive
Procedures
As discussed in section IV.B.4. of this final rule with comment
period, we proposed to modify the calculation of OPPS payment when
modifiers on the claim indicate that the procedure was discontinued.
When a procedure assigned to a device-intensive APC is discontinued
either prior to administration of anesthesia or for a procedure that
does not require anesthesia, we presume that, in the majority of cases,
the device was not used and remains sterile such that it could be used
for another case. In these circumstances, under current policy,
providers are being paid twice by Medicare for the same device, once
for the initial procedure that was discontinued and again when the
device is actually used. We believe that, in cases where the procedure
was not performed, it would be appropriate to remove the estimated cost
of the device because the device would have presumably not been used.
We believe these same issues exist in the ASC setting. Therefore,
in the CY 2016 OPPS/ASC proposed rule (80 FR 39314 through 39315), we
proposed that this alternative payment calculation, where the device
offset is removed before applying any standard downward payment
adjustments because a full procedure was not performed, would also
apply to device-intensive procedures in the ASC payment system
beginning in CY 2016, with modifiers ``52'' (reduced services) and
``73'' (Discontinued outpatient procedure prior to anesthesia
administration). These are the same modifiers proposed for use in the
OPPS. Modifier ``52'' is used to indicate certain circumstances in
which a procedure is partially reduced or eliminated. Modifier ``73''
is used when a service is canceled prior to the surgical preparation
due to circumstances that may threaten the well-being of a patient.
Under this proposed methodology, any adjustment policies reducing
payment would only apply to the procedural portion of the service,
based on ASC payment after the device offset is removed. Use of
modifiers ``52'' or ``73'' would thus result in 50 percent of ASC
payment for the service, after the device offset has first been
subtracted from the standard ASC payment amount. We proposed to
restrict the policy to ASC device-intensive procedures so that the
adjustment would not be triggered by the use of an inexpensive device
whose cost would not constitute a significant portion of the total
payment rate.
Similar to the OPPS, we did not propose to deduct the device offset
amount from a procedure that was discontinued after anesthesia was
administered (modifier ``74'') because we believe that it may be more
likely that devices involved with such procedures are no longer sterile
and could not be restocked and used for another case. However, we
solicited public comments on how often the device becomes ineligible
for use in a subsequent case and whether we should deduct the device
offset amount from claims with modifier ``74'' as well. We proposed to
revise 42 CFR 416.172 to reflect this proposal.
We invited public comment on this proposal and this proposed
codification.
Comment: Commenters generally disagreed with the proposal to modify
the calculation of payment when device intensive procedures with
modifiers ``52'' and ``73.'' The commenters suggested that the current
calculation or alternatives such as full payment of the device cost
were preferable. One commenter also questioned the magnitude of the
issue, noting that removing the estimated cost of the device would
incentivize the continuation of a procedure at possible risk to the
beneficiaries.
Response: We have a longstanding policy of appending modifiers to
track discontinued procedures and reducing payment. We believe that the
payment adjustment that we proposed for these discontinued device
intensive procedures is appropriate for expenses incurred in these
cases. While we note that these occur in special circumstances and
therefore the frequency with which they occur is limited, we would
expect that providers who furnish services to Medicare beneficiaries
would not expose beneficiaries to health risk due to financial
incentives related to this policy. We believe that the ASC payment
adjustment we have proposed better represents the estimated cost of
these procedures.
However, in the case of procedures involving modifier ``52'' where
anesthesia is not planned, we now believe that it would be rare that an
implantable device would be used based on the feedback commenters have
provided and an examination of the claims data. Accordingly, we are not
finalizing our proposal to remove the device offset from services
furnished in the ASC that are billed with modifier ``52.''
After consideration of the public comments we received, we are
finalizing our proposed policy with modification. For device-intensive
procedures (defined as those APCs with a device offset greater than 40
percent), we will reduce the ASC payment amount for discontinued
device-intensive procedures billed with modifier ``73,'' where
anesthesia is planned but is discontinued after the patient is prepared
for surgery and taken to the room where the procedure is to be
performed but before anesthesia is induced, by 100 percent of the
device offset amount prior to application of any additional payment
adjustments associated with discontinued procedures. We are revising 42
CFR

[[Page 70488]]

416.172 to reflect this policy. We also note that we inadvertently used
the word ``copayment'' instead of ``coinsurance'' in the proposed
codification of 42 CFR 416.172(f)(2) and have made this technical
change to the final regulation.
e. Additions to the List of ASC Covered Surgical Procedures
We conducted a review of HCPCS codes that currently are paid under
the OPPS, but not included on the ASC list of covered surgical
procedures, to determine if changes in technology and/or medical
practice affected the clinical appropriateness of these procedures for
the ASC setting. Based on this review, we proposed to update the list
of ASC covered surgical procedures by adding 11 procedures to the list
for CY 2016. We determined that these 11 procedures would not be
expected to pose a significant risk to beneficiary safety when
performed in an ASC, and would not be expected to require active
medical monitoring and care of the beneficiary at midnight following
the procedure. Therefore, we proposed to include them on the list of
ASC covered surgical procedures for CY 2016.
The 11 procedures that we proposed to add to the ASC list of
covered surgical procedures, including their HCPCS code long
descriptors and proposed CY 2016 payment indicators, were displayed in
Table 63 of the proposed rule (80 FR 39315).
We invited public comment on this proposal.
Comment: Several commenters supported the proposal to add 11
procedures to the CY 2016 list of ASC covered surgical procedures.
Response: We appreciate the commenters' support. As indicated later
in this section, we are finalizing our proposal to add these procedure
codes to the list of ASC covered procedures in addition to six other
procedure codes requested by commenters.
Comment: One commenter requested that CMS include all surgical and
ancillary procedures that are currently paid in the HOPD setting on the
ASC covered surgical procedures list.
Response: We are not adopting this commenter's request. As stated
in our final policy, which is discussed in detail in the August 2, 2007
final rule (72 FR 42476 through 42486; 42 CFR 416.2 and 416.166), we
believe that it is inappropriate to exclude only those surgical
procedures on the OPPS inpatient list from ASC payment and have
established criteria to determine whether a procedure should be
excluded from the ASC covered surgical procedures list (42 CFR 416.2
and 416.166). Including all of the procedures that are currently paid
in the HOPD setting on the ASC covered surgical procedures list is
inconsistent with our goal of only excluding those procedures from ASC
payment that are unsafe for performance in ASCs or are expected to
require an overnight stay. Typically, HOPDs are able to provide much
higher acuity care than ASCs. ASCs have neither patient safety
standards consistent with those in place for hospitals, nor are they
required to have the trained staff and equipment needed to provide the
breadth and intensity of care that hospitals are required to maintain.
Therefore, there are some procedures that we believe may be
appropriately provided in the HOPD setting that are unsafe for the
performance in ASCs. Thus, we did not adopt a final policy to exclude
only those surgical procedures on the OPPS inpatient list from ASC
payment under the ASC payment system.
Comment: Some commenters requested that CMS include several
additional CPT/HCPCS codes on the list of ASC covered surgical
procedures that were not proposed to be added to the list. The
commenters stated that codes that describe instrumentation and bone
grafting are key components of many spine procedures that have been
added to the ASC covered surgical procedures list in recent years and
requested that those codes be added to the list as well. The commenters
also stated that some of the procedures described by these codes were
performed on non-Medicare patients in the ASC setting with positive
outcomes. Some commenters believed that, because Medicare makes
facility payments for unlisted CPT codes under the OPPS, CMS should
also allow ASCs to use unlisted CPT codes to report procedures. The
list of codes that commenters requested to be added in addition to
those that were proposed to be added is shown in Table 67 below.

Table 67--Procedures Requested for Addition to the CY 2016 List of ASC
Covered Surgical Procedures
------------------------------------------------------------------------
CY 2016 CPT/HCPCS code Short descriptor
------------------------------------------------------------------------
17999............................... Skin tissue procedure.
19307............................... Mast mod rad.
20999............................... Muscoskeletal surgery.
22840*.............................. Insert spine fixation device.
22842*.............................. Insert spine fixation device.
22845*.............................. Insert spine fixation device.
22851............................... Apply spine prosth device.
22856............................... Cerv artific diskectomy.
23470............................... Reconstruct shoulder joint.
23473............................... Revis reconst shoulder joint.
28805............................... Amputation thru metatarsal.
28899............................... Foot/toes surgery procedure.
29799............................... Casting/strapping procedure.
29868............................... Meniscal trnspl knee w/scpe.
29999............................... Arthroscopy of joint.
31599............................... Larynx surgery procedure.
31600............................... Incision of windpipe.
32551............................... Insertion of chest tube.
33244............................... Remove eltrd transven.
35045............................... Repair defect of arm artery.
35471............................... Repair arterial blockage.
35903............................... Excision graft extremity.
37191............................... Ins endovas vena cava filtr.
37193............................... Rem endovas vena cava filter.
37241............................... Vasc embolize/occlude venous.
37242............................... Vasc embolize/occlude artery.
37243............................... Vasc embolize/occlude organ.
37799............................... Vascular surgery procedure.
38207............................... Cyropreserve stem cells.
38214............................... Volume deplete of harvest.
38999............................... Blood/lymph system procedure.
39400............................... Mediastinoscopy incl biopsy.
41899............................... Dental surgery procedure.
43280............................... Laparoscopy fundoplasty.
43281............................... Lap paraesophag hern repair.
43499............................... Esophagus surgery procedure.
43770............................... Lap place gastr adj device.
43999............................... Stomach surgery procedure.
44180............................... Lap enterolysis.
44799............................... Unlisted px small intestine.
44970............................... Laparoscopy appendectomy.
49659............................... Laparo proc hernia repair.
46999............................... Anus surgery procedure.
47379............................... Laparoscope procedure liver.
49329............................... Laparo proc abdm/per/oment.
49406............................... Image cath fluid peri/retro.
49999............................... Abdomen surgery procedure.
53899............................... Urology surgery procedure.
54332............................... Revise penis/urethra.
54336............................... Revise penis/urethra.
54535............................... Extensive testis surgery.
54650............................... Orchiopexy (Fowler-Stephens).
55899............................... Genital surgery procedure.
57282............................... Colpopexy intraperitoneal.
57283............................... Colpopexy extraperitoneal.
57425............................... Laparoscopy surg colpopexy.
60252............................... Removal of thyroid.
60260............................... Repeat thyroid surgery.
60271............................... Removal of thyroid.
63011............................... Removal of spinal lamina.
63012............................... Removal of spinal lamina.
63015............................... Removal of spinal lamina.
63016............................... Removal of spinal lamina.
63017............................... Removal of spinal lamina.
63035............................... Spinal disk surgery add-on.
63040............................... Laminotomy single cervical.
63046............................... Remove spine lamina 1 thrc.
63048............................... Remove spinal lamina add-on.
63055............................... Decompress spinal cord thrc.
63057............................... Decompress spine cord add-on.

[[Page 70489]]

63064............................... Decompress spinal cord thrc.
63075............................... Neck spine disk surgery.
63076............................... Neck spine disk surgery.
64999............................... Nervous system surgery.
66999............................... Eye surgery procedure.
------------------------------------------------------------------------
*CPT codes on the OPPS inpatient list for CY 2015

We reviewed all of the codes that commenters requested for addition
to the ASC list of covered surgical procedures. Of the 75 codes
requested for addition to the ASC list, we did not consider the three
procedures that are reported by CPT codes (22840, 22842, and 22845)
that are on the inpatient-only list (identified with one asterisk in
Table 67). The three codes that are currently on the inpatient-only
list are not eligible for addition to the ASC list of covered surgical
procedures (72 FR 42476 through 42486; 42 CFR 416.166). We have,
however, evaluated these three codes for removal from the inpatient-
only list, and we do not believe that any of the codes meet the
criteria to be safely performed in the hospital outpatient setting.
Of the remaining 72 procedures described by codes in Table 67 that
commenters requested be added to the list of ASC covered surgical
procedures, there are procedures described by six codes (CPT codes
37241, 37242, 37243, 49406, 63046, and 63055) that we agree should be
added to the list for CY 2016. These procedures are similar to other
procedures that we have previously added to the ASC list and are
described below.
We are adding the procedures described by: (1) CPT code 37241
(Vascular embolization or occlusion, inclusive of all radiological
supervision and interpretation, intraprocedural roadmapping, and
imaging guidance necessary to complete the intervention; venous, other
than hemorrhage (e.g., congenital or acquired venous malformations,
venous and capillary hemangiomas, varices, varicoceles)); (2) CPT code
37242 (Vascular embolization or occlusion, inclusive of all
radiological supervision and interpretation, intraprocedural
roadmapping, and imaging guidance necessary to complete the
intervention; arterial, other than hemorrhage or tumor (e.g.,
congenital or acquired arterial malformations, arteriovenous
malformations, arteriovenous fistulas, aneurysms, pseudoaneurysms));
and (3) CPT code 37243 (Vascular embolization or occlusion, inclusive
of all radiological supervision and interpretation, intraprocedural
roadmapping, and imaging guidance necessary to complete the
intervention; for tumors, organ ischemia, or infarction) to the ASC
list of covered procedures for CY 2016. The procedures described by
these codes are similar to the stent placement procedures described by
codes in the CPT code 372XX series that are payable in the ASC setting.
We are adding the procedure described by CPT code 49406 (Image-guided
fluid collection drainage by catheter (e.g., abscess, hematoma, seroma,
lymphocele, cyst); peritoneal or retroperitoneal, percutaneous) because
of this procedure's similarity to the procedure described by CPT code
49407 (Image-guided fluid collection drainage by catheter (e.g.,
abscess, hematoma, seroma, lymphocele, cyst); peritoneal or
retroperitoneal, transvaginal or transrectal), which is included on the
ASC list of covered surgical procedures. We also believe that the
procedure described by CPT code 63046 (Laminectomy, facetectomy, and
foraminotomy (unilateral or bilateral with decompression of spinal
cord, cauda equine and/or nerve root(s), eg spinal or lateral recess
stenosis, single vertebral segment; thoracic) should be included on the
ASC list of covered surgical procedures. This procedure described by
this code is similar to the procedures described by CPT code 63045
(Laminectomy, facetectomy and foraminotomy (unilateral or bilateral
with decompression of spinal cord, cauda equina and/or nerve root[s],
[e.g., spinal or lateral recess stenosis]), single vertebral segment;
cervical) and CPT code 63047 (Laminectomy, facetectomy and foraminotomy
(unilateral or bilateral with decompression of spinal cord, cauda
equina and/or nerve root[s], [e.g., spinal or lateral recess
stenosis]), single vertebral segment; lumbar), which are on the ASC
covered procedures list. We also believe that the procedure described
by CPT code 63055 (Transpedicular approach with decompression of spinal
cord, equine and/or nerve root(s) (e.g., herniated intervertebral
disc), single segment; thoracic) should be added to the ASC list of
covered surgical procedures because this procedure is similar to the
procedure described by CPT code 63056 (Transpedicular approach with
decompression of spinal cord, equina and/or nerve root(s) (e.g.,
herniatedintervertebral disc), single segment; lumbar (including
transfacet, or lateral extraforaminal approach) (e.g., far lateral
herniated intervertebral disc)), which is on the ASC covered procedures
list.
Regarding the comment about unlisted codes being noncovered in the
ASC, we have a longstanding ASC policy that procedures described by all
unlisted codes are noncovered in the ASC because we are unable to
determine (due to the nondescript nature of unlisted procedure codes)
if a procedure that would be reported with an unlisted code would not
be expected to pose a significant risk to beneficiary safety when
performed in an ASC, and would not be expected to require active
medical monitoring and care of the beneficiary at midnight following
the procedure. We continue to believe it would not be appropriate to
provide ASC payment for procedures described by unlisted CPT codes in
the surgical range, even if payment may be provided under the OPPS.
ASCs do not possess the breadth and intensity of services that
hospitals must maintain to care for patients of higher acuity, and we
would have no way of knowing what specific procedures reported by
unlisted CPT codes were provided to patients in order to ensure that
they are safe for ASC performance. Therefore, we are not adding the
procedures describe by the 22 unlisted CPT codes requested to the ASC
list of covered surgical procedures.
We do not agree that any of the 44 remaining procedures described
by these codes should be added to the list of ASC covered surgical
procedures because they do not meet our criteria for inclusion on this
list. Under 42 CFR 416.2 and 416.166, subject to certain exclusions,
covered surgical procedures in an ASC are surgical procedures that are
separately paid under the OPPS, that would not be expected to pose a
significant risk to safety when performed in an ASC, and would not be
expected to require active medical monitoring and care of the
beneficiary at midnight following the procedure. The criteria used
under the revised ASC payment system to identify procedures that would
be expected to pose a significant safety risk when performed in an ASC
include, but are not limited to, those procedures that: Generally
result in extensive blood loss; require major or prolonged invasion of
body cavities; directly involve major blood vessels; are generally
emergent or life threatening in nature; commonly require systemic
thrombolytic therapy; are designated as requiring inpatient care under
42 CFR 419.22(n); can only be reported using a CPT unlisted surgical
procedure code; or are otherwise excluded under 42 CFR 411.15 (we refer

[[Page 70490]]

readers to 42 CFR 416.166). Procedures that do not meet the criteria
set forth in Sec. 416.166 would not be added to the list of ASC
covered surgical procedures. We note that we have evaluated many of
these procedures in previous years (79 FR 66918 through 66921; 78 FR
75067 through 75070) and did not add the procedures to the ASC list due
to similar concerns regarding beneficiary safety. The commenters
provided no specific information regarding the safety of these
procedures in the ASC setting.
After consideration of the public comments we received, we are
finalizing our proposal to add the 11 procedures that we proposed to
add to the ASC list of covered surgical procedures. In addition, we are
adding six procedures recommended by commenters as discussed above. The
HCPCS code long descriptors and CY 2016 payment indicators for these
codes are displayed in Table 68.

Table 68--Additions to the List of ASC Covered Surgical Procedures for
CY 2016
------------------------------------------------------------------------
Final CY 2016
Final CY 2016 HCPCS code Final CY 2016 long ASC payment
descriptor indicator
------------------------------------------------------------------------
0171T...................... Insertion of posterior J8
spinous process
distraction device
(including necessary
removal of bone or
ligament for insertion
and imaging guidance),
lumbar; single level.
0172T...................... Insertion of posterior N1
spinous process
distraction device
(including necessary
removal of bone or
ligament for insertion
and imaging guidance),
lumbar; each additional
level.
37241...................... Vascular embolization or J8
occlusion, inclusive of
all radiological
supervision and
interpretation,
intraprocedural
roadmapping, and imaging
guidance necessary to
complete the
intervention; venous,
other than hemorrhage
(e.g., congenital or
acquired venous
malformations, venous and
capillary hemangiomas,
varices, varicoceles).
37242...................... Vascular embolization or J8
occlusion, inclusive of
all radiological
supervision and
interpretation,
intraprocedural
roadmapping, and imaging
guidance necessary to
complete the
intervention; arterial,
other than hemorrhage or
tumor (e.g., congenital
or acquired arterial
malformations,
arteriovenous
malformations,
arteriovenous fistulas,
aneurysms,
pseudoaneurysms).
37243...................... Vascular embolization or J8
occlusion, inclusive of
all radiological
supervision and
interpretation,
intraprocedural
roadmapping, and imaging
guidance necessary to
complete the
intervention; for tumors,
organ ischemia, or
infarction.
49406...................... Image-guided fluid G2
collection drainage by
catheter (e.g., abscess,
hematoma, seroma,
lymphocele, cyst);
peritoneal or
retroperitoneal,
percutaneous.
57120...................... Colpocleisis (Le Fort G2
type).
57310...................... Closure of urethrovaginal G2
fistula.
58260...................... Vaginal hysterectomy, for G2
uterus 250 g or less.
58262...................... Vaginal hysterectomy, for G2
uterus 250 g or less;
with removal of tube(s),
and/or ovary(s).
58543...................... Laparoscopy, surgical, G2
supracervical
hysterectomy, for uterus
greater than 250 g.
58544...................... Laparoscopy, surgical, G2
supracervical
hysterectomy, for uterus
greater than 250 g; with
removal of tube(s) and/or
ovary(s).
58553...................... Laparoscopy, surgical, G2
with vaginal
hysterectomy, for uterus
greater than 250 g.
58554...................... Laparoscopy, surgical, G2
with vaginal
hysterectomy, for uterus
greater than 250 g; with
removal of tube(s) and/or
ovary(s).
58573...................... Laparoscopy, surgical, G2
with total hysterectomy,
for uterus greater than
250 g; with removal of
tube(s) and/or ovary(s).
63046...................... Laminectomy, facetectomy, G2
and foraminotomy
(unilateral or bilateral
with decompression of
spinal cord, cauda equine
and/or nerve root(s), eg
spinal or lateral recess
stenosis, single
vertebral segment;
thoracic.
63055...................... Transpedicular approach G2
with decompression of
spinal cord, equine and/
or nerve root(s) (e.g.,
herniated intervertebral
disc), single segment;
thoracic.
------------------------------------------------------------------------

f. ASC Treatment of Surgical Procedures That Are Removed From the OPPS
Inpatient List for CY 2016
As we discussed in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68724), we adopted a policy to include, in our annual
evaluation of the ASC list of covered surgical procedures, a review of
the procedures that are being proposed for removal from the OPPS
inpatient-only list for possible inclusion on the ASC list of covered
surgical procedures. We evaluated each of the seven procedures we
proposed to remove from the OPPS inpatient-only list for CY 2016
according to the criteria for exclusion from the list of covered ASC
surgical procedures. The CPT codes for these seven procedures and their
long descriptors are listed in Table 64 of the proposed rule (80 FR
39315 through 39316). We invited public comment on the continued
exclusion of these codes from the ASC list of covered surgical
procedures. Based on commenters' requests, we are also removing CPT
codes 27477 and 27485 found in Table 69 below from the CY 2016
inpatient-only list. We believe that these nine procedures should
continue to be excluded from the ASC list of covered surgical
procedures for CY 2016 because they would be expected to pose a
significant risk to beneficiary safety or to require an overnight stay
in ASCs.
Comment: Some commenters requested that CMS add CPT codes 0312T,
20936, 20937, 20938, 22552, 54411, and 54417 that were proposed to be
removed from the inpatient-only list for CY 2016 to the CY 2016 list of
ASC covered surgical procedures to allow these procedures to be
performed in the ASC setting as well as the hospital outpatient
setting. One commenter stated that the procedure described by CPT code
0312T can be compared to other laparoscopic procedures allowed to be
performed in an ASC such as laparoscopic cholecystectomy (CPT 47562 or
47563) or laparoscopic adjustable gastric band placement (CPT 43770).
In addition, the commenter mentioned that the majority of patients who
participated in clinical trials of the device used in the procedure
were discharged the same day they received their implant.
Response: We are not adding these CPT codes to the list of ASC
covered surgical procedures. Under 42 CFR 416.2 and 416.166, subject to
certain exclusions, covered surgical procedures in an ASC are surgical
procedures that

[[Page 70491]]

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
would not be expected to require active medical monitoring and care of
the beneficiary at midnight following the procedure. Although we
believe that the procedures proposed to be removed from the inpatient-
only list for CY 2016 may be appropriately provided in the HOPD setting
based on ability of HOPDs to provide extended monitoring and higher
acuity care for the management of complications, based on our
evaluation of these codes, we maintain the belief that these procedures
are unsafe for performance in ASCs. Also, although the commenter noted
that patients who participated in clinical trials of the device used in
CPT code 0312T were discharged the same day they received their
implant, this has not been replicated outside of the experimental
setting. Further, CPT codes 20936, 20937, 20938, and 22552 are not
separately payable under the OPPS, which also makes these procedures
ineligible for payment under the ASC payment system.
After consideration of the public comments we received, we are
finalizing our proposal without modification to continue to exclude
these codes from the ASC list of covered surgical procedures.

Table 69--Procedures Excluded From the ASC List of Covered Surgical
Procedures for CY 2016 That Are Removed From the CY 2016 OPPS Inpatient
List
------------------------------------------------------------------------
CPT code Long descriptors
------------------------------------------------------------------------
0312T.............................. Vagus nerve blocking therapy
(morbid obesity); laparoscopic
implantation of neurostimulator
electrode array, anterior and
posterior vagal trunks adjacent to
esophagogastric junction (EGJ),
with implantation of pulse
generator, includes programming.
20936.............................. Autograft for spine surgery only
(includes harvesting the graft);
local (e.g., ribs, spinous
process, or laminar fragments)
obtained from same incision.
20937.............................. Autograft for spine surgery only
(includes harvesting the graft);
morselized (through separate skin
or fascial incision).
20938.............................. Autograft for spine surgery only
(includes harvesting the graft);
structural bicortical or
tricortical (through separate skin
or fascial incision).
22552.............................. Arthrodesis, anterior interbody,
including disc space preparation,
discectomy, osteophytectomy and
decompression of spinal cord and/
or nerve roots; cervical below C2,
each additional interspace.
27477.............................. Arrest epiphyseal, any method
(e.g., epiphysiodesis); tibia and
fibula, proximal.
27485.............................. Arrest, hemiepiphyseal, distal
femur or proximal tibia or fibula
(e.g., genu varus or valgus.
54411.............................. Removal and replacement of all
components of a multi-component
inflatable penile prosthesis
through an infected field at the
same operative session, including
irrigation and debridement of
infected tissue.
54417.............................. Removal and replacement of non-
inflatable (semi-rigid) or
inflatable (self-contained) penile
prosthesis through an infected
field at the same operative
session, including irrigation and
debridement of infected tissue.
------------------------------------------------------------------------

2. Covered Ancillary Services
a. List of Covered Ancillary Services
Consistent with the established ASC payment system policy, in the
CY 2016 OPPS/ASC proposed rule (80 FR 39316), we proposed to update the
ASC list of covered ancillary services to reflect the proposed payment
status for the services under the CY 2016 OPPS. Maintaining consistency
with the OPPS may result in proposed changes to ASC payment indicators
for some covered ancillary services because of changes that are being
proposed under the OPPS for CY 2016. For example, a covered ancillary
service that was separately paid under the revised ASC payment system
in CY 2015 may be proposed for packaged status under the CY 2016 OPPS
and, therefore, also under the ASC payment system for CY 2016.
To maintain consistency with the OPPS, we proposed that these
services also would be packaged under the ASC payment system for CY
2016. We proposed to continue this reconciliation of packaged status
for subsequent calendar years. Comment indicator ``CH,'' discussed in
section XII.F. of the proposed rule, is used in Addendum BB to the
proposed rule (which is available via the Internet on the CMS Web site)
to indicate covered ancillary services for which we proposed a change
in the ASC payment indicator to reflect a proposed change in the OPPS
treatment of the service for CY 2016.
All ASC covered ancillary services and their proposed payment
indicators for CY 2016 were included in Addendum BB to the proposed
rule. We invited public comment on this proposal.
Comment: Commenters expressed appreciation for CMS' adding the
service described by CPT code 91035 (Esophagus, gastroesophageal reflux
test; with mucosal attached telemetry pH electrode placement,
recording, analysis and interpretation) to the list of covered
ancillary services. The commenters also requested that pass-through
payment status be granted to this device.
Response: We appreciate the commenters' support. The code is not a
pass-through device under the OPPS and, therefore, is not assigned ASC
payment indicator ``J7'' (OPPS pass-through device paid separately when
provided integral to a surgical procedure on ASC list; payment
contractor-priced). The designation of a device as having pass-through
status only applies in the OPPS. We note that there is a process for
applying for pass-through device payment under the OPPS, which is
described in detail in section IV.A.2. of this final rule with comment
period.
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to update the ASC list
of covered ancillary services to reflect the payment status for the
services under the OPPS. All CY 2016 ASC covered ancillary services and
their final payment indicators are included in Addendum BB to this
final rule with comment period (which is available via the Internet on
the CMS Web site).
b. Exclusion of Corneal Tissue Procurement from the Covered Ancillary
Services List When Used for Nontransplant Procedures
We refer readers to section X.D. of this final rule with comment
period for a discussion of our final policy regarding the inclusion of
corneal tissue procurement as a covered ancillary service only when it
is provided integral to the performance of a corneal transplant
procedure that is an ASC covered surgical procedure.
c. Removal of Certain Services from the Covered Ancillary Services List
That Are Not Used as Ancillary and Integral To A Covered Surgical
Procedure
As stated in 42 CFR 416.2 and 416.164(b), covered ancillary
services

[[Page 70492]]

are ancillary items and services that are integral to a covered
surgical procedure performed in an ASC for which separate payment may
be made. It has come to our attention that we include codes for
services on our covered ancillary services list that are not provided
as ancillary and integral to an ASC covered surgical procedure. In some
cases, codes on the ASC covered ancillary services list are not
provided in the ASC setting due to clinical practice. In examining the
current ancillary services list and claims data available to us for CY
2016 proposed ASC rulemaking, we noted several services that are not
and have not been historically furnished in the ASC setting as integral
and ancillary to an ASC covered surgical procedure. Several radiation
therapy treatment services, including Co-60 stereotactic radiosurgery
(SRS), are most frequently provided in the hospital outpatient setting
and paid through the OPPS and also are furnished, but also somewhat
less frequently, in freestanding radiation therapy centers and paid
under the PFS. Only four claims for SRS treatment services were
included in the CY 2014 ASC claims data. Two of these four claims were
denied and the other two claims were paid in error. SRS delivery is a
stand-alone radiation treatment and is not furnished integral and
ancillary to an ASC covered surgical procedure. Thus, in the CY 2016
OPPS/ASC proposed rule (80 FR 39316), we proposed to remove radiation
treatment codes for SRS treatment services from the list of ASC covered
ancillary services. Specifically, we proposed to remove CPT codes 77371
(Radiation treatment delivery, stereotactic radiosurgery (srs),
complete course of treatment of cranial lesion(s) consisting of 1
session; multi-source cobalt 60 based), 77372 (Radiation treatment
delivery, stereotactic radiosurgery (srs), complete course of treatment
of cranial lesion(s) consisting of 1 session; linear accelerator
based), and 77373 (Stereotactic body radiation therapy, treatment
delivery, per fraction to 1 or more lesions, including image guidance,
entire course not to exceed 5 fractions) from the list of ASC covered
ancillary services for CY 2016 and subsequent years.
We invited public comment on this proposal.
Comment: Commenters requested that CMS include the stereotactic
radiosurgery codes on the covered ancillary services list, with one
commenter specifically focusing on CPT code 77371. One commenter noted
that several ASCs provide the service and requested that CMS reevaluate
available data to confirm that the service was being provided in the
ASC setting.
Response: We reviewed the available claims data and, as stated
previously, only four claims for SRS treatment services were included
in the CY 2014 ASC claims data--two of which were denied and two of
which were paid in error. Based on these claims data, we continue to
believe that SRS delivery is a standalone radiation treatment and is
not furnished integral and ancillary to an ASC covered surgical
procedure. Therefore, SRS treatment services should not be on the list
of ASC covered ancillary services. With respect CPT code 77371,
clinically, it is not performed integral to an ASC covered surgical
procedure. It is a stand-alone form of radiation therapy. Therefore, it
should not be on the ASC covered ancillary services list.
After consideration of the public comments we received, we are
finalizing our proposed policy without modification to remove CPT codes
77371, 77372, and 77373 from the ASC covered ancillary services list
for CY 2016 and subsequent years.

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

1. ASC 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, we use the ASC
standard ratesetting methodology of multiplying the ASC relative
payment weight for the procedure by the ASC conversion factor for that
same year to calculate the national unadjusted payment rates for
procedures with payment indicators ``G2'' and ``A2.'' Payment indicator
``A2'' was developed to identify procedures that were included on the
list of ASC covered surgical procedures in CY 2007 and, therefore, were
subject to transitional payment prior to CY 2011. Although the 4-year
transitional period has ended and payment indicator ``A2'' is no longer
required to identify surgical procedures subject to transitional
payment, we retained payment indicator ``A2'' because it is used to
identify procedures that are exempted from application of the office-
based designation.
The rate calculation established for device-intensive procedures
(payment indicator ``J8'') is structured so that the packaged device
payment amount is the same as under the OPPS, and only the service
portion of the rate is subject to the ASC standard ratesetting
methodology. In the CY 2015 OPPS/ASC final rule with comment period (79
FR 66915 through 66940), we updated the CY 2014 ASC payment rates for
ASC covered surgical procedures with payment indicators of ``A2,''
``G2,'' and ``J8'' using CY 2013 data, consistent with the CY 2015 OPPS
update. We also updated payment rates for device-intensive procedures
to incorporate the CY 2015 OPPS device offset percentages calculated
under the standard APC ratesetting methodology as discussed earlier in
this section.
Payment rates for office-based procedures (payment indicators
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS nonfacility PE
RVU-based amount (we refer readers to the CY 2016 MPFS proposed rule)
or the amount calculated using the ASC standard ratesetting methodology
for the procedure. In the CY 2015 OPPS/ASC final rule with comment
period, we updated the payment amounts for office-based procedures
(payment indicators ``P2,'' ``P3,'' and ``R2'') using the most recent
available MPFS and OPPS data. We compared the estimated CY 2015 rate
for each of the office-based procedures, calculated according to the
ASC standard ratesetting methodology, to the MPFS nonfacility PE RVU-
based amount to determine which was lower and, therefore, would be the
CY 2015 payment rate for the procedure under our final policy for the
revised ASC payment system (Sec. 416.171(d)).
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
75081), we finalized our proposal to calculate the CY 2014 payment
rates for ASC covered surgical procedures according to our established
methodologies, with the exception of device removal procedures. For CY
2014, we finalized a policy to conditionally package payment for device
removal codes under the OPPS. Under the OPPS, a conditionally packaged
code (status indicators ``Q1'' and ``Q2'') describes a HCPCS code where
the payment is packaged when it is provided with a significant
procedure but is separately paid when the service appears on the claim
without a significant procedure. Because ASC services always include a
covered surgical procedure, HCPCS codes that are conditionally packaged
under the OPPS are always packaged (payment indicator ``N1'') under the
ASC payment system. Under the OPPS, device removal procedures are
conditionally packaged and, therefore, would be packaged under the ASC
payment

[[Page 70493]]

system. There would be no Medicare payment made when a device removal
procedure is performed in an ASC without another surgical procedure
included on the claim; therefore, no Medicare payment would be made if
a device was removed but not replaced. To address this concern, for the
device removal procedures that are conditionally packaged in the OPPS
(status indicator ``Q2''), we assigned the current ASC payment
indicators associated with these procedures and continued to provide
separate payment in CYs 2014 and 2015.
b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2016
In the CY 2016 OPPS/ASC proposed rule (80 FR 39317), we proposed to
update ASC payment rates for CY 2016 and subsequent years using the
established rate calculation methodologies under Sec. 416.171 and
using our established modified definition of device-intensive
procedures, as discussed above. Because the proposed OPPS relative
payment weights are based on geometric mean costs for CY 2016 and
subsequent years, the ASC system will use geometric means to determine
proposed relative payment weights under the ASC standard methodology.
We proposed to continue to use the amount calculated under the ASC
standard ratesetting methodology for procedures assigned payment
indicators ``A2'' and ``G2.''
We proposed that payment rates for office-based procedures (payment
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures
(payment indicator ``J8'') be calculated according to our established
policies and, for device-intensive procedures, using our established
modified definition of device-intensive procedures, as discussed above.
Therefore, we proposed to update the payment amount for the service
portion of the device-intensive procedures using the ASC standard
ratesetting methodology and the payment amount for the device portion
based on the proposed CY 2016 OPPS device offset percentages that have
been calculated using the standard OPPS APC ratesetting methodology.
Payment for office-based procedures would be at the lesser of the
proposed CY 2016 MPFS nonfacility PE RVU-based amount or the proposed
CY 2016 ASC payment amount calculated according to the ASC standard
ratesetting methodology.
As we did for CYs 2014 and 2015, for CY 2016 and subsequent years,
we proposed to continue our policy for device removal procedures such
that payment for device removal procedures that are conditionally
packaged in the OPPS (status indicators ``Q1'' and ``Q2'') would be
assigned the current ASC payment indicators associated with these
procedures and would continue to be paid separately under the ASC
payment system.
We invited public comment on these proposals.
We did not receive any public comments on these proposals.
Therefore, we are finalizing our proposed policies, without
modification, to calculate the CY 2016 payment rates for ASC covered
surgical procedures according to our established methodologies using
the modified definition of device-intensive procedures. For those
covered surgical procedures where the payment rate is the lower of the
final rates under the ASC standard ratesetting methodology and the MPFS
final rates, the final payment indicators and rates set forth in this
final rule with comment period are based on a comparison using the MPFS
rates effective January 1, 2016. For a discussion of the MPFS rates, we
refer readers to the CY 2016 MPFS final rule with comment period.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
Section 1833(a)(1) and section 1833(b)(1) of the Act waive the
coinsurance and the Part B deductible for those preventive services
under section 1861(ddd)(3)(A) of the Act as described in section
1861(ww)(2) of the Act (excluding electrocardiograms) that are
recommended by the United States Preventive Services Task Force
(USPSTF) with a grade of A or B for any indication or population and
that are appropriate for the individual. Section 1833(b) of the Act
also waives the Part B deductible for colorectal cancer screening tests
that become diagnostic. In the CY 2011 OPPS/ASC final rule with comment
period, we finalized our policies with respect to these provisions and
identified categories of services and the ASC covered surgical
procedures and covered ancillary services that are preventive services
that are recommended by the USPSTF with a grade of A or B for which the
coinsurance and the deductible are waived. For a complete discussion of
our policies and categories of services, we refer readers to the CY
2011 OPPS/ASC final rule with comment period (75 FR 72047 through
72049). We did not propose any changes to our policies or the
categories of services for CY 2016. We identify the specific services
with a double asterisk in Addenda AA and BB to this final rule with
comment period (which are available via the Internet on the CMS Web
site).
d. Payment for Cardiac Resynchronization Therapy Services
Cardiac resynchronization therapy (CRT) uses electronic devices to
sequentially pace both sides of the heart to improve its output. CRT
utilizes a pacing electrode implanted in combination with either a
pacemaker or an implantable cardioverter defibrillator (ICD). CRT
performed by the implantation of an ICD along with a pacing electrode
is referred to as ``CRT-D.'' In the CY 2012 OPPS/ASC final rule with
comment period, we finalized our proposal to establish the CY 2012 ASC
payment rate for CRT-D services based on the OPPS payment rate
applicable to APC 0108 when procedures described by CPT codes 33225
(Insertion of pacing electrode, cardiac venous system, for left
ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (e.g., for upgrade to dual
chamber system) (list separately in addition to code for primary
procedure)) and 33249 (Insertion or replacement of permanent pacing
cardioverter-defibrillator system with transvenous lead(s), single or
dual chamber) are performed on the same date of service in an ASC.
In the CY 2015 OPPS/ASC final rule with comment period (79 FR
66931), we finalized our proposals under the OPPS that the services
described by CPT code 33249, the primary code for CRT-D services,
continue to be assigned to APC 0108 (Level II ICD and Similar
Procedures), and that payment for the services described by CPT code
33225 be packaged under the OPPS. We also finalized our proposals under
the ASC payment system that services described by CPT code 33249, the
primary code for CRT-D services, will continue to be assigned to APC
0108, and payment for services described by CPT code 33225 will be
packaged into the payment for the primary covered surgical procedure
(for example, CPT code 33249). In the CY 2016 OPPS/ASC proposed rule
(80 FR 39317 through 39318), we did not propose any changes to our ASC
payment policies for cardiac resynchronization therapy services for CY
2016. However, we note that, in the proposed rule, we proposed to
renumber APC 0108 as APC 5232 (Level 2 ICD and Similar Procedures).
We did not receive any public comments on our proposal to renumber
APC 0108 as APC 5232, and therefore as discussed in section II.A. of
this final rule with comment period, are finalizing

[[Page 70494]]

the renumbering for the APC beginning in CY 2016.
e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite
LDR prostate brachytherapy is a treatment for prostate cancer in
which hollow needles or catheters are inserted into the prostate,
followed by permanent implantation of radioactive sources into the
prostate through the needles/catheters. At least two CPT codes are used
to report the treatment service because there are separate codes that
describe placement of the needles/catheters and the application of the
brachytherapy sources: CPT code 55875 (Transperineal placement of
needles or catheters into prostate for interstitial radioelement
application, with 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 on the same date of service to the Medicare
beneficiary being treated with LDR brachytherapy for prostate cancer.
In the CY 2013 OPPS/ASC final rule with comment period, we
finalized our proposal to establish the CY 2013 ASC payment rate for
LDR prostate brachytherapy services based on the OPPS relative payment
weight applicable to APC 8001 when CPT codes 55875 and 77778 are
performed on the same date of service in an ASC. ASCs use the
corresponding HCPCS Level II G-code (G0458) for proper reporting when
the procedures described by CPT codes 55875 and 77778 are performed on
the same date of service, and therefore receive the appropriate LDR
prostate brachytherapy composite payment. When not performed on the
same day as the service described by CPT code 55875, the service
described by CPT code 77778 will be assigned to APC 0651 (in the
proposed rule, proposed to be renumbered APC 5641). When not performed
on the same day as the service described by CPT code 77778, the service
described by CPT code 55875 will be assigned to APC 0162 (in the
proposed rule, proposed to be renumbered APC 5374). For a complete
discussion of our policy regarding payment for LDR prostate
brachytherapy services in ASCs, we refer readers to the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68457). In the CY 2016 OPPS/
ASC proposed rule (80 FR 39318), we did not propose any changes to our
current policy regarding ASC payment for LDR prostate brachytherapy
services for CY 2016. We did not receive any public comments on our
proposal to renumber APC 0162 as APC 5374, and therefore as discussed
in section II.A. of this final rule with comment period, are finalizing
the renumbering for the APC beginning in CY 2016.
2. Payment for Covered Ancillary Services
a. Background
Our final payment policies under the revised ASC payment system for
covered ancillary services vary according to the particular type of
service and its payment policy under the OPPS. Our overall policy
provides separate ASC payment for certain ancillary items and services
integrally related to the provision of ASC covered surgical procedures
that are paid separately under the OPPS and provides packaged ASC
payment for other ancillary items and services that are packaged or
conditionally packaged (status indicators ``N,'' ``Q1,'' and ``Q2'')
under the OPPS. In the CY 2013 OPPS/ASC rulemaking (77 FR 45169; 77 FR
68457 through 68458), we further clarified our policy regarding the
payment indicator assignment of codes that are conditionally packaged
in the OPPS (status indicators ``Q1'' and ``Q2''). Under the OPPS, a
conditionally packaged code describes a HCPCS code where the payment is
packaged when it is provided with a significant procedure but is
separately paid when the service appears on the claim without a
significant procedure. Because ASC services always include a surgical
procedure, HCPCS codes that are conditionally packaged under the OPPS
are always packaged (payment indictor ``N1'') under the ASC payment
system (except for device removal codes as discussed in section
XII.D.1.a. of this final rule with comment period). Thus, our final
policy generally aligns ASC payment bundles with those under the OPPS
(72 FR 42495). In all cases, in order for those ancillary services also
to be paid, ancillary items and services must be provided integral to
the performance of ASC covered surgical procedures for which the ASC
bills Medicare.
Our ASC payment policies provide separate payment for drugs and
biologicals that are separately paid under the OPPS at the OPPS rates.
We generally pay for separately payable radiology services at the lower
of the MPFS nonfacility PE RVU-based (or technical component) amount or
the rate calculated according to the ASC standard ratesetting
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators
for all nuclear medicine procedures (defined as CPT codes in the range
of 78000 through 78999) that are designated as radiology services that
are paid separately when provided integral to a surgical procedure on
the ASC list are set to ``Z2'' so that payment is made based on the ASC
standard ratesetting methodology rather than the MPFS nonfacility PE
RVU amount, regardless of which is lower.
Similarly, we also finalized our policy to set the payment
indicator to ``Z2'' for radiology services that use contrast agents so
that payment for these procedures will be based on the OPPS relative
payment weight using the ASC standard ratesetting methodology and,
therefore, will include the cost for the contrast agent (42 CFR
416.171(d)(2)).
ASC payment policy for brachytherapy sources mirrors the payment
policy under the OPPS. ASCs are paid for brachytherapy sources provided
integral to ASC covered surgical procedures at prospective rates
adopted under the OPPS or, if OPPS rates are unavailable, at
contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs
have been paid for brachytherapy sources provided integral to ASC
covered surgical procedures at prospective rates adopted under the
OPPS.
Our ASC policies also provide separate payment for: (1) Certain
items and services that CMS designates as contractor-priced, including,
but not limited to, the procurement of corneal tissue; and (2) certain
implantable items that have pass-through payment status under the OPPS.
These categories do not have prospectively established ASC payment
rates according to the final policies for the revised ASC payment
system (72 FR 42502 and 42508 through 42509; 42 CFR 416.164(b)). Under
the revised ASC payment system, we have designated corneal tissue
acquisition and hepatitis B vaccines as contractor-priced. Corneal
tissue acquisition is contractor-priced based on the invoiced costs for
acquiring the corneal tissue for transplantation. Hepatitis B vaccines
are contractor-priced based on invoiced costs for the vaccine.
Devices that are eligible for pass-through payment under the OPPS
are separately paid under the ASC payment system and are contractor-
priced. Under the revised ASC payment system (72 FR 42502), payment for
the surgical procedure associated with the pass-through device is made
according to our standard methodology for the ASC payment system, based
on only the service (nondevice) portion of the

[[Page 70495]]

procedure's OPPS relative payment weight if the APC weight for the
procedure includes other packaged device costs. We also refer to this
methodology as applying a ``device offset'' to the ASC payment for the
associated surgical procedure. This ensures that duplicate payment is
not provided for any portion of an implanted device with OPPS pass-
through payment status.
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66933
through 66934), we finalized that, beginning in CY 2015, certain
diagnostic tests within the medicine range of CPT codes for which
separate payment is allowed under the OPPS are covered ancillary
services when they are integral to an ASC covered surgical procedure.
We finalized that diagnostic tests within the medicine range of CPT
codes include all Category I CPT codes in the medicine range
established by CPT, from 90000 to 99999, and Category III CPT codes and
Level II HCPCS codes that describe diagnostic tests that crosswalk or
are clinically similar to procedures in the medicine range established
by CPT. In the CY 2015 OPPS/ASC final rule with comment period, we also
finalized our policy to pay for these tests at the lower of the MPFS
nonfacility PE RVU-based (or technical component) amount or the rate
calculated according to the ASC standard ratesetting methodology (79 FR
66933 through 66934). We finalized that the diagnostic tests for which
the payment is based on the ASC standard ratesetting methodology be
assigned to payment indicator ``Z2'' and revised the definition of
payment indicator ``Z2'' to include reference to diagnostic services
and those for which the payment is based on the MPFS nonfacility PE
RVU-based amount be assigned payment indicator ``Z3,'' and revised the
definition of payment indicator ``Z3'' to include reference to
diagnostic services.
b. Payment for Covered Ancillary Services for CY 2016
In the CY 2016 OPPS/ASC proposed rule (80 FR 39319 through 39320),
for CY 2016 and subsequent years, we proposed to update the ASC payment
rates and to 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 2016 OPPS and ASC payment rates and subsequent year payment rates.
We also proposed to continue to set the CY 2016 ASC payment rates and
subsequent year payment rates for brachytherapy sources and separately
payable drugs and biologicals equal to the proposed OPPS payment rates
for CY 2016.
Consistent with established ASC payment policy (72 FR 42497), we
proposed that the CY 2016 payment for separately payable covered
radiology services be based on a comparison of the proposed CY 2016
MPFS nonfacility PE RVU-based amounts (we refer readers to the CY 2016
MPFS proposed rule) and the CY 2016 ASC payment rates calculated
according to the ASC standard ratesetting methodology and then set at
the lower of the two amounts (except as discussed below for nuclear
medicine procedures and radiology services that use contrast agents).
We made this same proposal for subsequent years. For CY 2016 and
subsequent years, we also proposed that payment for a radiology service
would be packaged into the payment for the ASC covered surgical
procedure if the radiology service is packaged or conditionally
packaged under the OPPS. The payment indicators in Addendum BB to the
proposed rule (which is available via the Internet on the CMS Web site)
indicate whether the proposed payment rates for radiology services are
based on the MPFS nonfacility PE RVU-based amount or the ASC standard
ratesetting methodology, or whether payment for a radiology service is
packaged into the payment for the covered surgical procedure (payment
indicator ``N1''). Radiology services that we proposed to pay based on
the ASC standard ratesetting methodology in CY 2016 and subsequent
years are assigned payment indicator ``Z2'' (Radiology or diagnostic
service paid separately when provided integral to a surgical procedure
on ASC list; payment based on OPPS relative payment weight), and those
for which the proposed payment is based on the MPFS nonfacility PE RVU-
based amount be assigned payment indicator ``Z3'' (Radiology or
diagnostic service paid separately when provided integral to a surgical
procedure on ASC list; payment based on MPFS nonfacility PE RVUs).
As finalized in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 72050), payment indicators for all nuclear medicine procedures
(defined as CPT codes in the range of 78000 through 78999) that are
designated as radiology services that are paid separately when provided
integral to a surgical procedure on the ASC list are set to ``Z2'' so
that payment for these procedures will be based on the OPPS relative
payment weight using the ASC standard ratesetting methodology (rather
than the MPFS nonfacility PE RVU-based amount, regardless of which is
lower) and, therefore, will include the cost for the diagnostic
radiopharmaceutical. We proposed to continue this modification to the
payment methodology for CY 2016 and subsequent years and, therefore,
proposed to assign the payment indicator ``Z2'' to nuclear medicine
procedures.
As finalized in the CY 2012 OPPS/ASC final rule with comment period
(76 FR 74429 through 74430), payment indicators for radiology services
that use contrast agents are set to ``Z2'' so that payment for these
procedures will be based on the OPPS relative payment weight using the
ASC standard ratesetting methodology and, therefore, will include the
cost for the contrast agent. We proposed to continue this modification
to the payment methodology for CY 2016 and subsequent years and,
therefore, proposed to assign the payment indicator ``Z2'' to radiology
services that use contrast agents.
We proposed to not make separate payment as a covered ancillary
service for procurement of corneal tissue when used in any
nontransplant procedure under the ASC payment system. For more detail
on this CY 2016 proposal, we refer readers to section X.C. of the
proposed rule and section X.D. of this final rule with comment period.
We proposed, for CY 2016 ASC payment purposes, to continue to designate
hepatitis B vaccines as contractor-priced based on the invoiced costs
for the vaccine, and corneal tissue acquisition as contractor-priced
based on the invoiced costs for acquiring the corneal tissue for
transplant.
Consistent with our established ASC payment policy, we proposed
that the CY 2016 payment for devices that are eligible for pass-through
payment under the OPPS are separately paid under the ASC payment system
and would be contractor-priced. Currently, the three devices that are
eligible for pass-through payment in the OPPS are described by HCPCS
code C1841 (Retinal prosthesis, includes all internal and external
components), HCPCS code C2623 (Catheter, transluminal angioplasty,
drug-coated, non-laser) and, beginning on July 1, HCPCS code C2613
(Lung biopsy plug with delivery system). As finalized in the CY 2015
OPPS/ASC final rule with comment period, HCPCS code C1841 will no
longer be eligible for pass-through payment in the OPPS for CY 2016 (79
FR 66870 through 66871), and thus the costs for devices described by
HCPCS code C1841 would be packaged into the costs of the procedures
with which the devices are reported in the hospital claims data used in
the development of the OPPS

[[Page 70496]]

relative payment weights that will be used to establish ASC payment
rates for CY 2016. Payment amounts for HCPCS codes C2623 and C2613
under the ASC payment system would be contractor-priced for CY 2016.
Consistent with our current policy, we proposed that payment for the
surgical procedure associated with the pass-through device is made
according to our standard methodology for the ASC payment system, based
on only the service (nondevice) portion of the procedure's OPPS
relative payment weight, if the APC weight for the procedure includes
similar packaged device costs.
Consistent with our current policy, we proposed that certain
diagnostic tests within the medicine range of CPT codes (that is, all
Category I CPT codes in the medicine range established by CPT, from
90000 to 99999, and Category III CPT codes and Level II HCPCS codes
that describe diagnostic tests that crosswalk or are clinically similar
to procedures in the medicine range established by CPT) for which
separate payment is allowed under the OPPS are covered ancillary
services when they are provided integral to an ASC covered surgical
procedure. We would pay for these tests at the lower of the MPFS
nonfacility PE RVU-based (or technical component) amount or the rate
calculated according to the ASC standard ratesetting methodology (79 FR
66933 through 66934). As discussed in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66934), for CY 2015, we identified one
diagnostic test that is within the medicine range of CPT codes and for
which separate payment is allowed under the OPPS: CPT code 91035
(Esophagus, gastroesophageal reflux test; with mucosal attached
telemetry pH electrode placement, recording, analysis and
interpretation). We added this code to the list of ASC covered
ancillary services and finalized separate ASC payment as a covered
ancillary service for this code beginning in CY 2015 when the test is
provided integral to an ASC covered surgical procedure. We stated that
we would expect the procedure described by CPT code 91035 to be
integral to the endoscopic attachment of the electrode to the
esophageal mucosa. There are no additional codes that meet this
criterion for CY 2016.
In summary, for CY 2016, we proposed to continue the methodologies
for paying for covered ancillary services established for CY 2015. Most
covered ancillary services and their proposed payment indicators for CY
2016 are listed in Addendum BB to the proposed rule (which is available
via the Internet on the CMS Web site).
We discuss our OPPS and ASC payment policies for nontransplant
corneal tissue in section X.D. of this final rule with comment period.
We did not receive public comments on our policy proposals
regarding payment for covered ancillary services (other than on the
corneal tissue procurement policy, which we discuss and finalize in
section X.D. of this final rule with comment period), and therefore are
finalizing these policies as proposed for CY 2016 and subsequent years.
For those covered ancillary services where the payment rate is the
lower of the final rates under the ASC standard ratesetting methodology
and the MPFS final rates, the final payment indicators and rates set
forth in this final rule with comment period are based on a comparison
using the MPFS rates effective January 1, 2016. For a discussion of the
MPFS rates, we refer readers to the CY 2016 MPFS final rule with
comment period.

E. New Technology Intraocular Lenses (NTIOLs)

New Technology Intraocular Lenses (NTIOLs) are intraocular lenses
that replace a patient's natural lens that has been removed in cataract
surgery and that also meet the requirements listed in 42 CFR 416.195.
1. NTIOL Application Cycle
Our process for reviewing applications to establish new classes of
NTIOLs is as follows:
Applicants submit their NTIOL requests for review to CMS
by the annual deadline. For a request to be considered complete, we
require submission of the information that is found in the guidance
document entitled ``Application Process and Information Requirements
for Requests for a New Class of New Technology Intraocular Lenses
(NTIOLs) or Inclusion of an IOL in an existing NTIOL Class'' posted on
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
We announce annually, in the proposed rule updating the
ASC and OPPS payment rates for the following calendar year, a list of
all requests to establish new NTIOL classes accepted for review during
the calendar year in which the proposal is published. In accordance
with section 141(b)(3) of Pub. L. 103-432 and our regulations at 42 CFR
416.185(b), the deadline for receipt of public comments is 30 days
following publication of the list of requests in the proposed rule.
In the final rule updating the ASC and OPPS payment rates
for the following calendar year, we--
++ Provide a list of determinations made as a result of our review
of all new NTIOL class requests and public comments;
++ When a new NTIOL class is created, identify the predominant
characteristic of NTIOLs in that class that sets them apart from other
IOLs (including those previously approved as members of other expired
or active NTIOL classes) and that is associated with an improved
clinical outcome.
++ Set the date of implementation of a payment adjustment in the
case of approval of an IOL as a member of a new NTIOL class
prospectively as of 30 days after publication of the ASC payment update
final rule, consistent with the statutory requirement.
++ Announce the deadline for submitting requests for review of an
application for a new NTIOL class for the following calendar year.
2. Requests To Establish New NTIOL Classes for CY 2016
We did not receive any requests for review to establish a new NTIOL
class for CY 2016 by March 2, 2015, the due date published in the CY
2015 OPPS/ASC final rule with comment period (79 FR 66935).
3. Payment Adjustment
The current payment adjustment for a 5-year period from the
implementation date of a new NTIOL class is $50 per lens. Since
implementation of the process for adjustment of payment amounts for
NTIOLs in 1999, we have not revised the payment adjustment amount, and
we did not propose to revise the payment adjustment amount for CY 2016.
4. Newness Criterion
Since the inception of the NTIOL policy in 1999, there has not been
any specific criterion provided to evaluate the newness of a candidate
IOL for new technology payment under the ASC payment system. Absence of
any specific criterion means that, regardless of when an IOL was
originally FDA approved and available on the U.S. market, the IOL could
be established as a new NTIOL class if it satisfies the requirements of
42 CFR 416.195. We believe that because the NTIOL payment adjustment
under the statute was specifically created for IOLs that are ``new,''
the regulations at Sec. 416.195 should include a newness criterion.
Therefore, in the CY 2016 OPPS/ASC proposed rule (80 FR 39320), we
proposed that, beginning in CY 2016,

[[Page 70497]]

any application for a new NTIOL class must fulfill an additional
criterion. Specifically, we proposed that, beginning January 1, 2016,
an NTIOL application will only be evaluated by CMS for a new IOL class
if the IOL has received initial FDA premarket approval within the 3
years prior to the NTIOL application submission date. Without this
proposed requirement, there is nothing in the existing regulations that
would preclude an applicant from applying for and possibly being
granted NTIOL status, despite U.S. market entry many years ago, which
would be contrary to the plain meaning of ``new'' technology IOLs. We
proposed to revise Sec. 416.195(a)(1) of the regulations to reflect
this proposal. We invited public comments on this proposal.
Comment: Two commenters supported the proposed newness criterion
for NTIOL candidate lenses.
Response: We appreciate the commenters' support.
Comment: One commenter believed that the current regulations are
sufficient and that this proposal was not necessary.
Response: We disagree with the commenter. Without the proposed
newness criterion, old IOLs that have been on the market for many years
could apply for NTIOL status. Furthermore, a lack of recent NTIOL
applications does not obviate the need for this new regulation.
After consideration of the public comments we received, we are
finalizing our proposal to establish a newness criterion for NTIOL
applications. Beginning January 1, 2016, an NTIOL application will only
be evaluated by CMS for a new NTIOL class if the IOL has received
initial FDA approval within the 3 years prior to the NTIOL application
submission date. We are revising 42 CFR 416.195 to reflect this change,
and in this final rule with comment period we are deleting the
unnecessary phrase ``under this provision'' from the proposed revised
regulation text.
5. Announcement of CY 2016 Deadline for Submitting Requests for CMS
Review of Applications for a New Class of NTIOLs
In accordance with 42 CFR 416.185(a) of our regulations, CMS
announces that in order to be considered for payment effective
beginning in CY 2017, requests for review of applications for a new
class of new technology IOLs must be received at CMS by 5 p.m. EST, on
March 1, 2016. Send requests to ASC/NTIOL, Division of Outpatient Care,
Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 7500
Security Boulevard, Baltimore, MD 21244-1850. To be considered,
requests for NTIOL reviews must include the information requested on
the CMS Web site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
In addition to the payment indicators that we introduced in the
August 2, 2007 final rule, we also created final comment indicators for
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66855). We created Addendum DD1 to define ASC payment
indicators that we use in Addenda AA and BB to provide payment
information regarding covered surgical procedures and covered ancillary
services, respectively, under the revised ASC payment system. The ASC
payment indicators in Addendum DD1 are intended to capture policy
relevant characteristics of HCPCS codes that may receive packaged or
separate payment in ASCs, such as whether they were on the ASC list of
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment
methodology; and their classification as separately payable ancillary
services, including radiology services, brachytherapy sources, OPPS
pass-through devices, corneal tissue acquisition services, drugs or
biologicals, or NTIOLs.
We also created Addendum DD2 that lists the ASC comment indicators.
The ASC comment indicators used in Addenda AA and BB to the proposed
rules and final rules with comment period serve to identify, for the
revised ASC payment system, the status of a specific HCPCS code and its
payment indicator with respect to the timeframe when comments will be
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final
rule with comment period to indicate new codes for the next calendar
year for which the interim payment indicator assigned is subject to
comment. The comment indicator ``NI'' also is assigned to existing
codes with substantial revisions to their descriptors such that we
consider them to be describing new services, as discussed in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60622). We
indicated that in the CY 2016 OPPS/ASC final rule with comment period,
we will respond to public comments and finalize the ASC treatment of
all codes that are labeled with comment indicator ``NI'' in Addenda AA
and BB to the CY 2015 OPPS/ASC final rule with comment period.
The ``CH'' comment indicator is used in Addenda AA and BB to the
proposed rule (which are available via the Internet on the CMS Web
site) to indicate that the payment indicator assignment has changed for
an active HCPCS code in the current year and the next calendar year; an
active HCPCS code is newly recognized as payable in ASCs; or an active
HCPCS code is discontinued at the end of the current calendar year. The
``CH'' comment indicators that are published in the final rule with
comment period are provided to alert readers that a change has been
made from one calendar year to the next, but do not indicate that the
change is subject to comment.
2. ASC Payment and Comment Indicators
In the CY 2016 OPPS/ASC proposed rule (80 FR 39321), for CY 2016
and subsequent years, we proposed to continue using the current comment
indicators of ``NI'' and ``CH.'' For CY 2016, there are new and revised
Category I and III CPT codes, as well as new and revised Level II HCPCS
codes. Therefore, we proposed that Category I and III CPT codes that
are new and revised for CY 2016 and any new and existing Level II HCPCS
codes with substantial revisions to the code descriptors for CY 2016
compared to the CY 2015 descriptors that are included in ASC Addendum
AA and BB to the CY 2016 OPPS/ASC proposed rule would be labeled with
proposed new comment indicator ``NP'' to indicate that these CPT and
Level II HCPCS codes are open for comment as part of the CY 2016 OPPS/
ASC proposed rule. Proposed new comment indicator ``NP'' means a new
code for the next calendar year or an existing code with substantial
revision to its code descriptor in the next calendar year as compared
to current calendar year; comments will be accepted on the proposed ASC
payment indicator for the new code.
For the CY 2016 update, we also proposed to add ASC payment
indicator ``B5'' (Alternative code may be available; no payment made)
to ASC Addendum DD1 to the proposed rule (which is available via the
Internet on the CMS Web site). This code indicates that an alternative
code is recognized under the ASC payment system. We proposed to add
this payment indicator for situations where we receive new and revised
Category I and Category III CPT codes too late for inclusion in a
proposed rule, as discussed in section XII.B.3.b. of the proposed rule
regarding

[[Page 70498]]

our proposed process for accepting comments on new and revised Category
I and III CPT codes that are effective January 1. We stated that we
would respond to public comments and finalize their ASC assignment in
the CY 2016 OPPS/ASC final rule with comment period. We refer readers
to Addenda DD1 and DD2 to the proposed rule (which are available via
the Internet on the CMS Web site) for the complete list of ASC payment
and comment indicators proposed for the CY 2016 update.
We did not receive any public comments on the ASC payment and
comment indicators and therefore are finalizing their use as proposed
without modification.

G. Calculation of the ASC Conversion Factor and the 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 the OPPS relative payment
weights. Consistent with that policy and the requirement at section
1833(i)(2)(D)(ii) of the Act that the revised payment system be
implemented so that it would be budget neutral, the initial ASC
conversion factor (CY 2008) was calculated so that estimated total
Medicare payments under the revised ASC payment system in the first
year would be budget neutral to estimated total Medicare payments under
the prior (CY 2007) ASC payment system (the ASC conversion factor is
multiplied by the relative payment weights calculated for many ASC
services in order to establish payment rates). That is, application of
the ASC conversion factor was designed to result in aggregate Medicare
expenditures under the revised ASC payment system in CY 2008 being
equal to aggregate Medicare expenditures that would have occurred in CY
2008 in the absence of the revised system, taking into consideration
the cap on ASC payments in CY 2007 as required under section
1833(i)(2)(E) of the Act (72 FR 42522). We adopted a policy to make the
system budget neutral in subsequent calendar years (72 FR 42532 through
42533; 42 CFR 416.171(e)).
We note that we consider the term ``expenditures'' in the context
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of
the Act to mean expenditures from the Medicare Part B Trust Fund. We do
not consider expenditures to include beneficiary coinsurance and
copayments. This distinction was important for the CY 2008 ASC budget
neutrality model that considered payments across the OPPS, ASC, and
MPFS payment systems. However, because coinsurance is almost always 20
percent for ASC services, this interpretation of expenditures has
minimal impact for subsequent budget neutrality adjustments calculated
within the revised ASC payment system.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857
through 66858), we set out a step-by-step illustration of the final
budget neutrality adjustment calculation based on the methodology
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531)
and as applied to updated data available for the CY 2008 OPPS/ASC final
rule with comment period. The application of that methodology to the
data available for the CY 2008 OPPS/ASC final rule with comment period
resulted in a budget neutrality adjustment of 0.65.
For CY 2008, we adopted the OPPS relative payment weights as the
ASC relative payment weights for most services and, consistent with the
final policy, we calculated the CY 2008 ASC payment rates by
multiplying the ASC relative payment weights by the final CY 2008 ASC
conversion factor of $41.401. For covered office-based surgical
procedures, covered ancillary radiology services (excluding covered
ancillary radiology services involving certain nuclear medicine
procedures or involving the use of contrast agents, as discussed in
section XII.D.2. of the proposed rule), and certain diagnostic tests
within the medicine range that are covered ancillary services, the
established policy is to set the payment rate at the lower of the MPFS
unadjusted nonfacility PE RVU-based amount or the amount calculated
using the ASC standard ratesetting methodology. Further, as discussed
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841
through 66843), we also adopted alternative ratesetting methodologies
for specific types of services (for example, device-intensive
procedures).
As discussed in the August 2, 2007 final rule (72 FR 42517 through
42518) and as codified at Sec. 416.172(c) of the regulations, the
revised ASC payment system accounts for geographic wage variation when
calculating individual ASC payments by applying the pre-floor and pre-
reclassified IPPS hospital wage indexes to the labor-related share,
which is 50 percent of the ASC payment amount based on a GAO report of
ASC costs using 2004 survey data. Beginning in CY 2008, CMS accounted
for geographic wage variation in labor cost when calculating individual
ASC payments by applying the pre-floor and pre-reclassified hospital
wage index values that CMS calculates for payment under the IPPS, using
updated Core Based Statistical Areas (CBSAs) issued by OMB in June
2003.
The reclassification provision in section 1886(d)(10) of the Act is
specific to hospitals. We believe that using the most recently
available pre-floor and pre-reclassified IPPS hospital wage indexes
results in the most appropriate adjustment to the labor portion of ASC
costs. We continue to believe that the unadjusted hospital wage
indexes, which are updated yearly and are used by many other Medicare
payment systems, appropriately account for geographic variation in
labor costs for ASCs. Therefore, the wage index for an ASC is the pre-
floor and pre-reclassified hospital wage index under the IPPS of the
CBSA that maps to the CBSA where the ASC is located.
On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which
provides the delineations of all Metropolitan Statistical Areas,
Metropolitan Divisions, Micropolitan Statistical Areas, Combined
Statistical Areas, and New England City and Town Areas in the United
States and Puerto Rico based on the standards published on June 28,
2010 in the Federal Register (75 FR 37246 through 37252) and 2010
Census Bureau data. (A copy of this bulletin may be obtained at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf). In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through
49963), we implemented the use of the CBSA delineations issued by OMB
in OMB Bulletin 13-01 for the IPPS hospital wage index beginning in FY
2015. In the CY 2015 OPPS/ASC final rule with comment period (79 FR
66937), we finalized a 1-year transition policy that we applied in CY
2015 for all ASCs that experienced any decrease in their actual wage
index exclusively due to the implementation of the new OMB
delineations. This transition does not apply in CY 2016.
For CY 2016, the proposed CY 2016 ASC wage indexes fully reflect
the new OMB labor market area delineations.
We note that, in certain instances, there might be urban or rural
areas for which there is no IPPS hospital that has wage index data that
could be used to set the wage index for that area. For these areas, our
policy has been to use the average of the wage indexes for CBSAs (or
metropolitan divisions as applicable) that are contiguous to the area
that has no wage index (where ``contiguous'' is defined as sharing a

[[Page 70499]]

border). For example, for CY 2014, we applied a proxy wage index based
on this methodology to ASCs located in CBSA 25980 (Hinesville-Fort
Stewart, GA) and CBSA 08 (Rural Delaware).
When all of the areas contiguous to the urban CBSA of interest are
rural and there is no IPPS hospital that has wage index data that could
be used to set the wage index for that area, we determine the ASC wage
index by calculating the average of all wage indexes for urban areas in
the State (75 FR 72058 through 72059). (In other situations, where
there are no IPPS hospitals located in a relevant labor market area, we
will continue our current policy of calculating an urban or rural
area's wage index by calculating the average of the wage indexes for
CBSAs (or metropolitan divisions where applicable) that are contiguous
to the area with no wage index.)
Comment: Several commenters made the same recommendation that was
made in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), CY 2012 (76
FR 74446), CY 2013 (77 FR 68463), and CY 2014 (78 FR 75086)
rulemakings--that is, that CMS adopt for the ASC payment system the
same wage index values used for hospital payment under the OPPS.
Response: We have responded to this comment in the past, and
believe our prior rationale for using unadjusted wage indexes is still
a sound one. We continue to believe that the unadjusted hospital wage
indexes, which are updated yearly and are used by almost all Medicare
payment systems, appropriately account for geographic variance in labor
costs for ASCs. We refer readers to our response to this comment in the
CY 2011 OPPS/ASC final rule with comment period (75 FR 72059). We
discuss our budget neutrality adjustment for changes to the wage
indices below in section XII.G.2.b. of this final rule with comment
period.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2016 and Future
Years
We update the ASC relative payment weights each year using the
national OPPS relative payment weights (and MPFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly
scale the ASC relative payment weights for each update year to make
them budget neutral (72 FR 42533). In the CY 2016 OPPS/ASC proposed
rule (80 FR 39322 through 39323), consistent with our established
policy, we proposed to scale the CY 2016 relative payment weights for
ASCs according to the following method. Holding ASC utilization, the
ASC conversion factor, and the mix of services constant from CY 2014,
we proposed to compare the total payment using the CY 2015 ASC relative
payment weights with the total payment using the CY 2016 ASC relative
payment weights to take into account the changes in the OPPS relative
payment weights between CY 2015 and CY 2016. We proposed to use the
ratio of CY 2015 to CY 2016 total payment (the weight scaler) to scale
the ASC relative payment weights for CY 2016. The proposed CY 2016 ASC
scaler is 0.9180 and scaling would apply to the ASC relative payment
weights of the covered surgical procedures, covered ancillary radiology
services, and certain diagnostic tests within the medicine range of CPT
codes which are covered ancillary services for which the ASC payment
rates are based on OPPS relative payment weights.
Scaling would not apply in the case of ASC payment for separately
payable covered ancillary services that have a predetermined national
payment amount (that is, their national ASC payment amounts are not
based on OPPS relative payment weights), such as drugs and biologicals
that are separately paid or services that are contractor-priced or paid
at reasonable cost in ASCs. Any service with a predetermined national
payment amount would be included in the ASC budget neutrality
comparison, but scaling of the ASC relative payment weights would not
apply to those services. The ASC payment weights for those services
without predetermined national payment amounts (that is, those services
with national payment amounts that would be based on OPPS relative
payment weights) would be scaled to eliminate any difference in the
total payment between the current year and the update year.
For any given year's ratesetting, we typically use the most recent
full calendar year of claims data to model budget neutrality
adjustments. At the time of this final rule with comment period, we
have available 98 percent of CY 2014 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 2014 ASC claims by ASC and by HCPCS
code. We used the National Provider Identifier for the purpose of
identifying unique ASCs within the CY 2014 claims data. We used the
supplier zip code reported on the claim to associate State, county, and
CBSA with each ASC. This file, available to the public as a supporting
data file for the proposed rule, is posted on the CMS Web site at:
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply a budget neutrality adjustment
for provider level changes, most notably a change in the wage index
values for the upcoming year, to the conversion factor. Consistent with
our final ASC payment policy, for the CY 2016 ASC payment system and
subsequent years, we proposed to calculate and apply a budget
neutrality adjustment to the ASC conversion factor for supplier level
changes in wage index values for the upcoming year, just as the OPPS
wage index budget neutrality adjustment is calculated and applied to
the OPPS conversion factor. For CY 2016, we calculated this proposed
adjustment for the ASC payment system by using the most recent CY 2014
claims data available and estimating the difference in total payment
that would be created by introducing the proposed CY 2016 ASC wage
indexes. Specifically, holding CY 2014 ASC utilization and service-mix
and the proposed CY 2016 national payment rates after application of
the weight scaler constant, we calculated the total adjusted payment
using the CY 2015 ASC wage indexes (which reflect the new OMB
delineations and include any applicable transition period) and the
total adjusted payment using the proposed CY 2016 ASC wage indexes
(which would fully reflect the new OMB delineations). 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 2015 ASC wage indexes to the total adjusted payment
calculated with the proposed CY 2016 ASC wage indexes and applied the
resulting ratio of 1.0014 (the proposed CY 2016 ASC wage index budget
neutrality adjustment) to the CY 2015 ASC conversion factor to
calculate the proposed CY 2016 ASC conversion factor.
Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary
has not updated amounts established under the revised ASC payment
system in a calendar year, the payment amounts shall be increased by
the percentage increase in the Consumer Price Index for all urban
consumers (U.S. city average) as estimated by the Secretary for the 12-
month period ending with the midpoint of the year involved. Therefore,
the statute does not mandate the adoption of any particular update
mechanism, but it requires the payment

[[Page 70500]]

amounts to be increased by the CPI-U in the absence of any update.
Because the Secretary updates the ASC payment amounts annually, we
adopted a policy, which we codified at 42 CFR 416.171(a)(2)(ii), to
update the ASC conversion factor using the CPI-U for CY 2010 and
subsequent calendar years. Therefore, the annual update to the ASC
payment system is the CPI-U (referred to as the CPI-U update factor).
Section 3401(k) of the Affordable Care Act amended section
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that
any annual update under the ASC payment system for the year, after
application of clause (iv), shall be reduced by the productivity
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act,
effective with the calendar year beginning January 1, 2011. The statute
defines the productivity adjustment to be equal to the 10-year moving
average of changes in annual economy-wide private nonfarm business
multifactor productivity (MFP) (as projected by the Secretary for the
10-year period ending with the applicable fiscal year, year, cost
reporting period, or other annual period) (the ``MFP adjustment'').
Clause (iv) of section 1833(i)(2)(D) of the Act authorizes the
Secretary to provide for a reduction in any annual update for failure
to report on quality measures. Clause (v) of section 1833(i)(2)(D) of
the Act states that application of the MFP adjustment to the ASC
payment system may result in the update to the ASC payment system being
less than zero for a year and may result in payment rates under the ASC
payment system for a year being less than such payment rates for the
preceding year.
In the CY 2012 OPPS/ASC final rule with comment period (76 FR
74516), we finalized a policy that ASCs begin submitting data on
quality measures for services beginning on October 1, 2012 for the CY
2014 payment determination under the ASCQR Program. In the CY 2013
OPPS/ASC final rule with comment period (77 FR 68499 through 68500), we
finalized a methodology to calculate reduced national unadjusted
payment rates using the ASCQR Program reduced update conversion factor
that would apply to ASCs that fail to meet their quality reporting
requirements for the CY 2014 payment determination and subsequent
years. The application of the 2.0 percentage point reduction to the
annual update factor, which currently is the CPI-U, may result in the
update to the ASC payment system being less than zero for a year for
ASCs that fail to meet the ASCQR Program requirements. We amended
Sec. Sec. 416.160(a)(1) and 416.171 to reflect these policies.
In accordance with section 1833(i)(2)(C)(i) of the Act, before
applying the MFP adjustment, the Secretary first determines the
``percentage increase'' in the CPI-U, which we interpret cannot be a
negative percentage. Thus, in the instance where the percentage change
in the CPI-U for a year is negative, we would hold the CPI-U update
factor for the ASC payment system to zero. For the CY 2014 payment
determination and subsequent years, under section 1833(i)(2)(D)(iv) of
the Act, we would reduce the annual update by 2.0 percentage points for
an ASC that fails to submit quality information under the rules
established by the Secretary in accordance with section 1833(i)(7) of
the Act. Section 1833(i)(2)(D)(v) of the Act, as added by section
3401(k) of the Affordable Care Act, requires that the Secretary reduce
the annual update factor, after application of any quality reporting
reduction, by the MFP adjustment, and states that application of the
MFP adjustment to the annual update factor after application of any
quality reporting reduction may result in the update being less than
zero for a year. If the application of the MFP adjustment to the annual
update factor after application of any quality reporting reduction
would result in an MFP-adjusted update factor that is less than zero,
the resulting update to the ASC payment rates would be negative and
payments would decrease relative to the prior year. We refer readers to
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72062
through 72064) for examples of how the MFP adjustment is applied to the
ASC payment system.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39323 through 39324),
based on IHS Global Insight's (IGI's) 2015 first quarter forecast with
historical data through 2014 fourth quarter, for the 12-month period
ending with the midpoint of CY 2016, the CPI-U update was projected to
be 1.7 percent. Also, based on IGI's 2015 first quarter forecast, the
MFP adjustment for the period ending with the midpoint of CY 2016 was
projected to be 0.6 percent. We finalized the methodology for
calculating the MFP adjustment in the CY 2011 MPFS final rule with
comment period (75 FR 73394 through 73396) as revised in the CY 2012
MPFS final rule with comment period (76 FR 73300 through 73301).
As we discussed in the CY 2011 MPFS final rule with comment period,
section 1833(i)(2)(D)(v) of the Act, as added by section 3401(k) of the
Affordable Care Act, requires that any annual update to the ASC payment
system after application of the quality adjustment be reduced by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the
productivity adjustment to be equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multifactor
productivity (MFP) (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, year, cost reporting
period, or other annual period). Historical published data on the
measure of MFP is available on the Bureau of Labor Statistics' (BLS)
Web site at http://www.bls.gov/mfp.
MFP is derived by subtracting the contribution of labor and capital
inputs growth from output growth. The projection of the components of
MFP are currently produced by IHS Global Insight, Inc. (IGI), a
nationally recognized economic forecasting firm with which CMS
contracts to forecast the components of MFP. To generate a forecast of
MFP, IGI replicates the MFP measure calculated by the BLS using a
series of proxy variables derived from IGI's U.S. macroeconomic models.
In the CY 2011 and CY 2012 MPFS final rules with comment period (75 FR
73394 through 73396, 76 FR 73300 through 73301), we set forth the
current methodology to generate a forecast of MFP. We identified each
of the major MFP component series employed by the BLS to measure MFP as
well as provided the corresponding concepts determined to be the best
available proxies for the BLS series.
Beginning with the CY 2016 rulemaking cycle, the MFP adjustment is
calculated using a revised series developed by IGI to proxy the
aggregate capital inputs. Specifically, IGI has replaced the Real
Effective Capital Stock used for Full Employment GDP with a forecast of
BLS aggregate capital inputs recently developed by IGI using a
regression model. This series provides a better fit to the BLS capital
inputs, as measured by the differences between the actual BLS capital
input growth rates and the estimated model growth rates over the
historical time period. Therefore, we are using IGI's most recent
forecast of the BLS capital inputs series in the MFP calculations
beginning with the CY 2016 rulemaking cycle. A complete description of
the MFP projection methodology is available on CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although
we discuss the IGI changes to the MFP

[[Page 70501]]

proxy series in the CY 2016 OPPS/ASC proposed rule and in this final
rule with comment period, in the future, when IGI makes changes to the
MFP methodology, we will announce them on our Web site rather than in
the annual rulemaking.
For CY 2016, we proposed to reduce the CPI-U update of 1.7 percent
by the MFP adjustment of 0.6 percentage point, resulting in an MFP-
adjusted CPI-U update factor of 1.1 percent for ASCs meeting the
quality reporting requirements. Therefore, we proposed to apply a 1.1
percent MFP-adjusted CPI-U update factor to the CY 2015 ASC conversion
factor for ASCs meeting the quality reporting requirements. The ASCQR
Program affected payment rates beginning in CY 2014 and, under this
program, there is a 2.0 percentage point reduction to the CPI-U for
ASCs that fail to meet the ASCQR Program requirements. We proposed to
reduce the CPI-U update of 1.7 percent by 2.0 percentage points for
ASCs that do not meet the quality reporting requirements and then apply
the 0.6 percentage point MFP reduction. Therefore, we proposed to apply
a -0.9 percent quality reporting/MFP-adjusted CPI-U update factor to
the CY 2015 ASC conversion factor for ASCs not meeting the quality
reporting requirements. We also proposed that if more recent data are
subsequently available (for example, a more recent estimate of the CY
2016 CPI-U update and MFP adjustment), we would use such data, if
appropriate, to determine the CY 2016 ASC update for the final rule
with comment period.
For CY 2016, we also proposed to adjust the CY 2015 ASC conversion
factor ($44.058) by the proposed wage index budget neutrality factor of
1.0014 in addition to the MFP-adjusted CPI-U update factor of 1.1
percent discussed above, which results in a proposed CY 2016 ASC
conversion factor of $44.605 for ASCs meeting the quality reporting
requirements. For ASCs not meeting the quality reporting requirements,
we proposed to adjust the CY 2015 ASC conversion factor ($44.058) by
the proposed wage index budget neutrality factor of 1.0014 in addition
to the quality reporting/MFP-adjusted CPI-U update factor of -0.9
percent discussed above, which results in a proposed CY 2016 ASC
conversion factor of $43.723.
We invited public comment on these proposals.
Comment: Some commenters suggested that CMS replace the CPI-U as
the update mechanism for ASC payments with the hospital market basket.
The commenters stated that the CPI-U measures inflation in a basket of
consumer goods atypical of what ASCs purchase. In addition, the
commenters stated that the Affordable Care Act requires CMS to reduce
the update by a measure of productivity gains, which inappropriately
subjects ASCs to two productivity adjustments: Improvements reflected
in the price of consumer purchased goods; and the additional
statutorily required reduction. While the commenters maintained that
the hospital market basket would be the most appropriate update for
ASCs, they suggested that there are various alternatives within the
CPI-U that CMS could explore that more accurately reflect the economic
climate in the ASC environment. MedPAC acknowledged that there may be a
burden associated with requiring ASCs to submit cost reports, but
recommended that CMS collect some sort of ASC cost data, to determine
whether an existing Medicare index is a good proxy or if there should
be an ASC specific market basket.
Response: As we have stated in response to similar comments in the
past (for example, 77 FR 68465; 78 FR 75088 through 75089; 79 FR
66939), we continue to believe that, while commenters argued that the
items included in the CPI-U index may not adequately measure inflation
for the goods and services provided by ASCs, the hospital market basket
does not align with the cost structures of ASCs. Hospitals provide a
much wider range of services, such as room and board and emergency
services, and the costs associated with providing these services are
not part of the ASC cost structure. Therefore, at this time, we do not
believe that it is appropriate to use the hospital market basket for
the ASC annual update. We recognize that the CPI-U is an output price
index that accounts for productivity. However, section 1833(i)(2)(D)(v)
of the Act requires the agency to reduce the annual update factor by
the MFP adjustment. For the reasons stated above, we do not believe
that the hospital market basket appropriately reflects the cost
structures of ASCs, and because we do not have cost data on ASCs, we
are continuing to use the CPI-U which we believe provides a reasonable
approximation of the price increases facing ASCs. We will continue to
explore the feasibility of collecting ASC cost data. However, based on
our past experience, we do not believe that collecting such data
through surveys would be productive. We appreciate the commenter's
suggestion to adjust the CPI-U, for productivity and will take this
suggestion into consideration if we propose changes to the ASC update
factor in the future.
After consideration of the public comments we received, we are
applying our established methodology for determining the final CY 2016
ASC conversion factor. Using more complete CY 2014 data for this final
rule with comment period than were available for the proposed rule, we
calculated a wage index budget neutrality adjustment of 0.9997. Based
on IGI's 2015 third quarter forecast, the CPI-U for the 12-month period
ending with the midpoint of CY 2016 is now projected to be 0.8 percent,
while the MFP adjustment (as finalized in the CY 2012 MPFS final rule
with comment period (76 FR 73300 through 73301) and revised as
discussed above) is 0.5 percent, resulting in an MFP-adjusted CPI-U
update factor of 0.3 percent for ASCs that meet the quality reporting
requirements. The final ASC conversion factor of $44.177, for ASCs that
meet the quality reporting requirements, is the product of the CY 2015
conversion factor of $44.058 multiplied by the wage index budget
neutrality adjustment of 0.9997 and the MFP-adjusted CPI-U payment
update of 0.3 percent. For ASCs that do not meet the quality reporting
requirements, we are reducing the CPI-U update of 0.8 percent by 2.0
percentage points and then we are applying the 0.5 percentage point MFP
reduction, resulting in a -1.7 percent quality reporting/MFP-adjusted
CPI-U update factor. The final ASC conversion factor of $43.296 for
ASCs that do not meet the quality reporting requirements is the product
of the CY 2015 conversion factor of $44.058 multiplied by the wage
index budget neutrality adjustment of 0.9997 and the quality reporting/
MFP-adjusted CPI-U payment update of -1.7 percent.
3. Display of CY 2016 ASC Payment Rates
Addenda AA and BB to this CY 2016 OPPS/ASC final rule with comment
period (which are available via the Internet on the CMS Web site)
display the final updated ASC payment rates for CY 2016 for covered
surgical procedures and covered ancillary services, respectively. For
those covered surgical procedures and covered ancillary services where
the payment rate is the lower of the final rates under the ASC standard
ratesetting methodology and the MPFS final rates, the payment
indicators and rates set forth in this rule are based on a comparison
using the MPFS rates that effective January 1, 2016. For a discussion
of the MPFS rates, we refer readers to the CY 2016 MPFS final rule with
comment period.
The payment rates included in these addenda reflect the full ASC
payment update and not the reduced payment

[[Page 70502]]

update used to calculate payment rates for ASCs not meeting the quality
reporting requirements under the ASCQR Program. These addenda contain
several types of information related to the CY 2016 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 change in payment policy for the item
or service, including identifying discontinued HCPCS codes, designating
items or services newly payable under the ASC payment system, and
identifying items or services with changes in the ASC payment indicator
for CY 2016. Display of the comment indicator ``NI'' in the column
titled ``Comment Indicator'' indicates that the code is new (or
substantially revised) and that comments will be accepted on the
interim APC assignment for the new code. Display of the comment
indicator ``NP'' in the column titled ``Comment Indicator'' indicates
that the code is new (or substantially revised) and that comments will
be accepted on the proposed payment indicator assignments for the new
code.
The values displayed in the column titled ``CY 2016 Payment
Weight'' are the relative payment weights for each of the listed
services for CY 2016. The relative payment weights for all covered
surgical procedures and covered ancillary services where the ASC
payment rates are based on OPPS relative payment weights were scaled
for budget neutrality. Therefore, scaling was not applied to the device
portion of the device-intensive procedures, services that are paid at
the MPFS nonfacility PE RVU-based amount, separately payable covered
ancillary services that have a predetermined national payment amount,
such as drugs and biologicals and brachytherapy sources that are
separately paid under the OPPS, or services that are contractor-priced
or paid at reasonable cost in ASCs.
To derive the CY 2016 payment rate displayed in the ``CY 2016
Payment Rate'' column, each ASC payment weight in the ``CY 2016 Payment
Weight'' column was multiplied by the CY 2016 conversion factor of
$44.177. The conversion factor includes a budget neutrality adjustment
for changes in the wage index values and the annual update factor as
reduced by the productivity adjustment (as discussed in section
XII.G.2.b. of this final rule with comment period).
In Addendum BB, there are no relative payment weights displayed in
the ``CY 2016 Payment Weight'' column for items and services with
predetermined national payment amounts, such as separately payable
drugs and biologicals. The ``CY 2016 Payment'' column displays the CY
2016 national unadjusted ASC payment rates for all items and services.
The CY 2016 ASC payment rates listed in Addendum BB for separately
payable drugs and biologicals are based on ASP data used for payment in
physicians' offices in October 2015.
Addendum EE provides the HCPCS codes and short descriptors for
surgical procedures that are excluded from payment in ASCs for CY 2016.

XIII. Requirements for the Hospital Outpatient Quality Reporting (OQR)
Program

A. Background

1. Overview
CMS seeks to promote higher quality and more efficient healthcare
for Medicare beneficiaries. In pursuit of these goals, CMS has
implemented quality reporting programs for multiple care settings
including the quality reporting program for hospital outpatient care,
known as the Hospital Outpatient Quality Reporting (OQR) Program,
formerly known as the Hospital Outpatient Quality Data Reporting
Program (HOP QDRP). The Hospital OQR Program has generally been modeled
after the quality reporting program for hospital inpatient services
known as the Hospital Inpatient Quality Reporting (IQR) Program
(formerly known as the Reporting Hospital Quality Data for Annual
Payment Update (RHQDAPU) Program).
In addition to the Hospital IQR and Hospital OQR Programs, CMS has
implemented quality reporting programs for other care settings that
provide financial incentives for the reporting of quality data to CMS.
These additional programs include reporting for care furnished by:
Physicians and other eligible professionals, under the
Physician Quality Reporting System (PQRS, formerly referred to as the
Physician Quality Reporting Program Initiative (PQRI));
Inpatient rehabilitation facilities, under the Inpatient
Rehabilitation Facility Quality Reporting Program (IRF QRP);
Long-term care hospitals, under the Long-Term Care
Hospital Quality Reporting (LTCH QRP) Program;
PPS-exempt cancer hospitals, under the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program;
Ambulatory surgical centers, under the Ambulatory Surgical
Center Quality Reporting (ASCQR) Program;
Inpatient psychiatric facilities, under the Inpatient
Psychiatric Facility Quality Reporting (IPFQR) Program;
Home health agencies, under the Home Health Quality
Reporting Program (HH QRP); and
Hospices, under the Hospice Quality Reporting Program.
In addition, CMS has implemented several value-based purchasing
programs, including the Hospital Value-Based Purchasing (VBP) Program
and the End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP),
that link payment to performance.
In implementing the Hospital OQR Program and other quality
reporting programs, we have focused on measures that have high impact
and support national priorities for improved quality and efficiency of
care for Medicare beneficiaries as reflected in the National Quality
Strategy (NQS) and the CMS Quality Strategy, as well as conditions for
which wide cost and treatment variations have been reported, despite
established clinical guidelines. To the extent possible under various
authorizing statutes, our ultimate goal is to align the clinical
quality measure requirements of the various quality reporting programs.
As appropriate, we will consider the adoption of measures with
electronic specifications to enable the collection of this information
as part of care delivery.
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68467 through 68469) for a discussion on the principles
underlying consideration for future measures that we intend to use in
implementing this and other quality reporting programs.
While we did not propose any changes, we received a comment on the
general principles we outlined above.
Comment: One commenter supported CMS' mission to promote higher
quality and more efficient health care for Medicare beneficiaries
through the alignment of various quality reporting programs for
multiple care settings, including the quality reporting program for
hospital outpatient care.

[[Page 70503]]

Response: We thank the commenter for its support. We will continue
to seek opportunities, as appropriate, to align our quality reporting
programs.
2. Statutory History of the Hospital OQR Program
We refer readers to the CY 2011 OPPS/ASC final rule with comment
period (75 FR 72064 through 72065) for a detailed discussion of the
statutory history of the Hospital OQR Program.

B. Hospital OQR Program Quality Measures

1. Considerations in the Selection of Hospital OQR Program Quality
Measures
We refer readers to the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74458 through 74460) for a detailed discussion of the
priorities we consider for the Hospital OQR Program quality measure
selection. In the CY 2016 OPPS/ASC proposed rule (80 FR 39325), we did
not propose any changes to our measure selection policy. However, we
received several comments on the priorities we consider for the
Hospital OQR Program quality measure selection.
Comment: Many commenters urged CMS to streamline and refocus the
measure set for the Hospital OQR Program to ensure alignment with
concrete national priority areas for improvement across the entire
healthcare system. The commenters also expressed concern that program
measures have proliferated in the Hospital OQR Program without a well-
articulated link to national priorities or goals. The commenters
recommended that CMS consider adopting the recommendations outlined in
the Institute of Medicine's (IOM) Vital Signs Report \1\ for
streamlining and focusing national quality measurement efforts.
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\1\ Institute of Medicine. Vital Signs: Core Metrics for Health
and Health Care Progress. April 2015. https://
iom.nationalacademies.org/~/media/Files/Report%20Files/2015/
Vital_Signs/VitalSigns_RB.pdf.
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Response: We thank the commenters for their suggestions and will
take them under consideration. We disagree that Hospital OQR Program
measures are not streamlined or aligned with concrete national priority
areas for improvement across the entire healthcare system. Guided by
NQS priorities,\2\ we focus on measures appropriate to HOPDs that
reflect the level of care and the most important areas of service and
measures for that provider category. In future rulemaking, we may
consider strategies outlined in the IOM's Vital Signs Report \3\ for
streamlining and focusing national quality measurement efforts as well.
We continuously work with stakeholders to improve and revise the
Hospital OQR Program measure set to develop and implement measures that
appropriately measure quality of care with the goal of improving health
outcomes. Furthermore, to the extent feasible, we adopt measures that
are appropriate for multiple care settings to promote alignment across
programs.
---------------------------------------------------------------------------

\2\ National Strategy for Quality Improvement in Health Care.
March 2011. http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.pdf.
\3\ Institute of Medicine. Vital Signs: Core Metrics for Health
and Health Care Progress. April 2015. https://
iom.nationalacademies.org/~/media/Files/Report%20Files/2015/
Vital_Signs/VitalSigns_RB.pdf.
---------------------------------------------------------------------------

Comment: One commenter generally expressed concern that the
proposed rule lacked sufficient detail, analysis, and rationale for a
complete understanding of the policies and its impact such that
hospitals would not be ready to implement many of the changes.
Response: We disagree with the commenter; we believe that the
proposals were fully articulated such that they can be implemented by
HOPDs. However, we will continue to contact hospitals through our
outreach and education programs to ensure hospitals are ready to comply
with the Hospital OQR Program's requirements.
Comment: Another commenter urged CMS to reexamine its approach in
selecting measures for adoption into the Hospital OQR Program.
Response: We strive to select measures that are appropriate for the
Hospital OQR Program that further our goals under the NQS and CMS
Quality Strategy, and we welcome specific feedback from stakeholders on
ways we can improve this process. As stated above, we focus on measures
appropriate to HOPDs that reflect the level of care and the most
important areas of service and measures for that provider category. We
continuously work with stakeholders to improve and revise the Hospital
OQR Program measure set to develop and implement measures that
appropriately measure quality of care with the goal of improving health
outcomes.
Comment: A few commenters recommended that additional measures
considered for adoption be endorsed by the National Quality Forum (NQF)
or identified by national consensus building entities to assure that
CMS achieves its goal of aligning national quality measures across
reporting programs, improving patient safety, and supporting the NQS
goals.
Response: To the extent practical and feasible, we propose and
adopt measures endorsed by NQF or other consensus-based entities, but
are not required to do so under section 1833(t)(17)(C)(i) of the Act.
We believe that consensus among affected parties can be achieved by
means other than endorsement by a national consensus building entity,
including through the measure development process, through stakeholder
input via Technical Expert Panel (TEP), through broad acceptance and
use of the measure(s), and through public comment. It is our priority
to ensure that all of our measures achieve CMS and NQS goals.
Comment: One commenter recommended that CMS use quality measures
that can be used for both the Hospital OQR and ASCQR Programs.
Response: We thank the commenter for the recommendation to adopt
measures that are applicable to both the Hospital OQR and ASCQR
Programs. Because outpatient surgical services are provided in both
settings and in order to foster alignment among quality reporting
programs, to the extent feasible, we aim to adopt measures that are
also appropriate for the ASC setting and can be proposed for the ASCQR
Program. However, under section 1833(t)(17)(C)(i) of the Act, we have a
statutory obligation to develop measures that the Secretary determines
to be appropriate for the measurement of the quality of care (including
medication errors) furnished by hospitals in outpatient settings and
that reflect consensus among affected parties and, to the extent
feasible and practicable, shall include measures set forth by one or
more national consensus building entities. We have a responsibility to
measure quality in the OPD setting according to this standard, and
measures may not always overlap with the ASC setting.
2. Retention of Hospital OQR Program Measures Adopted in Previous
Payment Determinations
We previously adopted a policy to retain measures from the previous
year's Hospital OQR Program measure set for subsequent years' measure
sets in the CY 2013 OPPS/ASC final rule with comment period (77 FR
68471). Quality measures adopted in a previous year's rulemaking are
retained in the Hospital OQR Program for use in subsequent years unless
otherwise specified. We refer readers to that rule for more
information. In the CY 2016 OPPS/ASC proposed rule (80 FR 39325 through
39326), we did not propose any changes to our retention policy for
previously adopted measures.

[[Page 70504]]

3. Removal of Quality Measures From the Hospital OQR Program Measure
Set
a. Considerations in Removing Quality Measures from the Hospital OQR
Program
In the FY 2010 IPPS/LTCH PPS final rule for the Hospital IQR
Program, we finalized a process for immediate retirement, which we
later termed ``removal'' (74 FR 43863), of Hospital IQR Program
measures based on evidence that the continued use of the measure as
specified raised patient safety concerns. We adopted the same immediate
measure retirement policy for the Hospital OQR Program in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60634 through 60635). We
refer readers to the CY 2013 OPPS/ASC final rule with comment period
(77 FR 68472 through 68473) for a discussion of our reasons for
changing the term ``retirement'' to ``removal'' in the Hospital OQR
Program. In the CY 2016 OPPS/ASC proposed rule (80 FR 39326), we did
not propose any changes to our policy to immediately remove measures as
a result of patient safety concerns.
In the CY 2013 OPPS/ASC final rule with comment period, we
finalized a set of criteria for determining whether to remove measures
from the Hospital OQR Program. We refer readers to the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68472 through 68473) for a
discussion of our policy on removal of quality measures from the
Hospital OQR Program. The benefits of removing a measure from the
Hospital OQR Program will be assessed on a case-by-case basis (79 FR
66941 through 66942). We note that, under this case-by-case approach, a
measure will not be removed solely on the basis of meeting any specific
criterion.
The following criteria will be used to determine whether to remove
a measure from the Hospital OQR Program: (i) Measure performance among
hospitals is so high and unvarying that meaningful distinctions and
improvements in performance can no longer be made (``topped-out''
measures); (ii) performance or improvement on a measure does not result
in better patient outcomes; (iii) a measure does not align with current
clinical guidelines or practice; (iv) the availability of a more
broadly applicable (across settings, populations, or conditions)
measure for the topic; (v) the availability of a measure that is more
proximal in time to desired patient outcomes for the particular topic;
(vi) the availability of a measure that is more strongly associated
with desired patient outcomes for the particular topic; and (vii)
collection or public reporting of a measure leads to negative
unintended consequences such as patient harm.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39326), we did not
propose any changes to our measure removal policy. However, we received
two general comments about removing measures.
Comment: One commenter recommended that CMS holistically examine
the quality measurement portfolio and remove measures that are overly
burdensome for hospitals and focus on measures that provide the most
value for both patients and hospitals.
Response: We focus on measures appropriate for HOPDs that reflect
the level of care and the most important areas of service for that
provider category. At this time, we continue to believe there is value
in collecting and reporting on each of the measures in the Hospital OQR
Program measure set. Moreover, as is currently done, we will
continuously evaluate the utility of the measures as we engage in
future rulemaking. As stated above, we evaluate measures based on many
factors. We also consider the burden on hospitals and the value for
both patients and hospitals associated with every measure adopted.
Comment: One commenter suggested that when NQF removes its
endorsement of a measure, that measure should be considered for removal
from the Hospital OQR Program, in order that the full set of Hospital
OQR Program measures does not become unwieldy.
Response: Regarding removal of measures to the Hospital OQR Program
based upon NQF endorsement, section 1833(t)(17)(C)(i) of the Act
requires the Secretary to develop measures that the Secretary
determines to be appropriate for the measurement of the quality of care
(including medication errors) furnished by hospitals in outpatient
settings and that reflect consensus among affected parties and, to the
extent feasible and practicable, shall include measures set forth by
one or more national consensus building entities.
Although NQF endorsement is a significant consideration in the
selection of measures for the Hospital OQR Program, this provision does
not require that the measures we adopt be endorsed by any particular
entity. In some cases, we believe that consensus among affected parties
can be achieved by other means, including through the measure
development process, through stakeholder input via TEPs, through broad
acceptance and use of the measure(s), and through public comment.
Therefore, loss of NQF endorsement would not necessitate removal of a
measure. However, we will consider loss of NQF endorsement in the
ongoing evaluation of adopted measures for the Hospital OQR Program.
b. Criteria for Removal of ``Topped-Out'' Measures
As provided above, quality measures may be removed from the
Hospital OQR Program when they are ``topped-out.'' We refer readers to
CY 2015 OPPS/ASC final rule with comment period where we finalized our
proposal to refine the criteria for determining when a measure is
``topped-out'' (79 FR 66942). In the CY 2016 OPPS/ASC proposed rule (80
FR 39326), we did not propose any changes to our ``topped-out''
criteria policy. However, we received one comment on our current
``topped-out'' measure policy.
Comment: One commenter suggested that hospitals should not be
penalized for not reporting ``topped-out'' measures under the Hospital
OQR Program, but these measures should continue to be separately
reported until CMS deems it likely that quality care is not being
sacrificed in the absence of incentive payments.
Response: We expect hospitals to always follow appropriate
standards-of care and clinical guidelines, regardless of whether a
quality measure exists. We believe that HOPDs are committed to
providing quality care to patients, and we do not have any indication
that HOPDs will stop doing so when measures are removed. However, we
must balance the burdens and costs of continued monitoring of a
successful measure with high levels of performance with the adoption of
other measures where there are opportunities for improvement in
clinical quality. We will consider the need for refinement of the
criteria for removal of ``topped-out'' measures for the Hospital OQR
Program and, if we determine changes are necessary, we will propose
such changes in future rulemaking.
4. Hospital OQR Program Quality Measures Adopted in Previous Rulemaking
The previously finalized measure set for the Hospital OQR Program
CY 2017 payment determination and subsequent years is listed below.

[[Page 70505]]

Hospital OQR Program Measure Set Previously Adopted for the CY 2017
Payment Determination and Subsequent Years
------------------------------------------------------------------------
NQF # Measure name
------------------------------------------------------------------------
N/A....................... OP-1: Median Time to Fibrinolysis.
0288...................... OP-2: Fibrinolytic Therapy Received Within
30 Minutes of ED Arrival.
0290...................... OP-3: Median Time to Transfer to Another
Facility for Acute Coronary Intervention.
0286...................... OP-4: Aspirin at Arrival.
0289...................... OP-5: Median Time to ECG.
0514...................... OP-8: MRI Lumbar Spine for Low Back Pain.
N/A....................... OP-9: Mammography Follow-up Rates.
N/A....................... OP-10: Abdomen CT--Use of Contrast Material.
0513...................... OP-11: Thorax CT--Use of Contrast Material.
N/A....................... OP-12: The Ability for Providers with HIT to
Receive Laboratory Data Electronically
Directly into their ONC-Certified EHR
System as Discrete Searchable Data.
0669...................... OP-13: Cardiac Imaging for Preoperative Risk
Assessment for Non-Cardiac Low-Risk
Surgery.
N/A....................... OP-14: Simultaneous Use of Brain Computed
Tomography (CT) and Sinus Computed
Tomography (CT).
N/A....................... OP-15: Use of Brain Computed Tomography (CT)
in the Emergency Department for Atraumatic
Headache.**
N/A....................... OP-17: Tracking Clinical Results between
Visits.
0496...................... OP-18: Median Time from ED Arrival to ED
Departure for Discharged ED Patients.
N/A....................... OP-20: Door to Diagnostic Evaluation by a
Qualified Medical Professional.
0662...................... OP-21: Median Time to Pain Management for
Long Bone Fracture.
N/A....................... OP-22: ED- Left Without Being Seen.
0661...................... OP-23: Head CT or MRI Scan Results for Acute
Ischemic Stroke or Hemorrhagic Stroke who
Received Head CT or MRI Scan Interpretation
Within 45 minutes of ED Arrival.
N/A....................... OP-25: Safe Surgery Checklist Use.
N/A....................... OP-26: Hospital Outpatient Volume on
Selected Outpatient Surgical Procedures.*
0431...................... OP-27: Influenza Vaccination Coverage among
Healthcare Personnel.
0658...................... OP-29: Endoscopy/Polyp Surveillance:
Appropriate Follow-up Interval for Normal
Colonoscopy in Average Risk Patients.
0659...................... OP-30: Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of
Inappropriate Use.
1536...................... OP-31: Cataracts--Improvement in Patient's
Visual Function within 90 Days Following
Cataract Surgery.***
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244.
** Measure we proposed for removal.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).

In the CY 2015 OPPS/ASC final rule with comment period, we
finalized one new measure beginning with the CY 2018 payment
determination: OP-32: Facility 7-Day Risk-Standardized Hospital Visit
Rate after Outpatient Colonoscopy (NQF #2539) (79 FR 66948 through
66955). The previously finalized measure set for the Hospital OQR
Program CY 2018 payment determination and subsequent years is listed
below.

Hospital OQR Program Measure Set Previously Adopted for the CY 2018
Payment Determination and Subsequent Years
------------------------------------------------------------------------
NQF # Measure name
------------------------------------------------------------------------
N/A....................... OP-1: Median Time to Fibrinolysis.
0288...................... OP-2: Fibrinolytic Therapy Received Within
30 Minutes of ED Arrival.
0290...................... OP-3: Median Time to Transfer to Another
Facility for Acute Coronary Intervention.
0286...................... OP-4: Aspirin at Arrival.
0289...................... OP-5: Median Time to ECG.
0514...................... OP-8: MRI Lumbar Spine for Low Back Pain.
N/A....................... OP-9: Mammography Follow-up Rates.
N/A....................... OP-10: Abdomen CT--Use of Contrast Material.
0513...................... OP-11: Thorax CT--Use of Contrast Material.
N/A....................... OP-12: The Ability for Providers with HIT to
Receive Laboratory Data Electronically
Directly into their ONC-Certified EHR
System as Discrete Searchable Data.
0669...................... OP-13: Cardiac Imaging for Preoperative Risk
Assessment for Non- Cardiac Low-Risk
Surgery.
N/A....................... OP-14: Simultaneous Use of Brain Computed
Tomography (CT) and Sinus Computed
Tomography (CT).
N/A....................... OP-15: Use of Brain Computed Tomography (CT)
in the Emergency Department for Atraumatic
Headache.**
N/A....................... OP-17: Tracking Clinical Results between
Visits.
0496...................... OP-18: Median Time from ED Arrival to ED
Departure for Discharged ED Patients.
N/A....................... OP-20: Door to Diagnostic Evaluation by a
Qualified Medical Professional.
0662...................... OP-21: Median Time to Pain Management for
Long Bone Fracture.
N/A....................... OP-22: ED--Left Without Being Seen.
0661...................... OP-23: Head CT or MRI Scan Results for Acute
Ischemic Stroke or Hemorrhagic Stroke who
Received Head CT or MRI Scan Interpretation
Within 45 minutes of ED Arrival.
N/A....................... OP-25: Safe Surgery Checklist Use.
N/A....................... OP-26: Hospital Outpatient Volume on
Selected Outpatient Surgical Procedures.*
0431...................... OP-27: Influenza Vaccination Coverage among
Healthcare Personnel.

[[Page 70506]]

0658...................... OP-29: Endoscopy/Polyp Surveillance:
Appropriate Follow-up Interval for Normal
Colonoscopy in Average Risk Patients.
0659...................... OP-30: Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of
Inappropriate Use.
1536...................... OP-31: Cataracts--Improvement in Patient's
Visual Function within 90 Days Following
Cataract Surgery.***
2539...................... OP-32: Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient
Colonoscopy
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
at: https://www.qualitynet.org/dcs/ContentServer?c=Page&
pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244
** Measure we proposed for removal.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).

We note that we proposed one new measure for the CY 2018 payment
determination and subsequent years in section XIII.B.6.a. of the CY
2016 OPPS/ASC proposed rule (80 FR 39328).
A number of commenters expressed views on previously adopted
Hospital OQR Program measures.
Comment: Some commenters supported previously adopted measures, and
some commenters recommended changing measure specifications for some
measures. Other commenters requested that CMS consider removing
previously added measures from the Hospital OQR Program, specifically,
OP-1 and OP-20, noting that these two chart-abstracted measures look at
processes of care and not clinical outcomes of care, which the
commenters believed should be CMS' main focus. A few commenters urged
CMS to remove OP-4, OP-5, OP-9, OP-10, OP-14, OP-20, OP-22, OP-25 from
the Hospital OQR Program because these measures are no longer NQF-
endorsed, are not recommended by the MAP, or are, the commenters
believed, unsuitable for public reporting. A few commenters did not
support the continued inclusion of OP-32 in the Hospital OQR Program,
stating concerns related to the validity, reliability, and necessity of
the measure.
Response: We thank the commenters for their suggestions. At this
time, we are not removing or modifying any of the measures suggested by
the commenters. There is no scientific evidence that continued use of
the measures as specified raises patient safety concerns that would
require immediate removal of the measures based on our established
policies. We refer readers to the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66941 through 66942) for more information about
those policies. We continue to believe there is value in collecting and
reporting these measures; however, we will consider these comments in
developing policy for future rulemaking.
Comment: A few commenters recommended that the Influenza
Vaccination Coverage among Healthcare Personnel measure (NQF #0431)
should be maintained in the Hospital OQR Program for the CY 2018
payment determination and subsequent years.
Response: As previously discussed, in the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68471), we finalized a policy that,
beginning CY 2013, when we adopt measures for the Hospital OQR Program,
these measures are automatically adopted for all subsequent years'
payment determinations, unless we propose to remove, suspend, or
replace the measures. The OP-27: Influenza Vaccination Coverage among
Healthcare Personnel (HCP) measure (NQF #0431) was finalized for the
Hospital OQR Program in the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75097 through 75099). Therefore, OP-27 continues to be
adopted in the Hospital OQR Program measure set for all subsequent
years' payment determinations, unless we propose to remove, suspend, or
replace the measure.
Comment: One commenter suggested that, for OP-29 and OP-30, CMS
provide specifications in a manner and format consistent with other
chart-abstracted measures including defined initial patient population,
acceptable sampling methods, measure algorithms complete with
exclusions, and defined alpha data dictionary with abstraction
guidelines.
Response: We thank the commenter for the suggestion. However, we
believe our measure specifications are sufficiently detailed to
facilitate reporting that is feasible for most HOPD settings. While
other chart-abstracted measures (for example, OP-18: Median Time from
ED Arrival to ED Departure for Discharged ED Patients (NQF #0496) and
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional (76 FR 74481 through 74482)) utilize the CMS Abstraction
and Reporting Tool for Outpatient Department measures (CART-OPD) or
third-party vendors for data submission, both OP-29 and OP-30 use a CMS
Web-based Tool (QualityNet Web site). Thus, data must be abstracted
from charts, aggregated, and submitted via the QualityNet Web site.
Because the data for measures submitted via a Web-based tool are
reported in aggregate, measure algorithms complete with exclusions and
defined alpha data dictionary with abstraction guidelines are not
currently provided. However, sampling approaches and specifications
defining initial patient populations are included. We refer readers to
our Specifications Manual and the ``Template for Collecting OP-29 and
OP-30 Endoscopy and Polyp Surveillance Data'' located at: http://www.qualityreportingcenter.com/wp-content/uploads/2015/02/OQR_Template-for-Collecting-OP29-and-OP30-Data_FINAL.pdf. Because the data for OP-29
and OP-30 are reported in aggregate and submitted via a Web-based tool,
specifications as listed by commenter are not provided by CMS as is
consistent with other chart-abstracted measures submitted via a Web-
based tool, such as OP-22 ED- Patient Left Without Being Seen (76 FR
74457 through 74458).
Comment: One commenter urged CMS to consider developing a cloud-
based registry for measures OP-29 and OP-30 to grant providers faster
access to data.
Response: The National Institute of Standards and Technology (NIST)
defines cloud computing as, ``a model for enabling ubiquitous,
convenient, on-demand network access to a shared pool of configurable
computing resources (e.g., networks, servers, storage, applications,
and services) that can be rapidly provisioned and released with minimal
management effort or service provider interaction.'' \4\ Based upon
this

[[Page 70507]]

definition, we interpret ``cloud-based registry'' to mean an on-demand
network providing access to a shared pool of measure data. At this
time, we are operationally unable to develop a cloud-based registry for
measure data, but we may consider this in the future.
---------------------------------------------------------------------------

\4\ Special Publication 800-145: The NIST Definition of Cloud
Computing. Recommendations of the National Institute of Standards
and Technology. September, 2011. Available at: http://csrc.nist.gov/publications/nistpubs/800-145/SP800-145.pdf.
---------------------------------------------------------------------------

5. Hospital OQR Program Quality Measure Removed for the CY 2017 Payment
Determination and Subsequent Years
In the CY 2016 OPPS/ASC proposed rule (80 FR 39327 through 39328),
we proposed to remove one measure from the Hospital OQR Program quality
measure set beginning with the CY 2017 payment determination and
subsequent years: OP-15: Use of Brain Computed Tomography (CT) in the
Emergency Department for Atraumatic Headache. The inclusion of OP-15 in
the Hospital OQR Program consistently has generated concerns from
stakeholders since its adoption in the CY 2011 OPPS/ASC final rule with
comment period (75 FR 72077 through 72082). In the CY 2012 OPPS/ASC
final rule with comment period, we deferred the public reporting of OP-
15 (76 FR 74456). We extended the postponement of public reporting for
this measure in the CY 2013 and CY 2014 OPPS/ASC final rules with
comment period (77 FR 68478 and 78 FR 75096). In addition, as we noted
in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66963),
we did not propose any changes to this policy. Public reporting for OP-
15 continues to be deferred, and this deferral has no effect on any
payment determinations (79 FR 66963).
Since deferring the measure, we have continued to evaluate OP-15.
In CY 2011, we conducted a dry run of the measure and received many
suggestions for refinements to the measure. Our technical expert panel
examined the suggestions we received regarding the measure during the
dry run as well as the comments we received during the maintenance
process for this measure. Based on these comments, CMS refined the
measure specifications for OP-15 to address most stakeholder concerns.
Nevertheless, as discussed below, given the continued inconsistency of
current clinical practice guidelines on which the measure is based, we
proposed to remove OP-15 for the CY 2017 payment determination and
subsequent years.
Based on our analysis, OP-15 meets the following criterion (iii)
for removal: The measure does not align with current clinical
guidelines or practice. We refer readers to the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68472) and the discussion above for a
list of criteria we consider when determining whether to remove quality
measures from the Hospital OQR Program. In peer-reviewed literature,
headache guidelines have either excluded older adults or recommended a
lower threshold for the use of CT scans.\5\ Furthermore, stakeholders
have expressed concern that this measure is influenced significantly by
case-mix, patient severity, and clinician behavior, and thus, fails to
represent appropriateness or efficiency accurately.\6\ Based upon
guidelines for use of CT scans published in peer-reviewed literature,
we believe that OP-15,\7\ as currently adopted in the Hospital OQR
Program, does not align with the most updated clinical guidelines or
practice, satisfying removal criterion (iii).
---------------------------------------------------------------------------

\5\ Available at: http://www.acepnow.com/article/proposed-measures-ct-scans-cause-concern/2/.
\6\ Ibid.
\7\ Hartsell W, et al. Randomized Trial of Short- Versus Long-
Course Radiotherapy for Palliation of Painful Bone Metastases.
Journal of the National Cancer Institute, 2005: 97 (11): 798-804.
---------------------------------------------------------------------------

For the reason stated above, we proposed to remove the OP-15: Use
of Brain Computed Tomography (CT) in the Emergency Department for
Atraumatic Headache measure from the Hospital OQR Program beginning
with the CY 2017 payment determination.
We invited public comment on this proposal.
Comment: Commenters supported removal of OP-15, stating that the
measure does not align with the most updated clinical guidelines or
practice and it is not NQF-endorsed. In addition, the commenters
observed that removing this measure would simplify and reduce
administrative burden.
Response: We thank the commenters for their support.
Comment: One commenter noted that there should be a focus on the
incorporation of other measures for which the evidence regarding
appropriate use of CTs is much more robust.
Response: We thank the commenter for the suggestion. We will
consider incorporating other measures focused on CTs in future
rulemaking.
After consideration of the public comments we received, we are
finalizing the removal of the OP-15: Use of Brain Computed Tomography
(CT) in the Emergency Department for Atraumatic Headache measure for
the CY 2017 payment determination and subsequent years as proposed. Set
out in the table below is the measure we are removing for the CY 2017
payment determination and subsequent years.

Hospital OQR Program Measure Removal for the CY 2017 Payment
Determination and Subsequent Years
------------------------------------------------------------------------
NQF # Measure
------------------------------------------------------------------------
N/A....................... OP-15: Use of Brain Computed Tomography (CT)
in the Emergency Department for Atraumatic
Headache.
------------------------------------------------------------------------

6. New Hospital OQR Program Quality Measures for the CY 2018 and CY
2019 Payment Determinations and Subsequent Years
In the CY 2016 OPPS/ASC proposed rule (80 FR 39328 through 39334),
we proposed to adopt a total of two new measures for the Hospital OQR
Program: (1) A Web-based quality measure for the CY 2018 payment
determination and subsequent years; and (2) a Web-based quality measure
for the CY 2019 payment determination and subsequent years. These
measures are discussed in detail below.
a. New Quality Measure for the CY 2018 Payment Determination and
Subsequent Years: OP-33: External Beam Radiotherapy (EBRT) for Bone
Metastases (NQF #1822)
Bone metastases are a common manifestation of malignancy. Some
cancer types have a bone metastasis prevalence as high as 70 to 95
percent.\8\ EBRT is a widely used modality \9\ to

[[Page 70508]]

provide pain relief in 50 to 80 percent of patients with painful bone
metastases.\10\ In October 2009, the American Society for Radiation
Oncology (ASTRO) organized a Task Force to perform an assessment of
existing recommendations in order to address a lack of palliative
radiotherapy guidelines. Based on a review of the literature, the Task
Force recommended the following EBRT dosing schedules for patients with
previously unirradiated painful bone metastases: 30 Gy over the course
of 10 fractions; 24 Gy over the course of 6 fractions; 20 Gy over the
course of 5 fractions; and a single 8 Gy fraction.\11\ Despite the
recommendations, the actual doses applied for EBRT continue to include
dosing schedules as high as 25 fractions.\12\ An international survey
of radiation oncologists, of which \3/4\ of the respondents were
members of ASTRO, found more than 100 different dose schedules in
use.\13\ Measure testing by ASTRO noted nearly a 20 percent performance
gap. Many studies support the conclusion that shorter EBRT schedules
produce similar pain relief outcomes when compared to longer EBRT
schedules, and that patients prefer shorter EBRT schedules because of
their convenience, increased tolerability, and reduced side
effects.\14\ In addition, the ASTRO Task Force found that the frequency
and severity of side effects associated with a single fraction were the
same or less than those associated with multiple fraction regimens,
indicating that shorter treatment schedules may be preferable.\15\
---------------------------------------------------------------------------

\8\ Coleman RE. Metastatic bone disease: Clinical features,
pathophysiology and treatment strategies. Cancer Treat Rev.
2001;27:165-176.
\9\ Chow E, Zeng L, Salvo N, Dennis K, Tsao M, Lutz S. Update on
the Systematic Review of Palliative Radiotherapy Trials for Bone
Metastases. Clin Onc. 2012;24:112-124. doi:10.1016/
j.clon.2011.11.004.
\10\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for
bone metastases: An ASTRO evidence-based guideline. Int J Radiat
Oncol Biol Phys. 2011;79(4):965-976.
\11\ Ibid.
\12\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
\13\ Fairchild A, Barnes E, Ghosh S, et al. International
Patterns of Practice in Palliative Radiotherapy for Painful Bone
Metastases: Evidence-Based Practice? Int J Radiat Oncol Biol Phys.
2009;75(5):1501-1510.
\14\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
\15\ Lutz S, Berk L, Chang E, et al. Palliative radiotherapy for
bone metastases: An ASTRO evidence-based guideline. Int J Radiat
Oncol Biol Phys. 2011;79(4):965-976.
---------------------------------------------------------------------------

To address concerns associated with unnecessary exposure to
radiation and a desire for shorter and less painful treatment options,
we proposed to adopt one new Web-based quality measure for the CY 2018
payment determination and subsequent years: OP-33: External Beam
Radiotherapy for Bone Metastases (NQF #1822). This measure assesses the
``[p]ercentage of patients (all-payer) with painful bone metastases and
no history of previous radiation who receive EBRT with an acceptable
dosing schedule.'' \16\ The measure numerator includes all patients
with painful bone metastases and no previous radiation to the same site
who receive EBRT with any of the following recommended fractionation
schemes: 30Gy/10fxns; 24Gy/6fxns; 20Gy/5fxns; or 8Gy/1fxn. The measure
denominator includes all patients with painful bone metastases and no
previous radiation to the same site who receive EBRT. The following
patients are excluded from the denominator: Patients who have had
previous radiation to the same site; patients with femoral axis
cortical involvement greater than 3 cm in length; patients who have
undergone a surgical stabilization procedure; and patients with spinal
cord compression, cauda equina compression, or radicular pain. Detailed
specifications for this measure may be found at: https://www.qualityforum.org/QPS/1822. We note that this measure is currently
undergoing an annual update. In the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50278 through 50279), the PCHQR Program adopted the EBRT measure
for the FY 2017 program and subsequent years.
---------------------------------------------------------------------------

\16\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
---------------------------------------------------------------------------

We believe that this measure will reduce the rate of EBRT services
overuse, support our commitment to promoting patient safety, and
support the NQS priority of Making Care Safer. Specifically, the
proposed External Beam Radiotherapy for Bone Metastases measure seeks
to address the performance gap in treatment variation, ensure
appropriate use of EBRT, and prevent the overuse of radiation therapy.
We believe that this measure is necessary to support patient
preferences for shorter EBRT schedules as well as to ensure patient
safety, given that shorter treatment courses show similar or fewer side
effects while producing similar clinical outcomes. The measure also
takes into account the effective schedule for relieving pain from bone
metastases, patient preferences and time and cost effectiveness.\17\
---------------------------------------------------------------------------

\17\ Measure Submission and Evaluation Worksheet. Available at:
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

In compliance with section 1890A(a)(2) of the Act, this measure was
included in the publicly available document: ``List of Measures under
Consideration for December 1, 2014.'' \18\ The Measure Applications
Partnership, a multi-stakeholder group convened by the NQF, reviews the
measures under consideration for the Hospital OQR Program, among other
Federal programs, and provides input on those measures to the
Secretary. The MAP's 2015 recommendations for quality measures under
consideration are captured in the ``Spreadsheet of MAP 2015 Final
Recommendations.'' \19\
---------------------------------------------------------------------------

\18\ ``List of Measures under Consideration for December 1,
2014.'' Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
\19\ ``Spreadsheet of MAP 2015 Final Recommendations.''
Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711.
---------------------------------------------------------------------------

As required under section 1890A(a)(4) of the Act, we considered the
input and recommendations provided by the MAP in selecting measures to
propose for the Hospital OQR Program. The MAP supported this proposed
measure, stating that ``External beam radiation can help provide
patients with pain relief . . . this measure has a demonstrated
performance gap and would begin to expand cancer care measurement to
settings beyond the PPS-exempt cancer hospitals.'' \20\
---------------------------------------------------------------------------

\20\ Ibid.
---------------------------------------------------------------------------

Furthermore, we believe that this measure meets the requirement
under section 1833(t)(17)(C)(i) of the Act, which states that the
Secretary shall develop measures that reflect consensus among affected
parties and, to the extent feasible and practicable, shall include
measures set forth by one or more national consensus building entities.
We believe that this proposed measure reflects consensus among the
affected parties because it is NQF-endorsed and recommended by the MAP.
We invited public comment on the proposal to include this measure
in the Hospital OQR Program for the CY 2018 payment determination and
subsequent years.
Comment: Most commenters supported adoption of this measure because
doing so supports alignment across hospital quality reporting programs
(since the measure was previously adopted by the PCHQR Program), and
because the measure targets the important topic of unnecessary
radiation exposure.
Response: We thank the commenters for their support.
Comment: Several commenters expressed concern that the measure
should be subject to additional testing prior to nationwide
implementation and recommended that CMS delay implementation until
additional data

[[Page 70509]]

becomes available from the PCHQR Program to avoid issues through
lessons learned from that program. One commenter urged CMS to ensure
that data collection for this measure is feasible in the HOPD setting,
stating that CMS should further test the measure in HOPDs to determine
whether facilities are able to capture all of the exclusions called for
in the measure.
Response: Because unnecessary radiation exposure is such an
important topic, as outlined above, we believe that it is of
sufficiently broad scope and priority to merit inclusion in the
Hospital OQR Program beginning with the CY 2018 payment determination,
and we do not that believe we should delay adopting this measure.
However, we will work with the PCHQR Program to simultaneously identify
any lessons learned as the measure is implemented. Furthermore, we do
not believe the measure requires further testing to determine whether
facilities are able to capture all of the exclusions called for in the
measure; rather, we believe this measure is specified for immediate
implementation. This measure has been rigorously tested, is NQF-
endorsed, and is supported by the MAP for implementation in the HOPD
setting. For more specifics on the testing of OP-33 (for example,
specifically in reference to best practices, dosing outliers, and
validation of medical records), we refer readers to the measure
specifications for evidence and supporting documents for quality
improvement purposes at: http://www.qualityforum.org/QPS/1822. This
measure was last updated on October 2, 2014, and as stated above, we
note that it is currently undergoing an annual update. The measure
steward has maintained this specific measure to address best clinical
practices.
Comment: Some commenters urged CMS to reassess whether this measure
addresses an issue of sufficiently broad scope and priority to merit
inclusion in the Hospital OQR Program. One commenter stated that this
measure is insufficient to drive meaningful quality improvement for
cancer care in the outpatient setting.
Response: We believe that the measure is sufficiently broad in
scope, because it was tested in outpatient settings and not limited to
only cancer hospitals. In addition, the measure was supported by the
MAP for implementation in the outpatient setting and endorsed by the
NQF. Furthermore, as stated in the measure description above, we
believe that this is a priority area as the measure would reduce the
rate of EBRT services overuse, support our commitment to promoting
patient safety, and support the NQS priority of Making Care Safer.
Specifically, OP-33 seeks to address the performance gap in treatment
variation, ensure appropriate use of EBRT, and prevent the overuse of
radiation therapy. We believe that this measure supports patient
preferences for shorter EBRT schedules, as well as ensures patient
safety, given that shorter treatment courses show similar or fewer side
effects while producing similar clinical outcomes. The measure also
takes into account the effective schedule for relieving pain from bone
metastases, patient preferences and time and cost effectiveness.\21\ We
believe that adoption of a national quality measure will encourage
hospitals and physicians to be more cognizant of and to reevaluate
their current EBRT dosing schedules. For these reasons, we believe the
measure would be sufficient to drive meaningful quality improvement for
cancer care in the outpatient setting.
---------------------------------------------------------------------------

\21\ Measure Submission and Evaluation Worksheet. Available at:
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

Comment: A few commenters expressed concern that the measure
specifications are not sufficiently detailed to assess impact on
resources to collect and report data on the measure and recommended
delaying data collection until details of the specifications are
published to allow hospitals adequate time to shift resources to
collect and report data on the measure. Other commenters asserted that
measures should apply to a unique patient population that is easily
defined and believed that this measure includes vague terminology and
exclusions.
Response: We believe that this measure, as currently specified, is
sufficiently detailed and can assess impact on resources to collect and
report data on the measure. We believe that the measure is ready for
immediate implementation in the outpatient setting. We have been
collaborating closely and frequently with the measure steward (American
Society for Radiation Oncology) in implementing this measure for the
PCHQR Program. For more details of the EBRT algorithm and acceptable
dosing please refer to the measure steward's specifications manual as
well as to the specifications that PCHQR program has adopted: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287744
79863.
In addition, measure specification 2a1.34-35 \22\ indicates that
this measure was specified and tested for the following settings:
Ambulatory Care: Clinician Office, Hospital/Acute Care Facility. The
testing results indicated that the facilities had sufficient resources
to collect and report the data. The average number of patients at the
testing facilities ranged between 250 and 1,000 patients per month.
Therefore, this measure has been and continues to be specified for and
tested in both the Hospital outpatient setting and the cancer hospital
setting. Furthermore, the measure was supported by the MAP for
implementation in the outpatient setting and endorsed by the NQF. We
believe that this measure applies to a unique patient population that
is easily defined, and we disagree that this measure includes vague
terminology and exclusions. For detailed specifications, we refer
readers to the specifications posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287744
79863.
---------------------------------------------------------------------------

\22\ Measure Submission and Evaluation Worksheet. Available at:
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70374.
---------------------------------------------------------------------------

Comment: One commenter cautioned against utilization of uniform
fractionation schemes for all patients with bone metastases called for
by this measure, because personalized treatment plans allow for more
appropriate balancing of the risks and benefits associated with EBRT.
Response: Although we agree that all treatment plans should be
decided within the context of the provider-patient relationship and
tailored to each patient, testing of the measure and many studies as
cited in the NQF Measure Evaluation Form,\23\ support the

[[Page 70510]]

conclusion that, in general, shorter EBRT schedules produce similar
pain relief outcomes with fewer side effects when compared to longer
EBRT schedules.\24\
---------------------------------------------------------------------------

\23\ Nine randomized studies were included in the body of
evidence in the guideline. These studies compared single fraction
(8Gy/1) with multiple fractionation schemes. References: 1. Jeremic
B, Shibamoto Y, Acimovic L, et al. A randomized trial of three
single-dose radiation therapy regimens in the treatment of
metastatic bone pain. Int J Radiat Oncol Biol Phys 1998;42:161-167.
NQF #1822 External Beam Radiotherapy for Bone Metastases See
Guidance for Definitions of Rating Scale: H=High; M=Moderate; L=Low;
I=Insufficient; NA=Not Applicable 6 2. Bone Pain Trial Working
Party. 8 Gy single fraction radiotherapy for the treatment of
metastatic skeletal pain: Randomized comparison with a multifraction
schedule over 12 months of patient follow-up. Radiother Oncol
1999;52:111-121. 3. Roos D, Turner S, O'Brien P, et al. Randomized
trial of 8 Gy in 1 versus 20 Gy in 5 fractions of radiotherapy for
neuropathic pain due to bone metastases (Trans-Tasman Radiation
Oncology Group, TROG 96.05). Radiother Oncol 2005;75: 54-63. 4.
Hartsell W, Konski A, Scott C, et al. Randomized trial of short
versus long-course radiotherapy for palliation of painful bone
metastases. J Natl Cancer Inst 2005;97:798-804. 5. Kaasa S, Brenne
E, Lund J-A, et al. Prospective randomized multicentre trial on
single fraction radiotherapy (8Gy/1) versus multiple fractions (3Gy/
10) in the treatment of painful bone metastases. Radiother Oncol
2006;79:278-284. 6. Foro A, Fontanals A, Galceran J, et al.
Randomized clinical trial with two palliative radiotherapy regimens
in painful bone metastases: 30 Gy in 10 fractions compared with 8 Gy
in single fraction. Radiother Oncol 2008;89:150-155. 7. Sande T,
Ruenes R, Lund J, et al. Long-term follow-up of cancer patients
receiving radiotherapy for bone metastases: Results from a
randomised multicentre trial. Radiother Oncol 2009;91:261-266. 8.
Nielsen O, Bentzen S, Sandberg E, et al. Randomized trial of single
dose versus fractionated palliative radiotherapy of bone metastases.
Radiother Oncol 1998;47:233-240. 9. Steenland E, Leer J, van
Houwelingen, et al. The effect of a single fraction compared to
multiple fractions on painful bone metastases: A global analysis of
the Dutch Bone Metastasis Study. Radiother Oncol 1999;52:101-109.
\24\ Available at: http://www.qualityforum.org/Measure_Evaluation_Form/Cancer_Project/1822.aspx.
---------------------------------------------------------------------------

After consideration of the public comments we received, we are
finalizing the adoption of the OP-33: External Beam Radiotherapy for
Bone Metastases (NQF #1822) measure for the CY 2018 payment
determination and subsequent years as proposed with a modification to
the manner of data submission. We refer readers to section XIII.D.4.b.
of this final rule with comment period for detailed data submission
requirements, including the modification. The table below sets forth
the measure we are finalizing in this final rule with comment period
for the CY 2018 payment determination and subsequent years.

------------------------------------------------------------------------
New measure for the CY 2018 payment
NQF # determination and subsequent years
------------------------------------------------------------------------
1822...................... OP-33: External Beam Radiotherapy for Bone
Metastases.
------------------------------------------------------------------------

The complete list of finalized measures for the CY 2018 payment
determination and subsequent years are listed below.

Hospital OQR Program Measure Set for the CY 2018 Payment Determination
and Subsequent Years
------------------------------------------------------------------------
NQF # Measure name
------------------------------------------------------------------------
N/A....................... OP-1: Median Time to Fibrinolysis.
0288...................... OP-2: Fibrinolytic Therapy Received Within
30 Minutes of ED Arrival.
0290...................... OP-3: Median Time to Transfer to Another
Facility for Acute Coronary Intervention.
0286...................... OP-4: Aspirin at Arrival.
0289...................... OP-5: Median Time to ECG.
0514...................... OP-8: MRI Lumbar Spine for Low Back Pain.
N/A....................... OP-9: Mammography Follow-up Rates.
N/A....................... OP-10: Abdomen CT--Use of Contrast Material.
0513...................... OP-11: Thorax CT--Use of Contrast Material.
N/A....................... OP-12: The Ability for Providers with HIT to
Receive Laboratory Data Electronically
Directly into their ONC-Certified EHR
System as Discrete Searchable Data.
0669...................... OP-13: Cardiac Imaging for Preoperative Risk
Assessment for Non-Cardiac Low-Risk
Surgery.
N/A....................... OP-14: Simultaneous Use of Brain Computed
Tomography (CT) and Sinus Computed
Tomography (CT).
N/A....................... OP-17: Tracking Clinical Results between
Visits.
0496...................... OP-18: Median Time from ED Arrival to ED
Departure for Discharged ED Patients.
N/A....................... OP-20: Door to Diagnostic Evaluation by a
Qualified Medical Professional.
0662...................... OP-21: Median Time to Pain Management for
Long Bone Fracture.
N/A....................... OP-22: ED--Left Without Being Seen.
0661...................... OP-23: ED--Head CT or MRI Scan Results for
Acute Ischemic Stroke or Hemorrhagic Stroke
who Received Head CT or MRI Scan
Interpretation Within 45 minutes of
Arrival.
N/A....................... OP-25: Safe Surgery Checklist Use.
N/A....................... OP-26: Hospital Outpatient Volume on
Selected Outpatient Surgical Procedures.*
0431...................... OP-27: Influenza Vaccination Coverage among
Healthcare Personnel.
0658...................... OP-29: Endoscopy/Polyp Surveillance:
Appropriate Follow-up Interval for Normal
Colonoscopy in Average Risk Patients.
0659...................... OP-30: Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of
Inappropriate Use.
1536...................... OP-31: Cataracts--Improvement in Patient's
Visual Function within 90 Days Following
Cataract Surgery.**
2539...................... OP-32: Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient
Colonoscopy.
1822...................... OP-33: External Beam Radiotherapy for Bone
Metastases.***
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
at: https://www.qualitynet.org/dcs/ContentServer ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=119628
9981244.
** Measure voluntarily collected as set forth in section XIII.D.3.b. of
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).
*** New measure for the CY 2018 payment determination and subsequent
years.

[[Page 70511]]

In the CY 2016 OPPS/ASC proposed rule, OP-4: Aspirin at Arrival
(NQF #0286) was inadvertently omitted from tables for the CY 2018 and
CY 2019 Payment Determination and Subsequent Years (80 FR 39329 and 80
FR 39334). We would like to clarify that OP-4 has not been removed from
the Hospital OQR Program measure set and data for OP-4 should be
submitted for the CY 2018 payment determination and subsequent years as
previously finalized.
b. Proposed New Hospital OQR Program Quality Measure for the CY 2019
Payment Determination and Subsequent Years: OP-34: Emergency Department
Transfer Communication (EDTC) (NQF #0291)
In the proposed rule, we proposed to adopt OP-34: Emergency
Department Transfer Communication (EDTC) (NQF #0291) to address
concerns associated with care transitions when patients are transferred
from Emergency Departments to other facilities.
Communication problems significantly contribute to adverse events
in hospitals, accounting for 65 percent of sentinel events (patient
safety events not primarily related to the natural course of the
patient's illness or underlying condition that result in death,
permanent harm, or severe temporary harm where intervention is required
to sustain life) tracked by The Joint Commission.\25\ In addition,
information deficits frequently result when patients transfer between
hospitals and primary care physicians in the community \26\ and between
hospitals and long-term care facilities.\27\ According to patient
safety studies,\28\ the highest percentage of preventable and negligent
adverse events within a hospital occurs in the Emergency
Department.\29\ The prevention of medical errors in the Emergency
Department setting is gaining attention throughout the nation,\30\ but
performance measures for Emergency Department care are lacking.\31\
---------------------------------------------------------------------------

\25\ Available at: http://www.jointcommission.org/Improving_Americas_Hospitals_The_Joint_Commissions_Annual_Report_on_Quality_and_Safety_-_2007/.
\26\ Kripalani, S., LeFevre, F., Phillips, C. et al. Deficits in
Communication and Information Transfer between Hospital-Based and
Primary Care Physicians: Implications for Patient Safety and
Continuity of Care. JAMA 297(8):831-841, 2007.
\27\ Cortes T., Wexler S. and Fitzpatrick J. The transition of
elderly patients between hospitals and nursing homes. Improving
nurse-to-nurse communication. Journal of Gerontological Nursing.
30(6):10-5, 2004.
\28\ Leape, L., Brennan, T., Laird, N. et al. The Nature of
Adverse Events in Hospitalized Patients. Results of the Harvard
Medical Practice Study II. New England Journal of Medicine 324:377-
384, 1991.
\29\ Thomas, E., Studdert, D., Burstin, H. et al. Incidence and
Types of Adverse Events and Negligent Care in Utah and Colorado.
Medical Care 38:261-271, 2000.
\30\ Schenkel, S. Promoting Patient Safety and Preventing
Medical Error in Emergency Departments. Academic Emergency Medicine
7:1204-1222, 2000.
\31\ Welch, S., Augustine, J., Camago, C. and Reese, C.
Emergency Department Performance Measures and Benchmarking Summit.
Academic Emergency Medicine, 13(10):1074-1080, 2006.
---------------------------------------------------------------------------

Effective and timely communication of a patient's clinical status
and other relevant information at the time of transfer from the
hospital is essential for supporting appropriate continuity of care.
Establishment of an effective transition from one treatment setting to
another is enhanced by providing the receiving providers and facilities
with sufficient information regarding treatment during hospitalization.
Studies have shown that readmissions can be prevented by providing
detailed, personalized information about patients at the time they are
transferred to home or any other site.\32\
---------------------------------------------------------------------------

\32\ Jack BW, Chetty VK, Anthony D, et al. A reengineered
hospital discharge program to decrease rehospitalization. Ann Intern
Med 2009; 150:178-187.
---------------------------------------------------------------------------

To address concerns associated with care when patients are
transferred from Emergency Departments to other facilities, we proposed
to adopt one new Web-based quality measure for the Hospital OQR Program
effective with the CY 2019 payment determination and subsequent years:
OP-34: Emergency Department Transfer Communication (EDTC) (NQF #0291).
We proposed to implement this measure beginning with the CY 2019
payment determination and subsequent years instead of the CY 2018
payment determination and subsequent years in order to give hospitals
adequate time to implement the proposed measure. We believe hospitals
will require approximately 3 to 6 months in order to familiarize
themselves with the implementation protocol and tools related to the
EDTC measure and to make associated improvements prior to the first
reporting deadline. If we were to propose and finalize this measure
beginning with the CY 2018 payment determination, we believe that
hospitals may not have adequate time to put the processes and
procedures in place necessary to collect this measure.
The EDTC measure captures the ``[p]ercentage of patients
transferred to another healthcare facility whose medical record
documentation indicated that administrative and clinical information
was communicated to the receiving facility in an appropriate time
frame.'' \33\ This measure is designed to prevent gaps in care
transitions caused by inadequate or insufficient information that lead
to avoidable adverse events. Such events cost CMS approximately $15
billion due in part to avoidable patient readmissions.\34\ The measure
has been rigorously peer reviewed and extensively tested with field
tests from 2004 to 2014 across 16 States in 249 hospitals.\35\
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\33\ Available at: http://www.qualityforum.org/QPS/0291.
\34\ Medicare Payment Advisory Commission. Promoting Greater
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
\35\ Refining and Field Testing a Relevant Set of Quality
Measures for Rural Hospitals Final Report June 30, 2005. Available
at: http://rhrc.umn.edu/wp-content/files_mf/rh_ruralmeasuresfinalreport_063005.pdf.
---------------------------------------------------------------------------

The measure consists of seven subcomponents: (a) Administrative
data; (b) patient information; (c) vital signs; (d) medication; (e)
physician information; (f) nursing information; and (g) procedure and
test results. The subcomponents are further comprised of a total of 27
elements, illustrated in the table below. We note that the EDTC measure
does not require hospitals to submit patient data on each of these
elements. Rather, hospitals would be required to answer yes or no as to
whether these clinical indicators were recorded and communicated to the
receiving facility prior to departure (Subsection 1) or within 60
minutes of transfer (Subsections 2 through 7).

Numerator Elements for OP-34--Emergency Department Transfer
Communication (EDTC) Measure (NQF #0291)
------------------------------------------------------------------------

---------------------------------------------------------------------------
Administrative communication (EDTC-Subsection 1):
Nurse to nurse communication
Physician to physician communication
Patient information (EDTC-Subsection 2):
Name

[[Page 70512]]

Address
Age
Gender
Significant others contact information
Insurance
Vital signs (EDTC--Subsection 3):
Pulse
Respiratory rate
Blood pressure
Oxygen saturation
Temperature
Glasgow score or other neuro assessment for trauma, cognitively
altered or neuro patients only
Medication information (EDTC--Subsection 4):
Medications administered in ED
Allergies
Home medications
Physician or practitioner generated information (EDTC--Subsection 5):
History and physical
Reason for transfer and/or plan of care
Nurse generated information (EDTC--Subsection 6):
Assessments/interventions/response
Sensory Status (formerly Impairments)
Catheters
Immobilizations
Respiratory support
Oral limitations
Procedures and tests (EDTC--Subsection 7):
Tests and procedures done
Tests and procedure results sent
------------------------------------------------------------------------

We proposed to use a scoring methodology by which the facility
score is reported as the percentage (0-100 percent) of all cases with a
perfect score of ``7.'' To calculate this score, hospitals assign a
value of ``0'' or ``1'' to each of the seven subcomponents for each
case. In order to achieve a value of ``1'' for each subcomponent, the
hospital must have recorded and transferred patient data pertaining to
all of the elements that comprise that particular subcomponent; if data
for any element fails to be recorded or transferred, then the value
assigned to that subcomponent would be ``0.'' Next, subcomponent scores
are added together, for a total ranging from ``0'' to ``7'' per case.
Finally, the facility score is calculated by adding all of the cases
that achieved a perfect score of ``7'' and dividing that number by the
total number of cases to reflect the percentage of all cases that
received a perfect score.
Example 1 below illustrates a case in which all patient data
elements were recorded and transferred to the receiving facility.

Example 1 of Calculation for OP-34--Emergency Department Transfer
Communication (EDTC) Measure (NQF #0291) by Case
------------------------------------------------------------------------

---------------------------------------------------------------------------
Administrative communication (EDTC--Subsection 1):
Y--Nurse to nurse communication
Y--Physician to physician communication
Sub-1 Score = 1.

Patient information (EDTC--Subsection 2):
Y--Name
Y--Address
Y--Age
Y--Gender
Y--Significant others contact information
Y--Insurance
Sub-2 Score = 1.
Vital signs (EDTC--Subsection 3):
Y--Pulse
Y--Respiratory rate
Y--Blood pressure
Y--Oxygen saturation
Y--Temperature
Y--Glasgow score or other neuro assessment for trauma, cognitively
altered or neuro patients only
Sub-3 Score = 1.

Medication information (EDTC--Subsection 4):
Y--Medications administered in ED
Y--Allergies
Y--Home medications
Sub-4 Score = 1.

[[Page 70513]]

Physician or practitioner generated information (EDTC--Subsection 5):
Y--History and physical
Y--Reason for transfer and/or plan of care
Sub-5 Score = 1.

Nurse generated information (EDTC--Subsection 6):
Y--Assessments/interventions/response
Y--Sensory Status (formerly Impairments)
Y--Catheters
Y--Immobilizations
Y--Respiratory support
Y--Oral limitations
Sub-6 Score = 1.

Procedures and tests (EDTC--Subsection 7):
Y--Tests and procedures done
Y--Tests and procedure results sent
Sub-7 Score = 1.

(Sub-1 (1) + Sub-2 (1) + Sub-3 (1) + Sub-4 (1) + Sub-5 (1) + Sub-6 (1) +
Sub-7 (1) = 7.
``7'' equals a perfect score; therefore, TOTAL SCORE FOR THIS CASE = 7.
------------------------------------------------------------------------

Example 2 below illustrates a case in which some patient data
elements failed to be recorded and/or transferred to the receiving
facility.

Example 2 of Calculation for OP-34--Emergency Department Transfer
Communication (EDTC) Measure (NQF #0291) by Case
------------------------------------------------------------------------

Patient information (EDTC--Subsection 2):
Y--Name
Y--Address
Y--Age
Y--Gender
Y--Significant others contact information
Y--Insurance
Sub-2 Score = 1.

Vital signs (EDTC--Subsection 3):
Y--Pulse
Y--Respiratory rate
Y--Blood pressure
Y--Oxygen saturation
Y--Temperature
N--Glasgow score or other neuro assessment for trauma, cognitively
altered or neuro patients only
Sub-3 Score = 0.

Medication information (EDTC--Subsection 4):
Y--Medications administered in ED
Y--Allergies
N--Home medications
Sub-4 Score = 0.

Physician or practitioner generated information (EDTC--Subsection 5):
Y--History and physical
Y--Reason for transfer and/or plan of care
Sub-5 Score = 1.

Procedures and tests (EDTC--Subsection 7):
Y--Tests and procedures done
Y--Tests and procedure results sent
Sub-7 Score = 1.

(Sub-1 (1) + Sub-2 (1) + Sub-3 (0) + Sub-4 (0) + Sub-5 (1) + Sub-6 (1) +
Sub-7 (1) = 5.
``5'' does not equal a perfect score of ``7''; therefore, TOTAL SCORE
FOR THIS CASE = 0.
------------------------------------------------------------------------

[[Page 70514]]

For more information on this measure, including its specifications,
we refer readers to the Current Emergency Department Transfer
Communication Measurement Specifications, Data Definitions, and Data
Collection Tool at: http://rhrc.umn.edu/2012/02/ed-transfer-submission-manual.
Additional information on this measure is also available at: http://www.qualityforum.org/QPS/0291.
As discussed above, the proposed EDTC measure seeks to address gaps
in care coordination, by ensuring that vital patient information is
both recorded and shared with the subsequent provider. We believe that
the EDTC measure would increase the quality of care provided to
patients, reduce avoidable readmissions, and increase patient safety.
More timely communication of vital information results in better care,
reduction of systemic medical errors, and improved patient outcomes. In
addition, we believe that this measure will promote the NQS priority of
Effective Communication and Coordination of Care. As articulated by
HHS, ``Care coordination is a conscious effort to ensure that all key
information needed to make clinical decisions is available to patients
and providers. It is defined as the deliberate organization of patient
care activities between two or more participants involved in a
patient's care to facilitate appropriate delivery of health care
services.'' \36\ Critically, the availability of the transfer record to
the next level provider within 60 minutes after departure supports more
effective care coordination and patient safety, since a delay in
communication can result in medication or treatment errors.
---------------------------------------------------------------------------

\36\ U.S. DHHS. ``National Healthcare Disparities Report 2013.''
Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html.
---------------------------------------------------------------------------

In compliance with section 1890A(a)(2) of the Act, this measure was
included in the publicly available document: ``List of Measures under
Consideration for December 1, 2014.'' \37\ As stated above, the MAP
reviews the measures under consideration for the Hospital OQR Program,
among other federal programs, and provides input on those measures to
the Secretary. The MAP's 2015 recommendations for quality measures
under consideration are captured in the ``Spreadsheet of MAP 2015 Final
Recommendations.'' \38\
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\37\ ``List of Measures under Consideration for December 1,
2014.'' Available at: www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
\38\ MAP. February 2015. ``Spreadsheet of MAP 2015 Final
Recommendations''. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711.
---------------------------------------------------------------------------

As required under section 1890A(a)(4) of the Act, we considered the
input and recommendations provided by the MAP in selecting measures to
propose for the Hospital OQR Program. The MAP supported this measure,
stating that ``This measure would help to address a previously
identified gap around improving care coordination and would help ensure
vital information is transferred between sites of care. The EDTC
measure set consists of seven components that focus on communication
between facilities around the transfer of patients. The measure set
assists in filling the workgroup identified priority gap of enhancing
care coordination efforts.'' \39\ In addition, as stated above, the
proposed measure addresses the NQS priority of Communication and Care
Coordination.
---------------------------------------------------------------------------

\39\ Ibid.
---------------------------------------------------------------------------

We believe this measure meets the requirement under section
1833(t)(17)(C)(i) of the Act, which states that the Secretary shall
develop measures that reflect consensus among affected parties and, to
the extent feasible and practicable, shall include measures set forth
by one or more national consensus building entities. We believe this
proposed measure reflects consensus among the affected parties, because
it is NQF-endorsed and supported by the MAP.
We invited public comment on the proposal to include the following
measure in the Hospital OQR Program for the CY 2019 payment
determination and subsequent years.

------------------------------------------------------------------------
Proposed measure for the CY 2019 payment
NQF # determination and subsequent years
------------------------------------------------------------------------
0291...................... OP-34: Emergency Department Transfer
Communication Measure.
------------------------------------------------------------------------

The public comments we received on the EDTC measure and our
responses are set forth below.
Comment: Commenters supported the concept of improving care
transitions, but the majority of commenters did not support the
adoption of this measure for three primary reasons. First, commenters
asserted that this measure overlaps significantly with the EHR
Incentive Program Meaningful Use Stage 2 Core Objective--Transition of
Care Requirements since 20 of the 27 elements in OP-34 are also
collected as part of the Stage 2 Eligible Hospital and Critical Access
Hospital (CAH) Meaningful Use Core Objectives. Second, many commenters
expressed concern that chart-abstraction for this measure would be
overly burdensome on hospitals, and particularly burdensome on
hospitals that do not have fully operational Electronic Health Records
(EHRs). Lastly, other commenters also had concerns that the scoring
methodology relied upon overly complex calculations and set an
unrealistically stringent standard. As a result, a few commenters
expressed concern that implementation of this measure should be delayed
beyond the CY 2019 payment determination because additional time and
training would be necessary to develop new systems and processes to
ensure the measure was correctly documented.
Response: The EHR Incentive Program Health Information Exchange
Objective for 2015 through 2017 (80 FR 62806) requires that the
Eligible Professional (EP), eligible hospital, or Critical Access
Hospital (CAH) who transitions their patient to another setting of care
or provider of care or refers their patient to another provider of care
provides a summary care record for each transition of care or referral
in order to successfully demonstrate meaningful use. For this
objective, CMS is also maintaining the requirements for the data
elements included in the summary of care documents at 80 FR 62805. We
recognize the proposed OP-34 would require hospitals to evaluate
elements that would indeed overlap with information already collected
as part of the EHR Incentive Program \40\ The overlapping elements, as
defined by the measure steward, during measure development can be found
in the OP-34 measure specifications at Appendix C: Emergency Department
Transfer Communication Measures: Crosswalk with Meaningful Use Stage
Two Requirements (http://www.stratishealth.org/documents/ED_Transfer_Data_Collection_Guide_Specifications.pdf).
---------------------------------------------------------------------------

\40\ Stage 2 Eligible Hospital and Critical Access Hospital
(CAH) Meaningful Use Core and Menu Objectives Table of Contents.
October 2015. http://www.thefederalregister.org/fdsys/pkg/FR-2015-10-16/pdf/2015-25595.pdf.

---------------------------------------------------------------------------

[[Page 70515]]

We note that this document, Appendix C: Emergency Department
Transfer Communication Measures: Crosswalk with Meaningful Use Stage
Two Requirements, was developed prior to publication of The EHR
Incentive Program Health Information Exchange Objective for 2015
through 2017 summary of care documents (80 FR 62805). The overlapping
data elements found in the OP-34 measure specifications were based upon
standards set forth in The EHR Incentive Program Meaningful Use Stage 2
Core Objective--Transition of Care (77 FR 53970). However, the data
elements submitted under the transition of care standards as part of
the Meaningful Use Stage Two Requirements remain unchanged in The EHR
Incentive Program Health Information Exchange Objective for 2015
through 2017 summary of care documents (80 FR 62805). Therefore, the
overlapping data elements found in the OP-34 measure specifications
remain the same.
Currently, 95 percent of hospitals attest to successful electronic
clinical quality measure reporting under the EHR Incentive Program (80
FR 49694). As a result, we agree that adopting OP-34 would
significantly overlap with the Meaningful Use Stage 2 requirements
diverting attention and resources away from another CMS priority and
potentially adding additional costs to hospitals in order to re-specify
EHR systems to comply with both programs' requirements.
Also, we recognize that the burden associated with chart-
abstracting for 27 elements associated with this measure presents a
significant burden for hospitals and that the scoring methodology is
complex and sets a very high standard. Initially, we intended that
delaying implementation of this measure until the CY 2019 payment
determination would allow facilities additional time to implement the
proposed measure (that is, to put the necessary processes and
procedures in place), to familiarize themselves with the implementation
protocol, tools, and scoring methodology related to the EDTC measure,
and to make associated improvements prior to the first reporting
deadline. However, in light of these comments, delayed implementation
may not sufficiently address these concerns. In general though, we do
not agree that hospitals without fully operational EHRs would be
disadvantaged in chart-abstracting data for measures compared to
hospitals with operational EHRs. Other measures in the Hospital OQR
Program also require chart abstraction and do not distinguish between
hospitals with fully operational EHRs versus those without.
Therefore, after considering the comments and for the reasons
discussed above, we are not finalizing our proposal to adopt OP-34 for
the CY 2019 payment determination and subsequent years as proposed.
Comment: Some commenters questioned whether the measure is
necessary and asked if there is evidence that hospitals are failing to
sufficiently report and transfer patient data. One commenter stated
that the references cited in the proposed rule that indicate that the
highest percentage of preventable and negligent adverse events
occurring within hospital emergency departments are inaccurate and
based on limited and outdated data.
Response: As stated in the measure background above, the proposed
EDTC measure seeks to address gaps in care coordination, by ensuring
that vital patient information is both recorded and shared with the
subsequent provider. More timely communication of vital information
results in better care, reduction of systemic medical errors, and
improved patient outcomes. We believe that an EDTC measure would
increase the quality of care provided to patients, reduce avoidable
readmissions, and increase patient safety. In addition, we believe that
a transfer communication measure would promote the NQS priority of
Effective Communication and Coordination of Care. As articulated by
HHS, ``Care coordination is a conscious effort to ensure that all key
information needed to make clinical decisions is available to patients
and providers. It is defined as the deliberate organization of patient
care activities between two or more participants involved in a
patient's care to facilitate appropriate delivery of health care
services.'' Critically, the availability of the transfer record to the
next level provider supports more effective care coordination and
patient safety, since a delay in communication can result in medication
or treatment errors. Furthermore, the MAP supported this measure,
stating that, ``[t]his measure would help to address a previously
identified gap around improving care coordination and would help ensure
vital information is transferred between sites of care.'' In addition,
we believe that references cited are accurate as of the time of measure
development and the proposed rule. However, as discussed above, we are
not finalizing this measure, but will take these comments into
consideration in developing future policy.
Comment: Several commenters suggested that CMS consider adopting
this measure as an eCQM.
Response: We did not propose this measure as an eCQM because it is
not currently electronically specified. However, because we believe
care coordination in the emergency department setting is an important
aspect for quality measurement, if the measure is electronically
specified in the future, we may consider proposing it or a similar
electronic measure addressing this topic in future rulemaking.
Comment: A few commenters supported adopting the measure as
proposed. One commenter suggested that CMS include at least one
companion, NQF-endorsed measure that captures communication of
medication information. This commenter also recommended that CMS
include OP-17: Tracking Clinical Results between Visits (former NQF
measure #0491; NQF endorsement removed April 8, 2014) in patient care
plans, noting that this measure is significant and very important to
patient safety and clinical outcomes.
Response: We thank the commenters for their support. However, for
the reasons stated above, we have decided not to finalize this measure.
We will consider these suggestions if we decide to propose a similar
measure in future rulemaking.
Comment: Many commenters requested clarification on various
technical aspects of the measure, such as the definition of
``communication'' and how to report data for John/Jane Doe patients,
patients that are unresponsive, or information that is otherwise
unknown.
Response: In the CY 2016 OPPS/ASC proposed rule (80 FR 39334), we
directed readers to the following Web site for a complete listing of
the measure specifications: http://www.qualityforum.org/QPS/0291.
Documents available on this Web site provide detailed definition of
``communication'' and answers to the commenter's concerns regarding how
to report data for John/Jane Doe patients, patients that are
unresponsive, or information that is otherwise unknown. According to
the measure specifications, a hospital would not be penalized for
missing information as long as information, even if the information for
a particular element is documented as ``unknown,'' is transferred to
the receiving facility. However, as discussed above, we are not
finalizing this measure but will take these comments into consideration
in developing future policy.

[[Page 70516]]

After considering the public comments we received, we are not
finalizing the OP-34: Emergency Department Transfer Communication
(EDTC) measure (NQF #0291) for the CY 2019 payment determination and
subsequent years as proposed.
The finalized measures for the CY 2019 payment determination and
subsequent years are listed below.

Hospital OQR Program Measure Set for the CY 2019 Payment Determination
and Subsequent Years
------------------------------------------------------------------------
NQF # Measure name
------------------------------------------------------------------------
N/A....................... OP-1: Median Time to Fibrinolysis.
0288...................... OP-2: Fibrinolytic Therapy Received Within
30 Minutes of ED Arrival.
0290...................... OP-3: Median Time to Transfer to Another
Facility for Acute Coronary Intervention.
0286...................... OP-4: Aspirin at Arrival.
0289...................... OP-5: Median Time to ECG.
0514...................... OP-8: MRI Lumbar Spine for Low Back Pain.
N/A....................... OP-9: Mammography Follow-up Rates.
N/A....................... OP-10: Abdomen CT--Use of Contrast Material.
0513...................... OP-11: Thorax CT--Use of Contrast Material.
N/A....................... OP-12: The Ability for Providers with HIT to
Receive Laboratory Data Electronically
Directly into their ONC-Certified EHR
System as Discrete Searchable Data.
0669...................... OP-13: Cardiac Imaging for Preoperative Risk
Assessment for Non-Cardiac Low-Risk
Surgery.
N/A....................... OP-14: Simultaneous Use of Brain Computed
Tomography (CT) and Sinus Computed
Tomography (CT).
N/A....................... OP-17: Tracking Clinical Results between
Visits.
0496...................... OP-18: Median Time from ED Arrival to ED
Departure for Discharged ED Patients.
N/A....................... OP-20: Door to Diagnostic Evaluation by a
Qualified Medical Professional.
0662...................... OP-21: Median Time to Pain Management for
Long Bone Fracture.
N/A....................... OP-22: ED-Left Without Being Seen.
0661...................... OP-23: ED--Head CT or MRI Scan Results for
Acute Ischemic Stroke or Hemorrhagic Stroke
who Received Head CT or MRI Scan
Interpretation Within 45 minutes of
Arrival.
N/A....................... OP-25: Safe Surgery Checklist Use.
N/A....................... OP-26: Hospital Outpatient Volume on
Selected Outpatient Surgical Procedures.*
0431...................... OP-27: Influenza Vaccination Coverage among
Healthcare Personnel.
0658...................... OP-29: Endoscopy/Polyp Surveillance:
Appropriate Follow-up Interval for Normal
Colonoscopy in Average Risk Patients.
0659...................... OP-30: Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps--Avoidance of
Inappropriate Use.
1536...................... OP-31: Cataracts--Improvement in Patient's
Visual Function within 90 Days Following
Cataract Surgery.**
2539...................... OP-32: Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient
Colonoscopy.
1822...................... OP-33: External Beam Radiotherapy for Bone
Metastases.***
------------------------------------------------------------------------
* OP-26: Procedure categories and corresponding HCPCS codes are located
at: https://www.qualitynet.org/dcs/ContentServer ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=119628
9981244.
** Measure voluntarily collected as set forth in section XIII.D.3.b. of
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).
*** New measure for the CY 2018 payment determination and subsequent
years.

As stated above, we reiterate that in the CY 2016 OPPS/ASC proposed
rule, OP-4: Aspirin at Arrival (NQF #0286) was inadvertently omitted
from tables for the CY 2018 and CY 2019 Payment Determination and
Subsequent Years (80 FR 39329 and 80 FR 39334). We would like to
clarify that OP-4 has not been removed from the Hospital OQR Program
measure set and data for OP-4 should be submitted for the CY 2018
payment determination and subsequent years as previously finalized.
7. Hospital OQR Program Measures and Topics for Future Consideration
The current measure set for the Hospital OQR Program includes
measures that assess process of care, imaging efficiency patterns, care
transitions, ED throughput efficiency, the use of health information
technology (health IT), care coordination, patient safety, and volume.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39335), we stated that for
future payment determinations, we are considering expanding these
measure areas and creating measures in new areas. Specifically, we are
exploring electronic clinical quality measures (eCQMs) and whether, in
future rulemaking, we would propose that hospitals have the option to
voluntarily submit data for OP-18: Median Time from ED Arrival to ED
Departure for Discharged ED Patients (NQF #0496) electronically
beginning with the CY 2019 payment determination. Hospitals would
otherwise still be required to submit data for this measure through
chart abstraction.
We believe all patients, their families, and their healthcare
providers should have consistent and timely access to their health
information in a standardized format that can be securely exchanged
between the patient, providers, and others involved in the patient's
care.\41\ To that end, we are committed to accelerating health
information exchange (HIE) through the use of electronic health records
(EHRs) and other types of health IT across the broader care continuum
through a number of initiatives including: (1) Alignment of incentives
and payment adjustments to encourage provider adoption and optimization
of health IT and HIE services through Medicare and Medicaid payment
policies; (2) adoption of common standards and certification
requirements for interoperable health IT; (3) support for privacy and
security of patient information across all HIE-focused initiatives; and
(4) governance of health information networks. More information on the
governance of health information networks and its role in facilitating
interoperability of health information systems can be found at: http://www.healthit.gov/sites/default/files/ONC10yearInteroperabilityConceptPaper.pdf.
---------------------------------------------------------------------------

\41\ HHS August 2013 Statement, ``Principles and Strategies for
Accelerating Health Information Exchange.'' Available at: http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf.

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[[Page 70517]]

We believe that HIE and the use of certified EHR technology can
effectively and efficiently help providers improve internal care
delivery practices, support management of patient care across the
continuum, and support the reporting of electronically specified
clinical quality measures. On March 30, 2015, ONC published in the
Federal Register a proposed rule (80 FR 16804) that proposes a new 2015
Edition Base EHR definition, as well as modifications to the ONC Health
IT Certification Program to make it open and accessible to more types
of health IT and health IT that supports various care and practice
settings. It also proposes to establish the capabilities and
specifications that certified EHR technology (CEHRT) would need to
include, at a minimum, to support the achievement of meaningful use by
eligible professionals and hospitals under the Medicare and Medicaid
EHR Incentive Programs (EHR Incentive Programs) when such edition is
required for use under these programs. More information on the 2015
Edition EHR Certification Criteria proposed rule can be found at:
http://healthit.gov/policy-researchers-implementers/standards-and-certification-regulations.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through
50810), the Hospital IQR Program finalized a policy to allow hospitals
to voluntarily electronically report at least one quarter of CY 2014
quality measure data for each measure in one or more of four measure
sets (STK, VTE, ED, and PC). In the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50241 through 50246 and 50249 through 50253), the Hospital IQR
Program finalized a policy that hospitals may voluntarily report any 16
of 28 Hospital IQR Program electronic clinical quality measures that
align with the Medicare EHR Incentive Program as long as those measures
span three different NQS priority areas. Most recently in the FY 2016
IPPS/LTCH PPS final rule (80 FR 49698), the Hospital IQR Program
finalized a policy to make reporting of electronic clinical quality
measures required rather than voluntary. Under that finalized policy,
hospitals will be required to submit only one quarter of data for
either Q3 (July 1-September 30) or Q4 (October 1-December 31) of 2016
for at least 4 electronic clinical quality measures.
We anticipate that as EHR technology evolves and more health IT
infrastructure is operational, we will begin to accept electronic
reporting of many measures from EHR technology certified under the ONC
Health IT Certification Program. We are working diligently toward this
goal. We believe that this progress would significantly reduce the
administrative burden on hospitals under the Hospital OQR Program to
report chart-abstracted measures.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72074), we finalized OP-18: Median Time from ED Arrival to ED Departure
for Discharged ED Patients (NQF #0496), the only measure in our current
measure set which is specified as an eCQM, or e-specified. The e-
specification for this measure is available at: http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/2014_eCQM_Specs_for_EH.zip in the folder entitled:
EH_CMS32v2_NQF0496_ED3_MedianTime.
The same measure, Median Time from ED Arrival to ED Departure for
Discharged ED Patients (NQF #0496), was adopted by the Medicare and
Medicaid EHR Incentive Program for Eligible Hospitals and Critical
Access Hospitals (CAHs) as one of 29 clinical quality measures
available for reporting under the program beginning with Federal fiscal
year 2014 (77 FR 54086 through 54087).
For the reasons stated above, we believe it is important to
encourage providers to submit this measure electronically. In addition,
allowing submission of OP-18 as an eCQM will begin to align the
Hospital OQR Program with the Medicare EHR Incentive Program for
Eligible Hospitals and CAHs in a manner similar to our policies for the
Hospital IQR Program (80 FR 50319 through 50321). Therefore, we stated
in the CY 2016 OPPS/ASC proposed rule (80 FR 39335) that we are
considering proposing a policy in future rulemaking that would give
hospitals an option to voluntarily submit data for this measure
electronically for the Hospital OQR Program beginning with the CY 2019
payment determination. Hospitals that chose not to submit
electronically would still be required to submit data though chart
abstraction.
We invited public comment on our intention to make this proposal in
the future.
Comment: Most commenters supported voluntary electronic submission
of data for OP-18: Median Time from ED Arrival to ED Departure for
Discharged ED Patients beginning with the CY 2019 payment
determination. In addition to voluntary electronic submission of OP-18,
one commenter suggested that CMS transition OP-20 to electronic
reporting in order to align ED through-put measures. A few commenters
urged that proposed reporting requirements for eCQMs be aligned with
the requirements and timelines as much as possible with other eCQM
initiatives across care settings, specifically, the Medicare EHR
Incentive Program clinical quality data reporting criteria for
demonstrating Meaningful Use of EHRs. With respect to voluntary
submission of data for OP-18 as an eCQM, one commenter requested
clarification on three points: (1) Whether the latest version of the
measure specification would be required as is the case for other
electronically reported measures; (2) whether measure reporting would
count toward the hospital's reporting requirements for the EHR
Incentive Program; and (3) whether CMS could provide a more detailed
description of the timeframe for voluntary reporting (for example,
calendar year, quarters, etc.). This commenter also suggested that
submission timeframes be consistent between EHR Incentive Program
Meaningful Use requirements and the Hospital IQR Program.
Response: We thank the commenters for their support and will take
these comments into consideration for future rulemaking. Ideally, we
would aim to align the Hospital OQR Program timeframes with those for
the EHR Incentive Program and the Hospital IQR Program in order to
reduce burden for hospitals. We are evaluating eCQM implementation in
the Hospital IQR Program and will take any lessons learned, including
those related to aligned requirements across CMS programs, submission
timeframes, and general overlap with the EHR Incentive Program, into
consideration in crafting policy for the Hospital OQR Program. We aim
to ease the transition to reporting of electronic clinical quality
measures, but any policies regarding the specific timelines and
requirements related to the voluntary submission of data for OP-18:
Median Time from ED Arrival to ED Departure for Discharged ED Patients
as an eCQM would be proposed in future rulemaking.
Comment: Some commenters did not support the option to report eCQMs
in quality reporting programs, because they believed that such
requirement might create a duplicative penalty for hospitals unable to
meet Meaningful Use Requirements. Several commenters urged CMS to not
require eCQM reporting for OP-18, noting that hospitals should have the
option to continue to submit data via chart abstraction if they
determine this method to be more feasible.
Response: As we stated in the CY 2016 OPPS/ASC proposed rule (80 FR
39335), we are considering proposing a

[[Page 70518]]

policy in future rulemaking that would give hospitals an option to
voluntarily submit data for OP-18 electronically beginning with the CY
2019 payment determination. Hospitals that chose not to submit
electronically would still have the option of submitting data though
chart abstraction. As a voluntary option, no penalty would be incurred
by hospitals choosing not to submit data for OP-18 electronically.
However, we have observed the successes of hospitals meeting the
Meaningful Use requirements and our data show that 95 percent of
hospitals already attest to successful eCQM reporting under the EHR
Incentive Program.
We anticipate that, as EHR technology evolves and more health IT
infrastructure is operational, we will begin to accept electronic
reporting of many measures from EHR technology certified under the ONC
Health IT Certification Program. We believe it is important to
encourage providers to submit measures electronically, and we expect
that, if proposed and finalized, the option to voluntarily submit data
for OP-18 electronically beginning with the CY 2019 payment
determination will begin the gradual transition toward electronic
reporting on measures. As noted above, if we choose to allow voluntary
electronic submission of OP-18, we will propose this policy in future
rulemaking.
Comment: One commenter supported CMS' commitment to eCQMs, but
cautioned that disparate information systems and conflicting data
elements may result in potentially inconsistent data that fail to
accurately reflect care. Another commenter suggested that no
electronically reported measures be used for public reporting of data
or for determinations in financial incentive/disincentive programs
until the issues of comparability, completeness, and accuracy are fully
addressed. A few commenters stated that there is currently no
validation process in place to confirm the accuracy of eCQM data and
urged CMS to develop a validation process for eCQMs that will allow for
future public reporting of these measures. One commenter recommended
continued reporting of manually abstracted measures in parallel with
eCQMs and simultaneous expansion of the eCQM pilot process, using
manually abstracted measures as a control, to allow for evidence-based
comparison data, in order to address concerns that removal of manual
measures in favor of immature eCQM technology might yield poor quality
performance.
Response: We thank the commenters for their suggestions. Similar
concerns about disparate information systems and conflicting data
elements resulting in issues of comparability, completeness, and
accuracy of eCQM data were also expressed by commenters in the FY 2016
IPPS/LTCH PPS final rule under the Hospital IQR Program (80 FR 49695
through 49698). We anticipate that as EHR technology evolves and more
health IT infrastructure is operational, in cooperation with the
efforts of the ONC Health IT Certification Program, data elements and
information systems requirements will become more standardized.
Reliable, accurate data and electronic reporting are all important
priorities to us. We believe that, with the advancement of technology
and the use of electronic measures, even more precise, accurate, and
reliable data will be captured for analysis. We are working diligently
toward this goal.
The development of a validation process for eCQMs is also a
suggestion we will consider if we decide to move forward with the
proposal to allow OP-18 to be electronically reported in future
rulemaking. We note that a validation pilot is currently under way in
the Hospital IQR Program and the results of that pilot are pending, as
described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50269 through
50273). We will take into consideration lessons learned in the Hospital
IQR Program before developing Hospital OQR Program policies. In regard
to the suggestion of a simultaneous expansion of the eCQM pilot
process, using manually abstracted measures as a control, to allow for
evidence-based comparison data, we will consider these recommendations
if we decide to move forward with the proposal in future rulemaking.
Comment: While supporting the concept of using data collected from
electronic health records, one commenter expressed concern that CMS
might have direct access to a facility's EHR for data abstraction,
adding that requirements for electronic submission of data may be
premature and there is little confidence that health care providers are
prepared to do so with great accuracy.
Response: We thank the commenter for its support. Matters of
patient privacy and medical record integrity are of utmost importance,
and we will give those issues serious consideration prior to proposing
any electronic reporting in future rulemaking. However, we note that it
is extremely unlikely that we would propose to access a facility's EHR
system directly for data abstraction purposes.
We also received several general comments regarding future measures
for the Hospital OQR Program.
Comment: Several commenters suggested the inclusion of more
outcome-based measures into the Hospital OQR Program measure set.
Another commenter expressed concern that outcome-based measures
unfairly penalize HOPDs because most follow-up care is not provided by
HOPDs.
Response: We will consider adopting more outcome-based measures in
the future, and in doing so, we will be mindful of the concerns the
commenters have about these measures.
Comment: A few commenters suggested that CMS include additional
immunization performance measures in the Hospital OQR Program to help
ensure vaccines are routinely offered and administered to patients in
the outpatient setting.
Response: We thank the commenters for their suggestion. We will
take this suggestion into consideration for future rulemaking.
8. Maintenance of Technical Specifications for Quality Measures
CMS maintains technical specifications for previously adopted
Hospital OQR Program measures. These specifications are updated as we
continue to develop the Hospital OQR Program. The manuals that contain
specifications for the previously adopted measures can be found on the
QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=11962899
81244.
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68469 through 68470), for a discussion of our policy for
updating Hospital OQR Program measures, the same policy we adopted for
updating Hospital IQR Program measures, which includes the
subregulatory process for making updates to the adopted measures (77 FR
53504 through 53505). This policy expanded upon the subregulatory
process for updating measures that we finalized in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68766 through 68767). In the CY
2016 OPPS/ASC proposed rule (80 FR 39335 through 39336), we did not
propose any changes to these policies.
9. Public Display of Quality Measures
We refer readers to the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75092) for our finalized public display policy. A more
robust discussion of our policy for the

[[Page 70519]]

publication of Hospital OQR Program data on the Hospital Compare Web
site and noninteractive CMS Web sites can be found in the CY 2014 OPPS/
ASC proposed rule (78 FR 43645). In the CY 2016 OPPS/ASC proposed rule
(80 FR 39336), we did not propose any changes to our public display
policy. However, we received one comment on these policies.
Comment: While stating support for the public display of outpatient
quality data on Hospital Compare, one commenter expressed concerns
about the outpatient categories on the Web site, noting that while
these particular categories may be meaningful to health care providers
and others with a professional interest in health care services, health
care policy, or health care economics, the categories are less
meaningful to the average consumer/patient.
Response: We thank the commenter for its observation. To the extent
feasible and practical, we work with as many stakeholders as possible
to ensure data are accurately reported and displayed on Hospital
Compare and other CMS Web sites. In the future, we will continue
working with stakeholders to improve the display of data in such a way
that is more accessible and meaningful to the public.

C. Administrative Requirements

1. QualityNet Account and Security Administrator
The QualityNet security administrator requirements, including
setting up a QualityNet account and the associated timelines, are
unchanged from those adopted in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75108 through 75109). In that final rule with
comment period, we codified these procedural requirements at 42 CFR
419.46(a). In the CY 2016 OPPS/ASC proposed rule (80 FR 39336), we did
not propose any changes to these requirements.
2. Requirements Regarding Participation Status
We refer readers to the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75108 through 75109) for requirements for participation
and withdrawal from the Hospital OQR Program. In that final rule with
comment period, we codified procedural requirements at 42 CFR
419.46(b).
In the CY 2016 OPPS/ASC proposed rule (80 FR 39336), we proposed to
make one change to the requirements regarding participation in the
Hospital OQR Program beginning with the CY 2017 payment determination.
Currently, a participating hospital may withdraw from the Hospital OQR
Program any time from January 1 to November 1 (42 CFR 419.46(b)) of the
year prior to the affected annual payment update by submitting a
withdrawal form to CMS via the secure portion of the QualityNet Web
site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=11928045
25137.
We proposed that beginning with the CY 2017 payment determination,
hospitals must submit a withdrawal form to CMS via the QualityNet Web
site up to and including August 31 of the year prior to the affected
annual payment update. For example, for the CY 2017 payment
determination, the withdrawal deadline would change from November 1,
2016 to any time up to and including August 31, 2016 under this
proposal.
The change to the withdrawal deadline is consistent with the ASCQR
Program withdrawal deadline described in section XIV.C.2. of this final
rule with comment period and in 42 CFR 416.305(b). We believe aligning
deadlines across programs will reduce provider burden by streamlining
processes and procedures.
In addition, as we discussed in section XIII.D.1. of the CY 2016
OPPS/ASC proposed rule (80 FR 39336 through 39337) and finalized in
section XIII.D.1. of this final rule with comment period, we proposed
to move the timeline for when we make annual percentage update (APU)
determinations to allow both CMS and stakeholders more time to review
the APU determinations before the beginning of the calendar year. To
ensure the correct hospitals are included in the APU determinations, we
also need to know at an earlier date which hospitals have withdrawn
from the Hospital OQR Program.
We also proposed to make a conforming revision to 42 CFR 419.46(b)
which currently states that the hospital may withdraw any time from
January 1 to November 1 of the year prior to the affected annual
payment updates to state that the hospital may withdraw any time up to
and including August 31 of the year prior to the affected annual
payment updates.
We invited public comment on our proposals to change the withdrawal
deadline and to revise 42 CFR 419.46(b) to reflect this change.
Comment: One commenter supported the proposed change of the
withdrawal deadline from the Hospital OQR Program from November 1 to
August 31, noting that this change fosters alignment and consistency
with the ASCQR Program.
Response: We thank the commenter for its support.
After consideration of the public comment we received, we are
finalizing our proposals to change the withdrawal deadline for the
Hospital OQR Program from November 1 to August 31 and to revise 42 CFR
419.46(b) to reflect this change as proposed.

D. Form, Manner, and Timing of Data Submitted for the Hospital OQR
Program

1. Change Regarding Hospital OQR Program Annual Percentage Update (APU)
Determinations
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75110
through 75111), we specify that our data submission deadlines will be
posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=12054420
58760.
The data submission requirements document, Hospital OQR Quality
Measures and Timelines for CY 2016 and Subsequent Payment
Determinations,\42\ explains that the chart-abstracted data on which we
base APU determinations is quarter 3 of the 2 years prior to the
payment determination through quarter 2 of the year prior to the
payment determination. For example, we base our APU determinations for
the CY 2016 Hospital OQR Program on chart-abstracted data from quarter
3, 2014, through quarter 2, 2015. Chart-abstracted data from quarter 2,
2015 must be submitted by November 1, 2015. APU determinations are
applied to payments beginning in January of the following year,
providing less than 2 months between the time the data on which we base
APU determinations is submitted for validation and the beginning of the
payments that are affected by this data. This timeline creates
compressed processing issues for CMS, and compressed timelines for
hospitals to review their APU determination decisions.
---------------------------------------------------------------------------

\42\ The Hospital OQR Quality Measures and Timelines for CY 2016
and Subsequent Payment Determinations. Available at: https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890446207&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3DHOQR_CY2016_MsrTmlns_0315.pdf&blobcol=urldata&blobtable=MungoBlobs.
---------------------------------------------------------------------------

To ease this burden for both CMS and hospitals, in the CY 2016
OPPS/ASC

[[Page 70520]]

proposed rule (80 FR 39336 through 39337), we proposed to change the
timeframe on which we base APU determinations for the Hospital OQR
Program. As stated above, we currently base APU determinations on
chart-abstracted data from patient encounter quarter 3 of 2 years prior
to the payment determination through patient encounter quarter 2 of the
year prior to the payment determination. We proposed to change that
timeframe to patient encounter quarter 2 of the 2 years prior to the
payment determination through patient encounter quarter 1 of the year
prior to the payment determination beginning with the CY 2018 payment
determination and for subsequent years. Because the deadline for
hospitals to submit chart-abstracted data for quarter 1 is August 1,
this will afford both CMS and hospitals additional time to review the
APU determinations before they are implemented in January. Current and
detailed information about data validation requirements and deadlines
is posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287587
29356.
To facilitate this process, we proposed to transition to the newly
proposed timeframe for the CY 2018 payment determination and subsequent
years and use only three quarters of data for determining the CY 2017
payment determination as illustrated in the tables below. However, we
noted that data submission deadlines will not be changing.
APU Determination Transition

CY 2016 Payment Determination
[Current State]
------------------------------------------------------------------------
Clinical data
Patient encounter quarter submission
deadline
------------------------------------------------------------------------
Q3 2014 (July 1-Sept. 30)............................... 2/1/2015
Q4 2014 (Oct. 1-Dec. 31)................................ 5/1/2015
Q1 2015 (Jan. 1-March 31)............................... 8/1/2015
Q2 2015 (April 1-June 30)............................... 11/1/2015
------------------------------------------------------------------------

Proposed CY 2017 Payment Determination
[Future state--transition period]
------------------------------------------------------------------------
Clinical data
Patient encounter quarter submission
deadline
------------------------------------------------------------------------
Q3 2015 (July 1-Sept. 30)............................... 2/1/2016
Q4 2015 (Oct. 1-Dec. 31)................................ 5/1/2016
Q1 2016 (Jan. 1-March 31)............................... 8/1/2016
------------------------------------------------------------------------

Proposed CY 2018 Payment Determination and Subsequent Years
[Future state]
------------------------------------------------------------------------
Clinical data
Patient encounter quarter submission
deadline
------------------------------------------------------------------------
Q2 2016 (April 1-June 30)............................... 11/1/2016
Q3 2016 (July 1-Sept. 30)............................... 2/1/2017
Q4 2016 (Oct. 1-Dec. 31)................................ 5/1/2017
Q1 2017 (Jan. 1-March 31)............................... 8/1/2017
------------------------------------------------------------------------

We refer readers to section XIII.D.6. of the CY 2016 OPPS/ASC
proposed rule (80 FR 39339) (inadvertently referenced in the proposed
rule as section XIII.D.8.), where we proposed to update our validation
processes to also reflect these changes. In addition, we refer readers
to section XIII.D.6. of this final rule with comment period where those
proposals are finalized.
We invited public comment on our proposals.
Comment: Most commenters supported the proposed change to the
timeframe for APU determinations for the Hospital OQR Program, noting
that the change will ease the burden on hospitals and allow them
additional time to review APU determinations prior to their impact on
payments.
Response: We thank the commenters for their support.
Comment: One commenter expressed concern about the inherent 2-year
gap between the reporting and payment adjustment periods for claims-
based measures because the delay limits the effectiveness of measures
as a tool for quality improvement. Alternatively, the commenter
encouraged CMS to incorporate more measures based on clinical and
registry data.
Response: We thank the commenter for its suggestion. We refer
readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR
75111 through 75112) for a discussion of the general claims-based
measure data submission requirements for the CY 2015 payment
determination and subsequent years. The timeframe required to finalize
claims is about 4 months. Processing and matching of claims takes
several months as well. A majority of claims are processed within the
full year allowed for timely filing under the OPPS (78 FR 75111). For
the current claims-based measures for example, the reporting period is
July 1, 2013 through June 30, 2014. Using this timeframe, these data
affect the CY 2016 payment determination and are publicly reported in
July 2015. Payment adjustments for the Hospital OQR Program are based
on the calendar year. Thus, if there is any overlap into another year,
the payment has to be applied to the following year. Furthermore,
testing and preview time for public reporting require additional time.
Therefore, because of the time required for: (1) Claims data to be
finalized; (2) data analysis; and (3) the preview period prior to
public reporting, operationally, we are not able to close the gap
between reporting and payment adjustment. However, we will take these
comments into consideration in developing future policy. We may also
consider incorporating more measures based on clinical and registry
data in future rulemaking.
After consideration of the public comments we received, we are
finalizing our proposal to shift the quarters upon which the Hospital
OQR Program APU determinations are based as proposed.
2. Requirements for Chart-Abstracted Measures Where Patient-Level Data
Are Submitted Directly to CMS
The following previously finalized Hospital OQR Program chart-
abstracted measures require patient-level data to be submitted for the
CY 2018 payment determination and subsequent years:
OP-1: Median Time to Fibrinolysis;
OP-2: Fibrinolytic Therapy Received Within 30 Minutes of
ED Arrival (NQF #0288);
OP-3: Median Time to Transfer to Another Facility for
Acute Coronary Intervention (NQF #0290);
OP-4: Aspirin at Arrival (NQF #0286);
OP-5: Median Time to ECG (NQF #0289);
OP-18: Median Time from ED Arrival to ED Departure for
Discharged ED Patients (NQF #0496);
OP-20: Door to Diagnostic Evaluation by a Qualified
Medical Professional;
OP-21: ED--Median Time to Pain Management for Long Bone
Fracture (NQF #0662); and
OP-23: ED--Head CT Scan Results for Acute Ischemic Stroke
or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within
45 Minutes of Arrival (NQF #0661).
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68481 through 68484) for a discussion of the form,
manner, and timing for data submission requirements of these measures
for the CY 2014 payment determination and subsequent years.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39337), we did not
propose any changes to these policies.

[[Page 70521]]

3. Claims-Based Measure Data Requirements
We refer readers to the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75111 through 75112) for a discussion of the general
claims-based measure data submission requirements for the CY 2015
payment determination and subsequent years. We note that, in section
XIII.B.5. of this final rule with comment period, we are removing OP-
15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache, beginning with the CY 2017 payment
determination and subsequent years. Therefore, for the CY 2017 payment
determination and subsequent years, there will be a total of seven
claims-based measures:
OP-8: MRI Lumbar Spine for Low Back Pain (NQF #0514);
OP-9: Mammography Follow-Up Rates;
OP-10: Abdomen CT--Use of Contrast Material;
OP-11: Thorax CT--Use of Contrast Material (NQF #0513);
OP-13: Cardiac Imaging for Preoperative Risk Assessment
for Non-Cardiac Low Risk Surgery (NQF #0669);
OP-14: Simultaneous Use of Brain Computed Tomography (CT)
and Sinus Computed Tomography (CT); and
OP-32: Facility 7-Day Risk-Standardized Hospital Visit
Rate after Outpatient Colonoscopy (NQF #2539).
In the CY 2016 OPPS/ASC proposed rule (80 FR 39337), we did not
propose any changes to our claims-based measure data submission
requirements.
4. Data Submission Requirements for Measure Data Submitted via a Web-
Based Tool
a. Previously Finalized Measures
The following Web-based quality measures previously finalized and
retained in the Hospital OQR Program require data to be submitted via a
Web-based tool (CMS' QualityNet Web site or CDC's NHSN Web site) for
the CY 2018 payment determination and subsequent years:
OP-12: The Ability for Providers with HIT to Receive
Laboratory Data Electronically Directly into their ONC-Certified EHR
System as Discrete Searchable Data (via CMS' QualityNet Web site);
OP-17: Tracking Clinical Results between Visits (via CMS'
QualityNet Web site);
OP-22: ED--Left Without Being Seen (via CMS' QualityNet
Web site);
OP-25: Safe Surgery Checklist Use (via CMS' QualityNet Web
site);
OP-26: Hospital Outpatient Volume on Selected Outpatient
Surgical Procedures (via CMS' QualityNet Web site); and
OP-27: Influenza Vaccination Coverage among Healthcare
Personnel (via the CDC NHSN Web site) (NQF #0431).
In addition to these measures, the following chart-abstracted
measures previously finalized and retained in the Hospital OQR Program
require data to be submitted via the Web-based tool for the CY 2017
payment determination and subsequent years:
OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658);
and
OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval
for Patients with a History of Adenomatous Polyps--Avoidance of
Inappropriate Use (NQF #1536).
We note that, in the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66962 through 66963), we categorized OP-29 and OP-30 as
chart-abstracted measures. However, unlike other chart-abstracted
measures, OP-29 and OP-30 are submitted through a Web-based tool (CMS'
QualityNet Web site).
We refer readers to the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75112 through 75115) for a discussion of the requirements
for measure data submitted via the CMS QualityNet Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12054421
25082) for the CY 2016 payment determination and subsequent years. In
addition, we refer readers to the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75097 through 75100) for a discussion of the
requirements for measure data submitted via the CDC NHSN Web site.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39337 through 39338),
we proposed to make one change to the data submission requirements for
measures submitted via the CMS Web-based tool (QualityNet Web site)
beginning with the CY 2017 payment determination. This proposal does
not affect OP-27, which is submitted via the CDC NHSN Web site.
Previously, we finalized that for measures reported via the CMS Web-
based tool, hospitals must report data between July 1 and November 1 of
the year prior to the payment determination with respect to the
encounter period of January 1 to December 31 of 2 years prior to the
payment determination year (78 FR 75112).
Beginning with the CY 2017 payment determination, however, we
proposed that hospitals must report data between January 1 and May 15
of the year prior to the payment determination with respect to the
encounter period of January 1 to December 31 of 2 years prior to the
payment determination year. For example, for the CY 2017 payment
determination, the data submission window would be January 1, 2016
through May 15, 2016 for the January 1, 2015 to December 31, 2015
encounter period.
We proposed this new data submission period to be consistent with
the data submission deadlines proposed by the ASCQR Program in section
XIV.D.3. of the CY 2016 OPPS/ASC proposed rule (80 FR 39345) and to
align with the submission deadline for OP-27: Influenza Vaccination
Coverage among Healthcare Personnel, reported via the CDC NHSN Web
site. We have determined that aligning all Web-based tool data
submission deadlines with this May 15 deadline would allow for
streamlined hospital submissions, earlier public reporting of that
measure data--possibly as soon as October of the data submission year--
and reduced administrative burden associated with tracking multiple
submission deadlines for these measures.
We invited public comment on our proposal to change the data
submission period for measures submitted via the CMS Web-based tool.
Comment: One commenter supported the change in the deadline for the
measures that are reported via the CMS Web-based tool (QualityNet Web
site) to conform to the deadline for the National Healthcare Safety
Network (NHSN) measure reporting, noting that the change will help
avoid confusion resulting from multiple reporting dates.
Response: We thank the commenter for its support.
Comment: One commenter expressed concern over competing data
submission requirements in the first part of the year with other
quality reporting programs as well as the current timing for the
release of measurement specifications and updates for OP-26.
Response: While we acknowledge that hospitals will no longer have
deadlines spread over a wider period of time for measures submitted via
a Web-based tool, we believe that aligning these data submission
deadlines will ultimately streamline and reduce administrative burden
on hospitals. The release of measure specifications and updated CPT
(Current Procedural Terminology) codes for OP-26 was delayed for the CY
2017 payment determination. Ideally, we planned to release CPT codes
for the CY 2017 payment determination prior to

[[Page 70522]]

the beginning of CY 2015. CPT codes were published in the
Specifications Manual 8.0a supplemental document posted on QualityNet
on April 1, 2015 and are available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287745
92819. However, we do not anticipate future delays. Future releases of
measure specifications and updated codes for OP-26 are anticipated to
be made available in November for the subsequent program year.
Therefore, we do not believe that hospitals will have difficulty
submitting these data by May 15.
Comment: One commenter expressed concerns about ongoing issues with
access and functionality of the NHSN Web site for reporting CMS-
required measures, adding that CMS should work to ensure that the NHSN
has the resources it needs to maintain the proper infrastructure to
support the growing role it plays in quality reporting.
Response: We appreciate the commenter's concerns. The NHSN Web site
is not maintained by CMS. However, we will share these concerns with
the CDC NHSN program.
Comment: One commenter recommended that measures submitted via a
Web-based tool be subject to a validation process.
Response: We thank the commenter for the suggestion. Due to limited
resources and the time needed to update our systems, at this time,
operationally we are not able to validate measures submitted through
the Web-based tool. We will take this recommendation into consideration
in developing future policy.
After consideration of the public comments we received, we are
finalizing our proposal to change the deadline for the measures that
are reported via the CMS Web-based tool (QualityNet Web site) to
conform to the deadline for the NHSN measure reporting as proposed. The
deadline for these measures beginning with the CY 2017 payment
determination will be May 15 of the year prior to the payment
determination. We note that the ASCQR Program is not finalizing the May
15 deadline in section XIV.D.3. of this final rule with comment period
due to commenters' concerns specific to the ASC setting. However, we
believe that aligning with the NHSN measure submission deadline serves
our goals of streamlining hospital submissions, earlier public
reporting of measure data, and reduced administrative burden associated
with tracking multiple submission deadlines for these measures.
b. Data Submission Requirements for Web-Based Measure OP-33: External
Beam Radiotherapy (EBRT) for Bone Metastases (NQF #1822) for the CY
2018 Payment Determination and Subsequent Years
As discussed in section XIII.B.6.a. of the CY 2016 OPPS/ASC
proposed rule (80 FR 39328 through 39330), we proposed one new Web-
based measure for the CY 2018 payment determination and subsequent
years, OP-33: External Beam Radiotherapy (EBRT) for Bone Metastases
(NQF #1822). As discussed in section XIII.B.6.a. of this final rule
with comment period, we are finalizing this measure.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39338), for data
submission for the CY 2018 payment determination and subsequent years,
we proposed that hospitals can either: (1) Report OP-33 beginning with
services furnished on January 1, 2016 in accordance with the data
submission requirements for measure data submitted via the CMS Web-
based tool (QualityNet Web site) as proposed in section XIII.D.4.a. of
the CY 2016 OPPS/ASC proposed rule (80 FR 39337 through 39338); or (2)
submit an aggregate data file (for example, a file in comma separated
value (csv) format or other format as will be specified in the data
submission requirements on QualityNet \43\) for this measure through a
vendor (via QualityNet infrastructure) containing aggregated data at
the hospital level. The aggregate data file would combine all patient
information, rather than reporting individual patient level data. The
data submission deadline for either method would be May 15. We stated
our belief that giving hospitals the option to submit data via vendors
would help to streamline processes and procedures. Detailed information
about format and submission requirements will be posted on QualityNet
at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=11912558
79384.
---------------------------------------------------------------------------

\43\ Data Submission Requirements will be available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287
75181731.
---------------------------------------------------------------------------

We invited public comment on our proposal.
Comment: Some commenters expressed concern that chart-abstracted
quality measures submitted via a CMS Web-based tool impose a heavy
administrative burden on providers. One commenter suggested that CMS
consider limiting data collection to radiation oncology sites. In
addition, this commenter noted that an abundance of data is readily
available through Tumor Registry services and suggested that CMS should
consider using this source for needed data, rather than implementing
another manually abstracted measure.
Response: While we understand the commenters' concerns about the
additional administrative burden of reporting data for the new measure,
we have weighed any associated burden of reporting this data against
the benefit of having data. We believe that OP-33 provides valuable
data that will enable us to address concerns associated with
unnecessary exposure to radiation and a desire for shorter and less
painful treatment options sufficient to justify its adoption into the
Hospital OQR Program measure set. In addition, as noted in section
XIII.B.6.a. of this final rule with comment period, because unnecessary
radiation exposure is such an important topic, we believe that this
measure is of sufficiently broad scope and priority to merit inclusion
in the Hospital OQR Program and not be limited to only radiation
oncology sites. Furthermore, we note that the MAP supported this
measure, stating that ``External beam radiation can help provide
patients with pain relief . . . this measure has a demonstrated
performance gap and would begin to expand cancer care measurement to
settings beyond the PPS-exempt cancer hospitals.'' \44\
---------------------------------------------------------------------------

\44\ Ibid.
---------------------------------------------------------------------------

However, we will take into consideration commenters' suggestions
for future rulemaking and may consider using data available through
registry services as a source of data for the Hospital OQR Program
provided there are no associated costs for data submission or
membership.
Comment: One commenter requested clarification regarding whether
this is a chart-abstracted measure or if data will be collected by
other means. The commenter suggested that, if this measure is a chart-
abstracted measure, CMS provide specifications in a manner and format
consistent with other chart-abstracted measures including defined
initial patient population, acceptable sampling methods, measure
algorithms complete with exclusions, and defined alpha data dictionary
with abstraction guidelines.
Response: In previous rulemaking (77 FR 68483 and 77 FR 68530), we
have referred to measures in which data are submitted via a Web-based
tool on a CMS Web site under our quality data

[[Page 70523]]

reporting programs as structural measures (measures concerned with
attributes of where care occurs, such as material resources, human
resources, and organizational structures).\45\ For example, OP-12: The
Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their ONC-Certified EHR System as Discrete
Searchable Data, is a structural measure. However, because measures for
which data are submitted via a Web-based tool on a CMS Web site may or
may not, in fact, be structural (for example, the Hospital IQR Program
chart abstracted, process of care measure PC-01: Elective Delivery
Prior to 39 Completed Weeks Gestation (NQF #0469) is submitted via a
Web-based tool, but measures quality-of-care rather than structural
elements (79 FR 50059)), we clarified our terminology to refer to the
mode of data submission as Web-based (78 FR 75112).
---------------------------------------------------------------------------

\45\ Maintz, J. Defining and Classifying Clinical Indicators for
Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-
530).
---------------------------------------------------------------------------

In particular, the source of the data for OP-33: External Beam
Radiotherapy (EBRT) for Bone Metastases is via charts gathered by
chart-abstraction. However, unlike some other chart-abstracted measures
in the Hospital OQR Program (OP-18: Median Time from ED Arrival to ED
Departure for Discharged ED Patients (NQF #0496) and OP-20: Door to
Diagnostic Evaluation by a Qualified Medical Professional (76 FR 74481
through 74482)) which utilize either the CART-OPD or third-party
vendors for data submission, for OP-33, the data submission method will
be via a CMS Web-based Tool (QualityNet Web site). Thus, data must be
abstracted from charts, aggregated, and submitted via the QualityNet
Web site. Because the data for measures submitted via a Web-based tool
are reported in aggregate, measure algorithms complete with exclusions,
and defined alpha data dictionary with abstraction guidelines are not
currently provided. However, sampling approaches and specifications
defining initial patient population are included. We refer readers to
our Specifications Manual at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=11962899
81244.
Comment: One commenter suggested that patient-level data be
collected for this measure as opposed to aggregate-level data.
Response: We thank the commenter for its suggestion. At this time,
we believe it is less burdensome for hospitals to report aggregate-
level data as opposed to patient-level data. In addition, for this
particular measure, we are not aware of any quality improvement
benefits that collecting patient-level data would provide. If we
determine that it would be beneficial to collect patient-level data for
this measure, weighed against the associated burden, we may consider
proposing to do so in future rulemaking.
Furthermore, as discussed above, we proposed to allow hospitals to
submit these data through a vendor because we believed this submission
method would further decrease burden. After analyzing this option
further, we do not believe that we will be able to accept data
operationally using this method for CY 2018 as our IT systems cannot
feasibly collect and provide hospitals timely and relevant submission
and measure rate feedback. If operationally we are able to accept data
through vendors in the future, we may propose to do so through
rulemaking.
After consideration of the public comments we received, we are
finalizing a modified version of our proposals. We are finalizing that
hospitals report OP-33 beginning with services furnished on January 1,
2016 in accordance with the data submission requirements for measure
data submitted via the CMS Web based tool (QualityNet Web site) as
proposed. However, we are not finalizing our second proposal that
hospitals can submit an aggregate data file for this measure through a
vendor (via the QualityNet infrastructure) containing aggregated data
at the hospital level for reasons discussed above.
c. Proposed Data Submission Requirements for Web-Based Measure OP-34:
Emergency Department Transfer Communication (EDTC) Measure for the CY
2019 Payment Determination and Subsequent Years
As discussed in section XIII.B.6.b. of the CY 2016 OPPS/ASC
proposed rule (80 FR 39330 through 39334), we proposed one new Web-
based measure for the CY 2019 payment determination and subsequent
years, OP-34: Emergency Department Transfer Communication (EDTC)
Measure (NQF #0291). In the CY 2016 OPPS/ASC proposed rule (80 FR
39338), for data submission for the CY 2019 payment determination and
subsequent years, we proposed that hospitals can either: (1) Report OP-
34 beginning with January 1, 2017 outpatient encounter dates in
accordance with the data submission requirements for measure data
submitted via the CMS Web-Based Tool (QualityNet Web site) as proposed
in section XIII.D.4.a. of the proposed rule (80 FR 39337 through
39338); or (2) submit an aggregate data file (for example, a file in
comma separated value (csv) format or other format as will be specified
in the data submission requirements on QualityNet \46\) for this
measure through a vendor (via QualityNet infrastructure) containing
aggregated data at the hospital level. The aggregate data file shall
combine all patient information, rather than reporting individual
patient level data. The data submission deadline for either method
would be May 15. We stated our belief that also giving hospitals the
option to submit data via vendors will help to streamline processes and
procedures. Detailed information about format and submission
requirements will be posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=11912558
79384.
---------------------------------------------------------------------------

\46\ Data Submission Requirements will be available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287
75181731.
---------------------------------------------------------------------------

We invited public comment on our proposals.
Comment: Many commenters expressed concern that the proposed manner
of data submission for this measure would be overly burdensome for
hospital abstractors. Several commenters suggested that patient-level
data be collected for this measure as opposed to aggregate-level data,
specifically through using a CART-OPD module. One commenter recommended
that the required data elements be tailored based on the patient's
clinical presentation, noting that not all elements are relevant to all
individual patients.
Response: As proposed, the EDTC measure does not require hospitals
to submit patient data on each of the 27 elements listed. Rather,
hospitals would be required to answer yes or no as to whether these
clinical indicators were recorded and communicated. Initially, we
intended that delaying implementation of this measure until the CY 2019
payment determination would allow facilities additional time to
implement the proposed measure (that is, to put the necessary processes
and procedures in place), to familiarize themselves with the
implementation protocol, tools, and scoring methodology related to the
EDTC measure, and to make associated improvements prior to the first
reporting deadline. However, in light of commenters' concerns, we
acknowledge that delayed implementation may not

[[Page 70524]]

sufficiently address these concerns. We refer readers to section
XIII.B.6.b. of this final rule with comment period, for our discussion
regarding not finalizing the EDTC measure for the CY 2019 payment
determination and subsequent years. Regardless, we will take these
comments into consideration in developing future policy.
After consideration of the public comments we received, we are not
finalizing the data submission methods for the EDTC measure as
proposed, because we are not finalizing the EDTC measure, as discussed
in section XIII.B.6.b. of this final rule with comment period.
5. Population and Sampling Data Requirements for the CY 2018 Payment
Determination and Subsequent Years
We refer readers to the CY 2011 OPPS/ASC final rule with comment
period (75 FR 72100 through 72103) and the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74482 through 74483) for discussions of our
policy that hospitals may voluntarily submit aggregate population and
sample size counts for Medicare and non-Medicare encounters for the
measure populations for which chart-abstracted data must be submitted.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39338), we did not
propose any changes to our population and sampling requirements.
6. Hospital OQR Program Validation Requirements for Chart-Abstracted
Measure Data Submitted Directly to CMS for the CY 2018 Payment
Determination and Subsequent Years
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68484 through 68487) and the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66964 through 66965) for a discussion of
finalized policies regarding our validation requirements. We codified
these policies at 42 CFR 419.46(e). Currently, validation is based on
four quarters of data (validation quarter 2, validation quarter 3,
validation quarter 4, and validation quarter 1) (75 FR 72104 and 79 FR
66965).
As discussed in section XIII.D.1. of the CY 2016 OPPS/ASC proposed
rule (80 FR 39336 through 39337), we proposed to make conforming
changes to our validation scoring process to reflect proposed changes
in the APU determination timeframes. For the CY 2017 payment
determination, we proposed that validation be based on three quarters
of data (validation quarter 2, validation quarter 3, and validation
quarter 4 of 2015). In addition, for the CY 2018 payment determination
and subsequent years, we proposed that validation again be based on
four quarters of data. However, those quarters are validation quarter
1, validation quarter 2, validation quarter 3, and validation quarter
4. We note that the data submission deadlines will remain unchanged.
Detailed information about data validation requirements and deadlines
will be posted on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287587
29356.
Finally, we also proposed to make one editorial correction to 42
CFR 419.46(e)(2) to replace the term ``fiscal year'' with the term
``calendar year.''
We invited public comment on our proposals.
We did not receive any public comments on these proposals.
Therefore, we are finalizing changes to our validation scoring process
to reflect changes in the APU determination timeframes and correcting
42 CFR 419.46(e)(2) to replace the term ``fiscal year'' with the term
``calendar year'' as proposed.
7. Extension or Exemption Process for the CY 2018 Payment Determination
and Subsequent Years
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75119 through 75120), the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66966), and 42 CFR 419.46(d) for a complete
discussion of our extraordinary circumstances extension or exception
process under the Hospital OQR Program.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39339), we proposed to
fix a typographical error to correct the name of this process from
extension and exception to extension and exemption (inadvertently
presented as a process name change). We also proposed to make
corresponding typographical error corrections (inadvertently presented
as a name change) to the regulation text at 42 CFR 419.46(d). These
proposed corrections align the Hospital OQR Program policies with those
of the Hospital IQR Program (79 FR 50101) and ASCQR Program (79 FR
66987). We would like to clarify that we are not renaming this process,
but rather we are proposing to fix a typographical error to correct the
name of this process from extension and exception to extension and
exemption. We invited public comment on our proposals.
We did not receive any public comments on these proposals.
Therefore, we are finalizing the correction of this typographical error
at 42 CFR 419.46(d) to extension and exemption as proposed.
8. Hospital OQR Program Reconsideration and Appeals Procedures for the
CY 2018 Payment Determination and Subsequent Years
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68487 through 68489) and the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75118 through 75119) for a discussion of our
reconsideration and appeals procedures. We codified this process by
which participating hospitals may submit requests for reconsideration
at 42 CFR 419.46(f). We also codified language at Sec. 419.46(f)(3)
stating that a hospital that is dissatisfied with a decision made by
CMS on its reconsideration request may file an appeal with the Provider
Reimbursement Review Board.
Currently, a hospital must submit a reconsideration request to CMS
via the QualityNet Web site no later than the first business day of the
month of February of the affected payment year (78 FR 75118 through
75119). In the CY 2016 OPPS/ASC proposed rule (80 FR 39339), we
proposed that beginning with the CY 2018 payment determination,
hospitals must submit a reconsideration request to CMS via the
QualityNet Web site by no later than the first business day on or after
March 17 of the affected payment year.
We proposed this new reconsideration submission deadline to be
consistent with the proposed ASCQR Program reconsideration submission
deadline in section XIV.D.8. of the CY 2016 OPPS/ASC proposed rule (80
FR 39347) and finalized in section XIV.D.8. of this final rule with
comment period. As stated above, we believe that aligning deadlines
across programs leads to decreased provider burden by streamlining
processes and procedures.
We also proposed to make a conforming change to 42 CFR 419.46(f)(1)
to reflect the above change in submission deadline from the first
business day of the month of February of the affected payment year to
the first business day on or after March 17 of the affected payment
year.
In addition, we proposed to make an editorial correction to 42 CFR
419.46(f)(1) to replace the term ``fiscal year'' with the term
``calendar year.''
We invited public comment on these proposals.
We did not receive any public comments on these proposals.
Therefore, we are finalizing these policies as proposed.

[[Page 70525]]

E. Payment Reduction for Hospitals That Fail To Meet the Hospital
Outpatient Quality Reporting (OQR) Program Requirements for the CY 2016
Payment Determination

1. Background
Section 1833(t)(17) of the Act, which applies to subsection (d)
hospitals (as defined under section 1886(d)(1)(B) of the Act), states
that hospitals that fail to report data required to be submitted on the
measures selected by the Secretary, in the form and manner, and at a
time, specified by the Secretary will incur a 2.0 percentage point
reduction to their Outpatient Department (OPD) fee schedule increase
factor; that is, the annual payment update factor. Section
1833(t)(17)(A)(ii) of the Act specifies that any reduction applies only
to the payment year involved and will not be taken into account in
computing the applicable OPD fee schedule increase factor for a
subsequent payment year.
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 in order to receive the full
payment update factor and that fail to meet the Hospital OQR Program
requirements. Hospitals that meet the reporting requirements receive
the full OPPS payment update without the reduction. For a more detailed
discussion of how this payment reduction was initially implemented, we
refer readers to the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68769 through 68772).
The national unadjusted payment rates for many services paid under
the OPPS equal the product of the OPPS conversion factor and the scaled
relative payment 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 the proposed rule, which is available via the Internet on the CMS
Web site): ``J1,'' ``J2,'' ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,''
``T,'' ``V,'' or ``U.'' We note that we proposed to adopt status
indicator ``J2'' for certain comprehensive services furnished to
beneficiaries who receive at least 8 hours of observation services in
the hospital outpatient department; more information about this status
indicator may be found in section XI.A. of this final rule with comment
period. Payment for all services assigned to these status indicators
will be subject to the reduction of the national unadjusted payment
rates for hospitals that fail to meet Hospital OQR Program
requirements, with the exception of services assigned to New Technology
APCs with assigned status indicator ``S'' or ``T.'' We refer readers to
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68770
through 68771) for a discussion of this policy.
The OPD fee schedule increase factor is an input into the OPPS
conversion factor, which is used to calculate OPPS payment rates. To
reduce the OPD fee schedule increase factor for hospitals that fail to
meet reporting requirements, we calculate two conversion factors--a
full market basket conversion factor (that is, the full conversion
factor), and a reduced market basket conversion factor (that is, the
reduced conversion factor). We then calculate a reduction ratio by
dividing the reduced conversion factor by the full conversion factor.
We refer to this reduction ratio as the ``reporting ratio'' to indicate
that it applies to payment for hospitals that fail to meet their
reporting requirements. Applying this reporting ratio to the OPPS
payment amounts results in reduced national unadjusted payment rates
that are mathematically equivalent to the reduced national unadjusted
payment rates that would result if we multiplied the scaled OPPS
relative payment weights by the reduced conversion factor. For example,
to determine the reduced national unadjusted payment rates that applied
to hospitals that failed to meet their quality reporting requirements
for the CY 2010 OPPS, we multiplied the final full national unadjusted
payment rate found in Addendum B of the CY 2010 OPPS/ASC final rule
with comment period by the CY 2010 OPPS final reporting ratio of 0.980
(74 FR 60642).
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771
through 68772), we established a policy that the Medicare beneficiary's
minimum unadjusted copayment and national unadjusted copayment for a
service to which a reduced national unadjusted payment rate applies
would each equal the product of the reporting ratio and the national
unadjusted copayment or the minimum unadjusted copayment, as
applicable, for the service. Under this policy, we apply the reporting
ratio to both the minimum unadjusted copayment and national unadjusted
copayment for services provided by hospitals that receive the payment
reduction for failure to meet the Hospital OQR Program reporting
requirements. This application of the reporting ratio to the national
unadjusted and minimum unadjusted copayments is calculated according to
Sec. 419.41 of our regulations, prior to any adjustment for a
hospital's failure to meet the quality reporting standards according to
Sec. 419.43(h). Beneficiaries and secondary payers thereby share in
the reduction of payments to these hospitals.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68772), we established the policy that all other applicable adjustments
to the OPPS national unadjusted payment rates apply when the OPD fee
schedule increase factor is reduced for hospitals that fail to meet the
requirements of the Hospital OQR Program. For example, the following
standard adjustments apply to the reduced national unadjusted payment
rates: The wage index adjustment; the multiple procedure adjustment;
the interrupted procedure adjustment; the rural sole community hospital
adjustment; and the adjustment for devices furnished with full or
partial credit or without cost. Similarly, OPPS outlier payments made
for high cost and complex procedures will continue to be made when
outlier 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. We established this policy in the OPPS beginning in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60642). For a
complete discussion of the OPPS outlier calculation and eligibility
criteria, we refer readers to section II.G. of this final rule with
comment period.
2. Reporting Ratio Application and Associated Adjustment Policy for CY
2016
In the CY 2016 OPPS/ASC proposed rule (80 FR 39340), we proposed to
continue our established policy of applying the reduction of the OPD
fee schedule increase factor through the use of a reporting ratio for
those hospitals that fail to meet the Hospital OQR Program requirements
for the full CY 2016 annual payment update factor. For the CY 2016
OPPS, the proposed reporting ratio is 0.980, calculated by dividing the
proposed reduced conversion factor of $72.478 by the proposed full
conversion factor of $73.929. We proposed to continue to apply the
reporting ratio to all services calculated using the OPPS conversion
factor. For the CY 2016 OPPS, we proposed to apply the reporting ratio,
when applicable, to all HCPCS codes to which we have proposed status
indicator assignments of ``J1,'' ``J2,'' ``P,'' ``Q1,'' ``Q2,'' ``Q3,''
``R,'' ``S,'' ``T,'' ``V,''

[[Page 70526]]

and ``U'' (other than new technology APCs to which we have proposed
status indicator assignment of ``S'' and ``T''). We note that,
discussed in sections II.A.2.e. of the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66962), we finalized our proposal to develop
status indicator ``J1'' as part of our CY 2015 comprehensive APC
policy, and to apply the reporting ratio to the comprehensive APCs. We
proposed to continue to exclude services paid under New Technology
APCs. We proposed to continue to apply the reporting ratio to the
national unadjusted payment rates and the minimum unadjusted and
national unadjusted copayment rates of all applicable services for
those hospitals that fail to meet the Hospital OQR Program reporting
requirements. We also proposed to continue to apply all other
applicable standard adjustments to the OPPS national unadjusted payment
rates for hospitals that fail to meet the requirements of the Hospital
OQR Program. Similarly, we proposed to continue to calculate OPPS
outlier eligibility and outlier payment based on the reduced payment
rates for those hospitals that fail to meet the reporting requirements.
We invited public comments on these proposals.
We did not receive any public comments on these proposals.
Therefore, we are finalizing our proposal to apply the Hospital OQR
Program reduction in the manner described above. We also are finalizing
our proposal to reflect the CY 2016 OPPS status indicators to which the
adjustment would apply. For the CY 2016 OPPS, the final reporting ratio
is 0.980, calculated by dividing the final reduced conversion factor of
$72.251 by the final full conversion factor of $73.725.

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

A. Background

1. Overview
We refer readers to section XIII.A.1. of this final rule with
comment period for a general overview of our quality reporting
programs.
2. Statutory History of the Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74492 through 74494) for a detailed
discussion of the statutory history of the ASCQR Program.
3. Regulatory History of the ASCQR Program
We refer readers to section XV.A.3. of the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75122) for an overview of the
regulatory history of the ASCQR Program, and to section XIV.4. of the
CY 2015 OPPS/ASC final rule with comment period (79 FR 66966 through
66987) for subsequently enacted policies.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39340), we proposed to
establish a new Subpart H under 42 CFR part 416 to codify many of the
administrative policies regarding the ASCQR Program. We proposed to
codify our statutory authority for the ASCQR Program in new proposed 42
CFR 416.300(a). In that proposed section, we state that section
1833(i)(2)(D)(iv) and (i)(7) of the Act authorizes the Secretary to
implement a revised ASC payment system in a manner so as to provide for
a 2.0 percentage point reduction in any annual update for an ASC's
failure to report on quality measures in accordance with the
Secretary's requirements. In new proposed 42 CFR 416.300(b), we state
that this subpart contains the specific requirements and standards for
the ASCQR Program. We note that we have previously referenced the
statutory basis for the ASCQR Program in 42 CFR part 416, subpart F (42
CFR 416.160(a)) and the 2 percentage point reduction for ASCs that do
not meet ASCQR Program requirements at 42 CFR 416.171(a)(2)(iii).
We invited public comment on our proposals to codify the scope and
basis for the ASCQR Program.
Comment: Several commenters supported CMS' proposals to codify the
scope and basis for the ASCQR Program. Some commenters expressed
concerns that codification was not warranted for a program that was
still under development and that codification could make program
changes in the future more difficult.
Response: We thank the commenters that supported our proposals to
codify the scope and basis for the ASCQR Program. While some commenters
believe codification could make program changes in the future more
difficult, we assure these commenters that future program changes to
codified ASCQR Program regulatory text is not more difficult than
updating non-codified regulatory policies. Codified regulatory text can
be and is modified through the rulemaking process, which for the ASCQR
Program, occurs on an annual basis.
After consideration of the public comments we received, we are
finalizing our proposals to establish a new Subpart H under 42 CFR part
416 to codify many of the administrative policies regarding the ASCQR
Program, and to codify the scope and basis of the ASCQR Program in 42
CFR 416.300.

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68493 through 68494) for a detailed discussion of the
priorities we consider for ASCQR Program quality measure selection. In
the CY 2016 OPPS/ASC proposed rule (80 FR 39341), we did not propose
any changes to this policy. However, we received several comments on
our priorities for measure selection.
Comment: One commenter stated that outcome reporting is the most
direct way to measure clinical improvements in the quality of care
provided to patients and expressed support for the ASCQR Program's use
of outcome measures.
Response: We thank the commenter for its support. We also believe
that outcome measures are important and are a direct way to measure
clinical improvement.
2. Policies for Retention and Removal of Quality Measures From the
ASCQR Program
We previously adopted a policy that quality measures adopted for an
ASCQR Program measure set for a previous payment determination year be
retained in the ASCQR Program for measure sets for subsequent payment
determination years, except when they are removed, suspended, or
replaced as indicated (76 FR 74494 and 74504; 77 FR 68494 through
68495; 78 FR 75122; 79 FR 66967 through 66969). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39341), we did not propose any changes to this
policy. However, we proposed to codify this policy at proposed new 42
CFR 416.320(a).
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66967
through 66969), we finalized a process for removing adopted measures.
Specifically, in cases where we believe that the continued use of a
measure as specified raises patient safety concerns, we will
immediately remove a quality measure from the ASCQR Program. In these
situations, we will promptly notify ASCs and the public of the removal
of the measure and the reasons for its removal through the ASCQR

[[Page 70527]]

Program ListServ and the ASCQR Program QualityNet Web site. We will
confirm the removal of the measure due to patient safety concerns in
the next ASCQR Program rulemaking. In the CY 2016 OPPS/ASC proposed
rule (80 FR 39341), we did not propose any changes to this process.
However, we proposed to codify this process at proposed new 42 CFR
416.320(b).
As stated in the CY 2015 OPPS/ASC final rule with comment period
(79 FR 66968), unless a measure as specified raises patient safety
concerns, we will use the regular rulemaking process to remove,
suspend, or replace quality measures in the ASCQR Program to allow for
public comment. In these situations, we will use the following criteria
to determine whether to remove a measure from the ASCQR Program: (1)
Measure performance among ASCs is so high and unvarying that meaningful
distinctions and improvements in performance can no longer be made
(``topped-out'' measures); (2) availability of alternative measures
with a stronger relationship to patient outcomes; (3) a measure does
not align with current clinical guidelines or practice; (4) the
availability of a more broadly applicable (across settings,
populations, or conditions) measure for the topic; (5) the availability
of a measure that is more proximal in time to desired patient outcomes
for the particular topic; (6) the availability of a measure that is
more strongly associated with desired patient outcomes for the
particular topic; and (7) collection or public reporting of a measure
leads to negative unintended consequences other than patient harm. The
benefits of removing a measure from the ASCQR Program will be assessed
on a case-by case basis. We intend for all the criteria to apply to all
measures to the extent possible. A measure will not be removed solely
on the basis of meeting any specific criterion.
As provided above, one of the criteria to determine whether to
remove a measure from the ASCQR Program is when it is ``topped-out''
(that is, when measure performance among ASCs is so high and unvarying
that meaningful distinctions and improvements in performance can no
longer be made). For purposes of the ASCQR Program, a measure is
considered to be topped-out when it meets both of the following
criteria: (1) Statistically indistinguishable performance at the 75th
and 90th percentiles (defined as when the difference between the 75th
and 90th percentiles for an ASC's measure is within two times the
standard error of the full data set); and (2) a truncated coefficient
of variation less than or equal to 0.10 (79 FR 66968 through 66969). In
the CY 2016 OPPS/ASC proposed rule (80 FR 39341), we did not propose
any changes to this process for measure removal, suspension, or
replacement. However, we proposed to codify this measure removal
criterion at proposed new 42 CFR 416.320(c).
We invited public comment on our proposals to codify these existing
policies.
We did not receive any public comments on the proposals to codify
our policies for the retention and removal of quality measures from the
ASCQR Program and, therefore, are finalizing them as proposed in 42 CFR
416.320.
3. ASCQR Program Quality Measures Adopted in Previous Rulemaking
In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492
through 74517), we implemented the ASCQR Program effective with the CY
2014 payment determination. In the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74496 through 74511), we adopted five claims-
based measures for the CY 2014 payment determination and subsequent
years, two measures with data submission directly to CMS via an online
Web-based tool for the CY 2015 payment determination and subsequent
years, and one process of care, preventive service measure submitted
via an online, Web-based tool to CDC's National Health Safety Network
(NHSN) for the CY 2016 payment determination and subsequent years. In
the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124
through 75130), we adopted three chart-abstracted measures with data
submission to CMS via an online Web-based tool for the CY 2016 payment
determination and subsequent years. In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66984 through 66985), we excluded one of
these measures, ASC-11: Cataracts: Improvement in Patient's Visual
Function within 90 Days Following Cataract Surgery (NQF #1536), from
the CY 2016 payment determination measure set and allowed for voluntary
data collection and reporting for the CY 2017 payment determination and
subsequent years. In the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66970 through 66979), we adopted one additional claims-
based measure for the CY 2018 payment determination and subsequent
years.
Most of the quality measures adopted for use by the ASCQR Program
are NQF-endorsed, although such endorsement is not an ASCQR Program
requirement for adopting a measure. Two measures previously adopted for
the ASCQR Program are not currently NQF-endorsed and were not endorsed
when adopted for the program (ASC-6: Safe Surgery Checklist Use and
ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures).
Further, ASC-12: Facility 7-Day Risk-Standardized Hospital Visit Rate
after Outpatient Colonoscopy (NQF #2539) was not NQF-endorsed at the
time it was adopted for the ASCQR Program, but now is NQF-endorsed.
Recently, NQF removed endorsement from ASC-5: Prophylactic Intravenous
(IV) Antibiotic Timing (formerly NQF #0264).\47\ We continue to believe
that ASC-5 is appropriate for measurement of the quality of care
furnished by ASCs and should be retained by the ASCQR Program; the
measure is supported by clinical evidence \48\ and the measure steward
will be continuing to support the measure.\49\ We will continue to
evaluate the appropriateness of this measure for the ASCQR Program as
we do other measures.
The previously finalized measure set for the ASCQR Program CY 2017
payment determination and subsequent years is listed below.
---------------------------------------------------------------------------

\47\ Available at: http://www.qualityforum.org/Publications/2015/02/NQF-Endorsed_Measures_for_Surgical_Procedures.aspx.
\48\ Burke J. Maximizing appropriate antibiotic prophylaxis for
surgical patients: an update from LDS Hospital, Salt Lake City. Clin
Infect Dis. 2001;33(Suppl 2):S78-83.
\49\ Available at: http://ascquality.org/documents/ASC_QC_ImplementationGuide_3.0_January_2015.pdf.

ASCQR Program Measure Set Previously Finalized for the CY 2017 Payment
Determination and Subsequent Years
------------------------------------------------------------------------
ASC # NQF # Measure name
------------------------------------------------------------------------
ASC-1......................... 0263............. Patient Burn.

[[Page 70528]]

ASC-2......................... 0266............. Patient Fall.
ASC-3......................... 0267............. Wrong Site, Wrong
Side, Wrong Patient,
Wrong Procedure,
Wrong Implant.
ASC-4......................... 0265............. All-Cause Hospital
Transfer/Admission.*
ASC-5......................... N/A.............. Prophylactic
Intravenous (IV)
Antibiotic Timing.
ASC-6......................... N/A.............. Safe Surgery
Checklist Use.
ASC-7......................... N/A.............. ASC Facility Volume
Data on Selected ASC
Surgical Procedures
Procedure categories
and corresponding
HCPCS codes are
located at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 cid=1228772475754.
ASC-8......................... 0431............. Influenza Vaccination
Coverage among
Healthcare
Personnel.
ASC-9......................... 0658............. Endoscopy/Polyp
Surveillance:
Appropriate Follow-
Up Interval for
Normal Colonoscopy
in Average Risk
Patients.
ASC-10........................ 0659............. Endoscopy/Polyp
Surveillance:
Colonoscopy Interval
for Patients with a
History of
Adenomatous Polyps--
Avoidance of
Inappropriate Use.
ASC-11........................ 1536............. Cataracts:
Improvement in
Patient's Visual
Function within 90
Days Following
Cataract Surgery.**
------------------------------------------------------------------------
* This measure was previously titled ``Hospital Transfer/Admission.''
According to the NQF Web site, the title was changed to better reflect
what is being measured. We have updated the title of this measure to
align it with the NQF update to the title.
** Measure voluntarily collected effective beginning with the CY 2017
payment determination as set forth in section XIV.E.3.c. of the CY
2015 OPPS/ASC final rule with comment period (79 FR 66984 through
66985).

The previously finalized measure set for the ASCQR Program CY 2018
payment determination and subsequent years is listed below.

ASCQR Program Measure Set Previously Finalized for the CY 2018 Payment
Determination and Subsequent Years
------------------------------------------------------------------------
ASC # NQF # Measure name
------------------------------------------------------------------------
ASC-1......................... 0263............. Patient Burn.
ASC-2......................... 0266............. Patient Fall.
ASC-3......................... 0267............. Wrong Site, Wrong
Side, Wrong Patient,
Wrong Procedure,
Wrong Implant.
ASC-4......................... 0265............. All-Cause Hospital
Transfer/Admission.*
ASC-5......................... N/A.............. Prophylactic
Intravenous (IV)
Antibiotic Timing.
ASC-6......................... N/A.............. Safe Surgery
Checklist Use.
ASC-7......................... N/A.............. ASC Facility Volume
Data on Selected ASC
Surgical Procedures.
Procedure categories
and corresponding
HCPCS codes are
located at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 cid=1228772475754.
ASC-8......................... 0431............. Influenza Vaccination
Coverage among
Healthcare
Personnel.
ASC-9......................... 0658............. Endoscopy/Polyp
Surveillance:
Appropriate Follow-
Up Interval for
Normal Colonoscopy
in Average Risk
Patients.
ASC-10........................ 0659............. Endoscopy/Polyp
Surveillance:
Colonoscopy Interval
for Patients with a
History of
Adenomatous Polyps--
Avoidance of
Inappropriate Use.
ASC-11........................ 1536............. Cataracts:
Improvement in
Patient's Visual
Function within 90
Days Following
Cataract Surgery.**
ASC-12........................ 2539............. Facility 7-Day Risk-
Standardized
Hospital Visit Rate
after Outpatient
Colonoscopy.***
------------------------------------------------------------------------
* This measure was previously titled ``Hospital Transfer/Admission.''
According to the NQF Web site, the title was changed to better reflect
what is being measured. We have updated the title of this measure to
align it with the NQF update to the title.
** Measure voluntarily collected effective beginning with the CY 2017
payment determination as set forth in section XIV.E.3.c. of the CY
2015 OPPS/ASC final rule with comment period (79 FR 66984 through
66985).
*** New measure finalized for the CY 2018 payment determination and
subsequent years in the CY 2015 OPPS/ASC final rule with comment
period (79 FY 66970 through 66979).

Several commenters expressed views on previously adopted ASCQR
Program measures.
Comment: Some commenters supported previously adopted measures, and
some commenters recommended changing measure specifications for some
measures. Other commenters requested that CMS consider removing
previously added measures from the ASCQR Program, specifically ASC-5,
ASC-9, ASC-10, and ASC-12, because these measures are no longer NQF-
endorsed, and the commenters believed that they are inappropriate for
ASCs due to concerns about measure reliability or validity, or are too
burdensome for ASCs. Some of these commenters expressed ongoing
concerns about the ASC-12 measure. They requested that CMS conduct
additional analyses of the reliability and validity of the measure as
specified for the ASCQR Program and implemented during the dry run, and
provide those results to the ASC community.
Response: We thank the commenters for their suggestions. At this
time, we have not made any proposals to remove or modify any of the
measures suggested by commenters. Further, there is no evidence that
continued use of the measures as specified raises patient

[[Page 70529]]

safety concerns that would require immediate removal of the measures
based on the process we finalized in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66967 through 66969). However, we will take
these suggestions into consideration in future years using our measure
removal criteria. We continue to believe there is value in collecting
and reporting these measures. We thank commenters for these suggestions
regarding the current ASCQR Program measures and will share them with
the measure stewards.
4. ASCQR Program Quality Measures for the CY 2018 Payment Determination
and Subsequent Years
In the CY 2016 OPPS/ASC proposed rule (80 FR 39343), we did not
propose to adopt any additional measures for the ASCQR Program for the
CY 2018 payment determination and subsequent years.
5. ASCQR Program Measures for Future Consideration
In the CY 2013 OPPS/ASC final rule with comment period, we set
forth our approach to future measure selection and development (77 FR
68493 through 68494). We seek to develop a comprehensive set of quality
measures to be available for widespread use for making informed
decisions and quality improvement in the ASC setting (77 FR 68496). We
also seek to align these quality measures with the National Quality
Strategy (NQS), the CMS Strategic Plan (which includes the CMS Quality
Strategy), and our other quality reporting and VBP programs, as
appropriate. Accordingly, as we stated in the CY 2015 OPPS/ASC final
rule with comment period (79 FR 66979), in considering future ASCQR
Program measures, we are focusing on the following NQS and CMS Quality
Strategy measure domains: Make care safer; strengthen person and family
engagement; promote effective communication and coordination of care;
promote effective prevention and treatment; work with communities to
promote best practices of healthy living; and make care affordable. We
did not propose any changes to this policy. However, we received one
comment on our priorities for measure selection.
Comment: One commenter supported alignment of the ASCQR Program
with the NQS, the CMS Strategic Plan, and other quality reporting and
value-based purchasing programs. The commenter also recommended that
CMS focus on the NQS and CMS Quality Strategy measure domains of: (1)
Make care safer, (2) strengthen person and family engagement, and (3)
promote effective communication and coordination of care, because these
domains fall within the scope of an ASC's accountability. This
commenter asserted that the remaining three domains (promote effective
prevention and treatment; work with communities to promote best
practices of healthy living; and make care affordable) are more the
responsibility of the primary care provider, not ASCs.
Response: We thank the commenter for these suggestions. We seek to
align our programs as much as possible, and we believe that it is
important to have measures that encompass each of the NQS priority
areas. We have and will continue to consider whether our current and
future measures are actionable by ASCs.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39343), we also
invited public comment on two measures developed by the ASC Quality
Collaboration for inclusion in the ASCQR Program in the future.
a. Normothermia Outcome
The first measure under consideration is the Normothermia Outcome
measure which assesses the percentage of patients having surgical
procedures under general or neuraxial anesthesia of 60 minutes or more
in duration who are normothermic within 15 minutes of arrival in the
post-anesthesia care unit. This issue is of interest to the ASCQR
Program because impairment of thermoregulatory control due to
anesthesia may result in perioperative hypothermia. Perioperative
hypothermia is associated with numerous adverse outcomes, including:
Cardiac complications; \50\ surgical site infections; \51\ impaired
coagulation; \52\ and colligation of drug effects.\53\ When
intraoperative normothermia is maintained, patients experience fewer
adverse outcomes and their overall care costs are lower.\54\ This
measure is also of interest to the ASCQR Program because many surgical
procedures performed at ASCs involve anesthesia; therefore, it is an
outcome measure of significance for ASCs.\55\ It also addresses the
MAP-identified priority measure area for the ASCQR Program of
anesthesia-related complications.\56\
---------------------------------------------------------------------------

\50\ Frank SM, Fleisher LA, Breslow MJ, et al. Perioperative
maintenance of normothermia reduces the incidence of morbid cardiac
events: A randomized clinical trial. JAMA. 1997;277(14): 1127-1134.
\51\ Kurz A, Sessler DI, Lenhardt R. Perioperative normothermia
to reduce the incidence of surgical-wound infection and shorten
hospitalization: Study of wound infection and temperature group. N
Engl J Med. 1996;334(19): 1209-1215.
\52\ Rajagopalan S, Mascha E, Na J, Sessler DI. The effects of
mild hypothermia on blood loss and transfusion requirements during
total hip arthroplasty. Lancet. 1996;347(8997):289-292.
\53\ Kurz A. Physiology of thermoregulation. Best Pract Res Clin
Anaesthesiol.2008;22(4):627-644.
\54\ Mahoney CB, Odom J. Maintaining intraoperative
normothermia: A meta-analysis of outcomes with costs. AANA Journal.
1999;67(2): 155-164.
\55\ MAP Hospital Workgroup Transcript.
\56\ National Quality Forum. MAP 2015 Considerations for
Selection of Measures for Federal Programs: Hospitals. Rep. National
Quality Forum, Feb. 2015. Available at: http://www.qualityforum.org/Publications/2015/02/MAP_Hospital_Programmatic_Deliverable_-_Final_Report.aspx.
---------------------------------------------------------------------------

The specifications for this measure for the ASC setting can be
found at: http://ascquality.org/documents/ASC_QC_ImplementationGuide_3.0_January_2015.pdf.
b. Unplanned Anterior Vitrectomy
The second measure under consideration for future payment
determination years is the Unplanned Anterior Vitrectomy measure. This
measure assesses the percentage of cataract surgery patients who have
an unplanned anterior vitrectomy (removal of the vitreous present in
the anterior chamber of the eye). Cataracts are a leading cause of
blindness in the United States, with 24.4 million cases in 2010.\57\
Each year, approximately 1.5 million patients undergo cataract surgery
to improve their vision.\58\ An unplanned anterior vitrectomy is
performed when vitreous inadvertently prolapses into the anterior
segment of the eye during cataract surgery. While unplanned anterior
vitrectomy rates are relatively low, this procedure complication may
result in poor visual outcomes and other complications, including
retinal detachment.\59\ This measure is of interest to the ASCQR
Program because cataract surgery is a procedure commonly performed at
ASCs; therefore, it is an outcome measure of significance for ASCs.\60\
It also addresses the MAP-identified priority measure area of procedure

[[Page 70530]]

complications for the ASCQR Program.\61\
---------------------------------------------------------------------------

\57\ National Eye Institute. ``Cataracts.'' Cataracts. National
Institutes of Health, n.d. Available at: https://www.nei.nih.gov/eyedata/cataract#1.
\58\ ``Measure Application Partnership Hospital Workgroup'',
National Quality Forum. Dec. 2014, Transcript. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
\59\ Chen M, Lamattina KC, Patrianakos T, Dwarakanathan S.
Complication rate of posterior capsule rupture with vitreous loss
during phacoemulsification at a Hawaiian cataract surgical center: A
clinical audit. Clin Ophthamlol. 2014 Feb 5;8:375-378.
\60\ ``Measure Application Partnership Hospital Workgroup'',
National Quality Forum. Dec. 2014, Transcript. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
\61\ National Quality Forum. MAP 2015 Considerations for
Selection of Measures for Federal Programs: Hospitals. Rep. National
Quality Forum, Feb. 2015. Available at: http://www.qualityforum.org/Publications/2015/02/MAP_Hospital_Programmatic_Deliverable_-_Final_Report.aspx.
---------------------------------------------------------------------------

The specifications for this measure for the ASC setting can be
found at: http://ascquality.org/documents/ASC_QC_ImplementationGuide_3.0_January_2015.pdf.
Both measures have received conditional support from the MAP,
pending the completion of reliability testing and NQF endorsement. A
summary of the MAP recommendations can be found at: http://www.qualityforum.org/setting_priorities/partnership/measure_applications_partnership.aspx under the title ``Spreadsheet of
MAP 2015 Final Recommendations.''
We invited public comment on the possible inclusion of these
measures in the ASCQR Program measure set in the future. As stated
previously, we did not propose to adopt any new measures for the CY
2018 payment determination or subsequent years in the CY 2016 OPPS/ASC
proposed rule.
Comment: Many commenters supported future adoption of the
Normothermia Outcome measure in the ASCQR Program, because it would
help promote quality care in ASCs and because public reporting of these
data would serve as a key measure to assist patients, policymakers, and
researchers in comparing quality among ASCs. One commenter noted that
the measure's reliability testing in the ASC setting was very strong,
and that the measure is already in use in the ASC Quality
Collaboration's quarterly public reporting program, which is a
voluntary reporting program that collects data from ASCs and provides
quarterly aggregated performance data for ASC facility-level quality
measures developed by the ASC Quality Collaboration. One commenter
recommended that CMS adopt the Normothermia Outcome measure in the
future and retire the measure once there is validation of sustained
normothermia among ASCs. Another commenter noted that the NQF's 2015
Surgical Standing Committee recently approved a change in the
definition of normothermia from 96.8 degrees Fahrenheit (36 degrees
Celsius) to 95.9 degrees Fahrenheit (35.5 degrees Celsius) and urged
CMS to ensure that any future measure on normothermia adopt this
updated definition in order to maintain uniformity in anesthesia
quality improvement efforts across programs.
A number of commenters did not support future adoption of the
Normothermia Outcome measure for the ASCQR Program. The commenters
asserted that the measure implementation guide states there is no
evidence of a performance gap in hypothermia for ASC providers. Other
commenters requested that CMS provide additional information regarding
the gap or variation in care that justifies future adoption of the
Normothermia Outcome measure, the risk adjustment methodology used
under the measure, and the measure's reliability testing data. The
commenters recommended CMS perform reliability and field testing of the
Normothermia Outcome measure, submit the measure to NQF for
endorsement, and resubmit the measure to the MAP for review before
proposing to add this measure to the ASCQR Program measure set.
Some commenters requested additional information regarding the
Normothermia Outcome measure. One commenter requested additional
information regarding the volume of postoperative hypothermia events
captured under the Normothermia Outcome measure, how CMS intends to
collect data for the measure, and how CMS will calculate this measure.
Response: We thank the commenters for sharing their comments and
recommendations regarding future inclusion of the Normothermia Outcome
measure in the ASCQR Program. We will take these suggestions and
concerns into consideration if we propose to adopt the Normothermia
Outcome measure in the future.
Comment: The majority of commenters supported future adoption of
the Unplanned Anterior Vitrectomy measure for the ASCQR Program. One
commenter noted that the measure's reliability testing in the ASC
setting was very strong, and that the measure is already in use in the
ASC Quality Collaboration's public reporting program. The commenter
further stated the measure does not require NQF endorsement because the
requirement of the ASCQR Program to reflect consensus among affected
parties has been met through the measure developer's collaboration with
the ASC industry. Some commenters recommended CMS perform reliability
and field testing of the Unplanned Anterior Vitrectomy measure, submit
the measure to NQF for endorsement, and resubmit the measure to the MAP
for review before proposing to add this measure to the ASCQR Program
measure set. One commenter requested additional information regarding
the volume of unplanned anterior vitrectomies captured under the
Unplanned Anterior Vitrectomy measure, how CMS intends to collect data
on the measures, and how CMS will calculate this measure.
Response: We thank the commenters for their comments and
recommendations regarding future inclusion of the Unplanned Anterior
Vitrectomy measure in the ASCQR Program. We will take these comments
and recommendations into consideration if we propose to adopt the
Unplanned Anterior Vitrectomy measure for the ASCQR Program in the
future.
Comment: One commenter recommended that CMS consider the measure
topic of Equipment Reprocessing (for patient safety, high-level
disinfection and sterilization, with a particular emphasis on endoscope
reprocessing) for the ASCQR Program.
Response: We thank the commenter for this recommendation and will
consider this measure topic for the ASCQR Program in future years.
Comment: One commenter recommended CMS consider including
additional quality measures covering vaccine preventable disease for
the ASCQR Program.
Response: We thank the commenter for this recommendation. We agree
that quality measures covering vaccine preventable disease are
important; the ASCQR Program currently contains one measure on
influenza immunizations, ASC-8: Influenza Vaccination Coverage among
Healthcare Personnel (NQF #0431). We will consider adopting additional
measures in this measure topic for the ASCQR Program in future years.
Comment: One commenter expressed concern about the MAP,
specifically the public comment process and the practice of submitting
measure concepts for consideration.
Response: We thank the commenter for expressing this concern. As we
stated in the CY 2015 OPPS/ASC final rule with comment period (79 FR
66980) in response to similar concerns, we invite the commenter to
submit its MAP-specific concerns directly to the NQF, which convenes
the MAP.
Comment: One commenter recommended that, to the extent feasible,
CMS adopt measures that can be used for both the Hospital OQR and ASCQR
Programs.
Response: We thank the commenter for the recommendation to adopt
measures that are applicable to both the Hospital OQR and ASCQR
Programs. We agree that because outpatient surgical services are
provided in both

[[Page 70531]]

settings, measures that apply to both settings should be adopted to the
extent feasible. We note that we have adopted the following for both
settings: ASC-6/OP-25 Safe Surgery Checklist Use; ASC-7/OP-26 ASC/
Hospital Outpatient Volume on Selected ASC/Outpatient Surgical
Procedures; ASC-8/OP-27 Influenza Vaccination Coverage among Healthcare
Personnel (NQF #0431); ASC-9/OP-29 Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk
Patients (NQF #0658); ASC-10/OP-30 Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a History of Adenomatous Polyps-
Avoidance of Inappropriate Use (NQF #0659); ASC-11/OP-31 Cataracts:
Improvement in Patient's Visual Function within 90 Days Following
Cataract Surgery (NQF #1536); and ASC-12/OP-32 Facility 7-Day Risk-
Standardized Hospital Visit Rate after Outpatient Colonoscopy (NQF
#2539).
Comment: One commenter stated that it would welcome opportunities
to work with CMS to explore alternative reporting options for measures
that cut across CMS quality reporting programs, particularly measures
that are included in both the ASCQR Program and PQRS.
Response: We thank the commenter for the offer to collaborate with
us on alternative reporting options. We will continue to look for
opportunities to work with ASC community stakeholders to continuously
improve the ASCQR Program, including alternate reporting options for
cross-cutting measures.
Comment: One commenter expressed support for the establishment of a
VBP program for ASCs, and recommended that the Secretary seek
legislative authority from Congress to implement an ASC VBP program.
The commenter noted that the ASCQR Program could lay the foundation for
a future ASC VBP program if modifications were made to the existing
measure set.
Response: We thank the commenter for these recommendations.
6. Maintenance of Technical Specifications for Quality Measures
We refer readers to the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74513 through 74514), where we finalized our proposal to
follow the same process for updating the ASCQR Program measures that we
adopted for the Hospital OQR Program measures, including the
subregulatory process for making updates to the adopted measures. In
the CY 2013 OPPS/ASC final rule with comment period (77 FR 68496
through 68497), the CY 2014 OPPS/ASC final rule with comment period (78
FR 75131), and the CY 2015 OPPS/ASC final rule with comment period (79
FR 66981), we provided additional clarification regarding the ASCQR
Program policy in the context of the previously finalized Hospital OQR
Program policy, including the processes for addressing nonsubstantive
and substantive changes to adopted measures.
We maintain technical specifications for previously adopted ASCQR
Program measures in the ASCQR Program Measures Specifications Manual.
These specifications are updated as we continue to develop the ASCQR
Program. We maintain the technical specifications for the measures
adopted for the ASCQR Program by updating this Specifications Manual.
The versions of the Specifications Manual that contain specifications
for the previously adopted measures can be found on the QualityNet Web
site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287724
75754.
As stated in the CY 2014 OPPS/ASC final rule with comment period
(78 FR 75131), we will determine what constitutes a substantive versus
a nonsubstantive change to a measure's specifications on a case-by-case
basis. If we determine that a change to a measure previously adopted in
the ASCQR Program is nonsubstantive, we will use a subregulatory
process to revise the ASCQR Program Specifications Manual so that it
clearly identifies the updates to that measure and provide links to
where additional information on the changes can be found. We will
provide notification of the measure specification update on the
QualityNet Web site and in the ASCQR Program Specifications Manual, and
will provide sufficient lead time for ASCs to implement the revisions
where changes to the data collection systems are necessary. We will
continue to use rulemaking to adopt substantive updates to measures in
the ASCQR Program. In the CY 2016 OPPS/ASC proposed rule (80 FR 39343
through 39344), we did not propose any changes to these policies.
However, we proposed to codify these policies at proposed new 42 CFR
416.325.
We previously finalized a policy to post technical specifications
on a CMS Web site in addition to posting this information on QualityNet
because we believed doing so would increase ASC awareness of our
technical specifications in our outreach and education (76 FR 74514).
However, we now believe that posting technical specifications on
QualityNet alone is preferable to prevent possible inconsistencies
associated with accessing multiple sites for information and to reduce
burden. We believe that posting this information on a single site is a
more efficient process that still provides ASCs with complete access to
the technical specifications for ASCQR Program purposes. Therefore, we
are not posting the technical specifications on a CMS Web site but will
continue to post this information on QualityNet for the ASCQR Program.
We invited public comment on our proposal to codify our existing
policies.
Comment: One commenter expressed concern that, moving forward, CMS
will only post technical specifications on the QualityNet Web site,
asserted that many ASCs are more comfortable accessing the CMS Web
site, and, therefore, recommended that CMS continue to post information
about the ASCQR Program technical specifications on both the CMS and
QualityNet Web sites.
Response: We thank the commenter for this recommendation. However,
we believe that ASCs should be comfortable accessing the QualityNet Web
site because they currently use the QualityNet Web site's secure portal
to submit data under the ASCQR Program. Furthermore, we believe the
commenter's concerns regarding the use of a single Web site to post
technical specifications are outweighed by the benefits--providing this
information on a single site is a more efficient process; it could
prevent potential inconsistencies associated with accessing multiple
sites for information; and it reduces burden.
After consideration of the public comments we received, we are not
displaying the technical specifications for the ASCQR Program on the
CMS Web site but will continue to display the technical specifications
for the ASCQR Program on the QualityNet Web site. In addition, we are
finalizing our proposal to codify our policies regarding the
maintenance of technical specifications for the ASCQR Program at 42 CFR
416.325.
7. Public Reporting of ASCQR Program Data
In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514
through 74515), we finalized a policy to make data that an ASC
submitted for the ASCQR Program publicly available on a CMS Web site
after providing an ASC an opportunity to review the data to be made
public. In the CY 2016 OPPS/ASC proposed rule (80 FR 39344), we
proposed to codify this existing policy at proposed new 42 CFR 416.315.
We also finalized a policy to display these data at the CMS
Certification Number (CCN) level in the CY 2012

[[Page 70532]]

OPPS/ASC final rule with comment period (76 FR 74514 through 74515).
However, in the CY 2016 OPPS/ASC proposed rule (80 FR 39344), we
proposed to change this policy. ASCs typically report quality measure
data to CMS using their National Provider Identifier (NPI), which is
their billing identifier on the CMS-1500 form as non-institutional
billers. Further, payment determinations are made by NPI. Because an
ASC CCN can have multiple NPIs, publication of data by CCN can
aggregate data for multiple facilities, thereby reducing identification
of individual facility information. To allow for identification of
individual facility information, beginning with any public reporting
that occurs on or after January 1, 2016, we proposed to display the
data by the NPI when data are submitted by the NPI. We believe
identifying data by the NPI would enable consumers to make more
informed decisions about their care because the public would be able to
distinguish between ASCs. Further, it would help ASCs to better
understand their performance on measures collected under the ASCQR
Program. We also proposed, beginning with any public reporting that
occurs on or after January 1, 2016, to display data by the CCN when
data are submitted by the CCN. When data are submitted by the CCN, all
NPIs associated with the CCN would be assigned the CCN's value because
we would not be able to parse the data by the NPI. For example, in the
case of ASC-8: Influenza Vaccination Coverage among Healthcare
Personnel measure (NQF #0431), the one ASCQR Program measure where data
are submitted by the CCN as this is the identifier used by the CDC's
NHSN Healthcare Personnel Vaccination Module, we would not be able to
parse the data by the NPI. Thus, the data displayed for ASC-8 would be
the same for all of the NPIs under the same CCN. We proposed to codify
this proposal at proposed new 42 CFR 416.315.
We invited public comment on our proposal to display data by the
NPI if the data are submitted by the NPI and to display data by the CCN
if the data are submitted by the CCN beginning with any public
reporting that occurs on or after January 1, 2016, and to codify this
policy and our existing policies.
Comment: Some commenters did not support CMS' proposal to assign
all NPIs associated with a CCN the CCN's value when the data are
submitted by CCN for that reporting. These commenters asserted that
doing so is not statistically valid and may misrepresent an individual
ASC's performance. The commenters recommended that CMS instead publicly
report data using the identifier it is reported under; that is, by NPI
when the data are submitted by NPI, and by CCN when data are submitted
by CCN.
Response: We thank the commenters for their recommendation. We
recognize that attributing data reported under a CCN to all NPIs
associated with that CCN has the potential to misrepresent ASC's
performance on a quality measure. For this reason, we are not
finalizing the proposal to assign all NPIs associated with a CCN the
CCN's value for reporting when data are submitted by CCN. Instead, as
proposed, beginning with any public reporting that occurs on or after
January 1, 2016, we will publicly report data under the identifier used
to submit that data; that is, reporting by NPI when the data are
submitted by NPI, and reporting by CCN when the data are submitted by
CCN. However, we are not finalizing our proposal to assign the CCN's
value to all NPIs associated with that CCN when data are submitted by
CCN.
Comment: Some commenters supported allowing ASCs to report data for
the ASCQR Program by either their NPI or CCN, depending upon the
collection requirements of the measure.
Response: We thank the commenters for their support. However, we
note that our proposal was to attribute data submitted at the CCN level
to all NPIs associated with that CCN, not just to report data by CCN
when the data are submitted by CCN. As discussed above, we are not
finalizing this proposed policy because of the potential unintended
negative effects of attributing the CCN's data to all NPIs associated
with that CCN.
Comment: One commenter recommended that CMS work toward collecting
all facility data under the facility NPI because reporting at this
level would ensure that consumers can distinguish performance at the
individual facility level and thereby better inform consumer decision-
making. Specifically, the commenter recommended that CMS work with the
CDC to modify the reporting tools for ASC-8, the only current ASCQR
Program measure collected by CCN, to allow facilities to report data
using their NPI for future payment determinations. The commenter
further stated that, because the public reporting policy should be
revised to allow ASCs to report all data by NPI, the current public
reporting policy should not be codified at this time.
Response: We thank the commenter for the recommendation to modify
ASC-8 to allow facilities to report data for this measure using their
NPI in the future. We will take this recommendation into consideration
as we continue to refine the public reporting policies for the ASCQR
Program so that data accuracy and transparency are maximized to the
extent possible.
We also thank the commenter for sharing its concerns regarding the
codification of our current public reporting policy when changes may be
made to this policy in future rulemaking. Again, we assure the
commenter that making future program changes to codified ASCQR Program
regulatory text is not more difficult. Codified regulatory text can be
and is modified through the rulemaking process, which, for the ASCQR
Program, occurs on an annual basis. In addition, for some users,
codified regulatory text is both easier to access and easier to
understand than programmatic policies found only in preamble text.
Thus, we believe it is appropriate to codify our currently public
reporting policy at this time and incorporate any future changes to
this policy after they are finalized through notice-and-comment
rulemaking.
Comment: Commenters encouraged CMS to make ASC data publicly
available as soon as possible to help patients, policymakers, and
researchers compare quality among facilities. The commenters also urged
CMS to ensure that the public reporting Web site for ASCQR Program data
is developed for use by the average consumer or patients.
Response: We thank the commenters for these comments. We agree that
it is important to make data collected under the ASCQR Program publicly
available and are working to do so. In addition, we are working to
ensure that the data publicly reported for the ASCQR Program will be
presented in a format that is easily understood by consumers and
patients and is user-friendly.
Comment: One commenter urged CMS to further specify its policies
regarding the public reporting of ASCQR Program data through future
rulemaking. Specifically, the commenter recommended that CMS provide
ASCs with more notice of the preview period; provide ASCs with more
time in which to review their data; and establish a means either for
ASCs to correct erroneous data or for CMS to suppress clearly incorrect
data. In the absence of a correction or suppression process, this
commenter further recommended that CMS make preview reports available
to ASCs well in advance of the withdrawal deadline for the ASCQR
Program so that an ASC with erroneous data has sufficient opportunity
to determine if it would like to withdraw from the

[[Page 70533]]

ASCQR Program, because, it stated, this would be its only recourse to
avoid publication of incorrect quality data.
Response: We thank the commenters for their comments and
recommendations, and will take these recommendations into consideration
during future policy development efforts. We note that ASCs can edit
any measure data submitted via an online data submission tool until the
data submission deadline for that measure. In addition, although we
understand that ASCs cannot currently change claims-based data
submitted for the ASCQR Program once submitted, or edit measure quality
data submitted via an online data submission tool after the submission
deadline for the measure has passed, we believe it is the
responsibility of each ASC to ensure that its data, as reported to CMS,
are accurate. We will continue looking for ways to address any data
inaccuracies in the future. Regarding the length of time available to
preview data prior to public release, we agree that sufficient time to
do so is important and will consider proposals for this in future
rulemaking.
Comment: One commenter urged CMS to maintain its established
practice of reporting data as ``Not Available'' for ASCs with
denominators greater than 0 and less than 11 for a given measure when
publicly reporting data for the ASCQR Program.
Response: We thank the commenter for its comment. We note that,
consistent with the CMS Policy for Privacy Act Implementation & Breach
Notification, 2007, CMS, statistical, aggregate, or summarized
information created as a result of analysis conducted using
identifiable CMS data obtained under CMS-approved projects/studies may
only be disclosed if the data are not individual-specific and the data
are aggregated to a level where no data cells contain 10 or fewer
individuals (https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-Information-Technology/SystemLifecycleFramework/downloads/privacypolicy.pdf). Thus, when case numbers are at issue, we will
publicly report data only for those measures for which an ASC had a
numerator greater than or equal to 11. However, this data reporting
requirement does not apply to data expressed as a rate or percentage.
After consideration of the public comments we received, we are
finalizing our proposal to publicly display data by the NPI when the
data are submitted by the NPI and to publicly display data by the CCN
when the data are submitted by the CCN, but are not finalizing our
proposal to attribute data submitted by the CCN to all NPIs associated
with the CCN. We are finalizing our proposal to codify the CCN and NPI
display policy at 42 CFR 416.315, with the modification discussed
above. We also are finalizing without modification our proposal to
codify our existing policies at 42 CFR 416.315.

C. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75132
through 75133), we finalized our requirements regarding QualityNet
accounts and QualityNet security administrators under the ASCQR Program
for the CY 2016 payment determination and subsequent years. Under these
requirements, ASCs must maintain a QualityNet account in order to
submit quality measure data to the QualityNet Web site for all Web-
based measures submitted via a CMS online data submission tool.
Further, a QualityNet security administrator is necessary to set up a
QualityNet user account to be able to enter data via an online tool
located on the QualityNet Web site. The registration process for the
QualityNet security administrator is described on the QualityNet Web
site. We recommend that ASCs submit documentation required for the
creation of a QualityNet Account at least 4 to 6 weeks prior to any
quality measure data submission deadline for the ASCQR Program. The
QualityNet security administrator typically fulfills a variety of tasks
related to quality reporting for ASCs, such as creating, approving,
editing, and terminating QualityNet user accounts, and monitoring
QualityNet usage to maintain proper security and confidentiality. In
the CY 2016 OPPS/ASC proposed rule (80 FR 39344), we did not propose
any changes to these policies. We proposed to codify these existing
requirements at proposed new 42 CFR 416.310(c)(1)(i).
We invited public comment on our proposal to codify our existing
requirements.
We did not receive any public comments on the proposal to codify
the administrative requirements regarding maintenance of a QualityNet
account and security administrator for the ASCQR Program and,
therefore, are finalizing it as proposed at 42 CFR 416.310(c)(1)(i).
2. Requirements Regarding Participation Status
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53639 through
53640), we finalized our participation policy. Under this policy, an
ASC is considered as participating in the ASCQR Program once the ASC
submits any quality measure data to the ASCQR Program. Further, once an
ASC submits any quality measure data and is considered participating in
the ASCQR Program, an ASC would still be considered participating in
the ASCQR Program, regardless of whether the ASC continues to submit
quality measure data, unless the ASC withdraws from the ASCQR Program.
An ASC may withdraw from the ASCQR Program by submitting to CMS a
withdrawal of participation form that can be found in the secure
portion of the QualityNet Web site, indicating that it is withdrawing
and the initial payment determination year to which the withdrawal
applies. Once the ASC has withdrawn, an ASC will incur a 2.0 percentage
point reduction in its ASC annual payment update for that payment
determination year and any subsequent payment determinations in which
it is withdrawn.
An ASC will be considered as rejoining the ASCQR Program if it
begins to submit any quality measure data again to the ASCQR Program.
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75133
through 75135), for the CY 2016 payment determination and subsequent
years, we finalized our policies that all program requirements would
apply to all ASCs designated as open in the Certification and Survey
Provider Enhanced Reporting (CASPER) system for at least 4 months prior
to the beginning of data collection for a payment determination and
that an ASC may withdraw from the ASCQR Program any time up to and
including August 31 of the year preceding a payment determination. For
example, an ASC can withdraw from the ASCQR Program at any time up to
and including August 31, 2016 for the CY 2017 payment determination. In
the CY 2016 OPPS/ASC proposed rule (80 FR 39344 through 39345), we did
not propose any changes to these policies. However, we proposed to
codify these existing requirements at proposed new 42 CFR 416.305(a)
and (b).
As finalized in the CY 2014 OPPS/ASC final rule with comment period
(78 FR 75135 through 75137), for the CY 2016 payment determination and
subsequent years, ASCs with fewer than 240 Medicare claims (Medicare
primary and secondary payer) per year during an annual reporting period
for a payment determination year are not required to participate in the
ASCQR Program for the subsequent annual reporting period for that
subsequent payment determination year. For example, an

[[Page 70534]]

ASC with fewer than 240 Medicare claims in CY 2016 (payment
determination year 2018) would not be required to participate in the
ASCQR Program in CY 2017 (payment determination year 2019). We did not
propose any changes to these existing requirements. However, we
proposed to codify these existing requirements at proposed new 42 CFR
416.305(c).
We invited public comment on our proposal to codify our existing
policies.
We did not receive any public comments on the proposals to codify
the requirements regarding participation status for the ASCQR Program
and, therefore, are finalizing them as proposed at 42 CFR 416.305(a),
(b), and (c).

D. Form, Manner, and Timing of Data Submitted for the ASCQR Program

We received public comments on alternate methods for submitting
data for the ASCQR Program.
Comment: One commenter recommended that CMS allow ASCs to meet the
requirements of the ASCQR Program using registry-based reporting,
noting that using a registry is an option under the PQRS and that other
registries are already in existence. The commenter also recommended
that ASCs should have the option of submitting quality data to CMS
through an EHR-based reporting mechanism, as there are ASCs that have
implemented this technology and could benefit from this option.
Response: We thank the commenter for these suggestions, and agree
that it could reduce burden to have a registry-based mechanism for data
submission because a registry would enable ASCs to contract with a
vendor that would collect and report quality data on the ASC's behalf.
We have not proposed a registry-based reporting option because,
currently, there is not a registry in place that is collecting
information on the quality measures that we have adopted for this
program. If registry-based reporting of the ASC quality measures
adopted for the ASCQR Program becomes available in the future, we will
explore further the viability of incorporating a registry-based
reporting mechanism in the ASCQR Program.
Regarding the use of EHR systems for reporting quality data, we
agree that reporting by this method could reduce reporting burden.
However, we are not aware of quality measures for ASCs that have been
specified for electronic reporting. If such measures do exist, we would
need to understand the level of EHR adoption and capabilities of ASCs
to utilize this method at that time before proposing their adoption in
the ASCQR Program. As we discussed in the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75124 through 75126), in a recent
environmental scan, which included an assessment of the readiness of
ASCs to electronically report quality data, we found evidence of low
levels of EHR use by ASCs. We believe that ASCs continue to be slow to
adopt EHRs because many of these facilities are small and the cost of
EHRs may pose a barrier to adoption.
Comment: One commenter requested a batch-processing data submission
option for entities that own multiple ASCs.
Response: We thank the commenter for this request. We agree that a
batch submission approach, which would allow ASCs to report data for
multiple facilities at once using their preexisting or a new
information technology infrastructure, has merit, especially for
entities that own multiple ASCs, and are considering how to implement
this capability into our data submission process. In the event this
method can be available for data submission, we would issue proposals
through future rulemaking for ASCQR Program implementation.
1. Requirements Regarding Data Processing and Collection Periods for
Claims-Based Measures Using Quality Data Codes (QDCs)
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68497
through 68498), we finalized our data processing and collection
policies for the claims-based measures using QDCs for the CY 2015
payment determination and subsequent years. Specifically, ASCs must
submit complete data on individual claims-based quality measures
through a claims-based reporting mechanism by submitting the
appropriate QDCs on the ASC's Medicare claims. The data collection
period for claims-based quality measures reported using QDCs is the
calendar year 2 years prior to the payment determination year. Only
claims for services furnished in each calendar year paid by the MAC by
April 30 of the following year of the ending data collection time
period will be included in the data used for the payment determination.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39345), we did not propose
any changes to these existing requirements. However, we proposed to
codify these existing requirements at proposed new 42 CFR 416.310(a)(1)
and (2).
We invited public comment on our proposal to codify our existing
policies.
We did not receive any public comments on the proposal to codify
the requirements regarding data processing and collection periods for
claims-based measures using QDCs for the ASCQR Program and, therefore,
are finalizing it as proposed at 42 CFR 416.310(a)(1) and (2).
2. Minimum Threshold, Minimum Case Volume, and Data Completeness for
Claims-Based Measures Using QDCs
The requirements for minimum threshold, minimum case volume, and
data completeness for participation in the ASCQR program for the CY
2015 payment determination and subsequent years are set forth in the CY
2013 OPPS/ASC final rule with comment period (77 FR 68498 through
68499) and the CY 2014 OPPS/ASC final rule with comment period (78 FR
75135 through 75137). As stated in the CY 2013 rule, for ASCQR Program
purposes, data completeness for claims-based measures using QDCs is
determined by comparing the number of Medicare claims (where Medicare
is the primary or secondary payer) meeting measure specifications that
contain the appropriate QDCs with the number of Medicare claims that
meet measure specifications, but do not have the appropriate QDCs on
the submitted Medicare claims. For the CY 2016 payment determination
and subsequent years, the minimum threshold for successful reporting is
that at least 50 percent of Medicare claims meeting measures
specifications contain the appropriate QDCs. ASCs that meet this
minimum threshold are regarded as having provided complete data for the
claims-based measures using QDCs for the ASCQR Program. In the CY 2016
OPPS/ASC proposed rule (80 FR 39345), we did not propose any changes to
these existing requirements. However, we proposed to codify these
existing requirements at proposed new 42 CFR 416.310(a)(3).
We invited public comment on our proposal to codify our existing
policies.
Comment: One commenter recommended that CMS raise the 50-percent
threshold for claims meeting measure specifications containing QDCs,
noting that many of the issues in the early years of the program that
led to this standard have been resolved. In addition, the commenter did
not support codifying the current 50-percent threshold for claims
meeting measure specifications containing QDCs because, the commenter
stated, CMS has previously expressed its intent to modify this
threshold and, the commenter stated, regulatory text should be reserved
for permanent policies.
Response: We thank the commenter for the recommendation. While we
did not propose any changes to our QDC use

[[Page 70535]]

threshold in this rulemaking, we will consider this comment as we move
forward with program planning as ASCs now have experience in submitting
data in this manner. We note that the threshold is a minimum and
holding at this level can enable an ASC that encounters reporting
issues during the year to recover and still meet requirements.
We also thank the commenter for sharing its concerns about the
ASCQR Program's proposal to codify this policy in regulatory text.
However, we note that codified regulatory text is regularly revised to
reflect changes in policy or position on a given issue. In addition,
for some users, codified text is both easier to access and easier to
understand than programmatic policies found only in preamble text.
Therefore, we believe it is appropriate to codify programmatic
policies, such as the minimum data threshold, and incorporate any
future changes to those policies when they are finalized through
notice-and-comment rulemaking.
After consideration of the public comments we received, we are
finalizing our proposal to codify our policies regarding the minimum
threshold and data completeness for claims-based measures using QDCs
for the ASCQR Program at 42 CFR 416.310(a)(3). We codified our policy
regarding the minimum case volume at 42 CFR 416.305(c), as discussed it
in section XIV.C.2. of this final rule with comment period.
3. Requirements for Data Submitted Via an Online Data Submission Tool
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75137
through 75139), we finalized the data collection time period for
quality measures for which data are submitted via a CMS online data
submission tool as services furnished during the calendar year 2 years
prior to the payment determination year. We also finalized our policy
that these data will be submitted during the time period of January 1
to August 15 in the year prior to the affected payment determination
year.
We established a different time period for data collection and
submission for ASC-8: Influenza Vaccination Coverage among Healthcare
Personnel (NQF #0431), which is submitted via the CDC's NHSN rather
than a CMS online data submission tool. For ASC-8, the data collection
for the CY 2016 payment determination is from October 1, 2014 through
March 31, 2015 (the 2014-2015 influenza season data) (76 FR 74510), and
for the CY 2017 payment determination and subsequent years is from
October 1 of the year 2 years prior to the payment determination year
to March 31 of the year prior to the payment determination year (79 FR
66986), and the submission deadline is May 15 of the year when the
influenza season ends (79 FR 66985 through 66986).
In the CY 2016 OPPS/ASC proposed rule (80 FR 39345 through 39346),
we proposed to implement a May 15 submission deadline for all data
submitted via a CMS Web-based tool in the ASCQR Program for the CY 2017
payment determination and subsequent years. This proposal currently
would include the following measures: ASC-6: Safe Surgery Checklist
Use; ASC-7: ASC Facility Volume Data on Selected ASC Surgical
Procedures; ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658);
ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients
with a History of Adenomatous Polyps--Avoidance of Inappropriate Use
(NQF #0659); and ASC-11: Cataracts: Improvement in Patient's Visual
Function within 90 Days Following Cataract Surgery (NQF #1536).\62\
Therefore, we proposed that data collected for a quality measure for
which data are submitted via a CMS online data submission tool must be
submitted during the time period of January 1 to May 15 in the year
prior to the payment determination year for the CY 2017 payment
determination and subsequent years. We proposed this change because we
believe that aligning all Web-based tool data submission deadlines with
the end date of May 15 would allow for earlier public reporting of
measure data and reduce the administrative burden for ASCs associated
with tracking multiple submission deadlines for these measures.
---------------------------------------------------------------------------

\62\ We note that ASC-11 is a voluntary measure for the CY 2017
payment determination and subsequent years. This proposal would mean
that ASCs that choose to submit data for this measure also would
need to submit such data between January 1 and May 15 for the CY
2018 payment determination and subsequent years.
---------------------------------------------------------------------------

We also proposed to codify these proposed and existing requirements
at proposed new 42 CFR 416.310(c)(1)(ii) and (2).
We invited public comment on our proposal to change the data
submission time period beginning with the CY 2017 payment determination
for measures for which data are submitted via a CMS online data
submission tool, and our proposal to codify this proposed policy and
our existing policy.
Comment: Commenters did not support CMS' proposal to implement a
May 15 submission deadline for all data submitted via a CMS online data
submission tool. The commenters asserted that a May 15 deadline would
increase ASC administrative burden by giving ASCs less time to collect
and report data. The commenters also noted that the current August 15
deadline was extended for the CY 2016 payment determination due to
technical issues, and expressed concern that similar issues may arise
each time new measures are added in the future. For these same reasons,
the commenters did not support CMS' proposal to codify the May 15
submission deadline for all data submitted via a CMS online data
submission tool. The commenters recommended that, if CMS wishes to
align the deadlines for submission of the Web-based measures, it use an
August 15 deadline instead.
Response: We thank the commenters for their comments regarding the
increased administrative burden associated with changing the submission
deadline for all data submitted via an online data submission tool from
August 15 to May 15. We seek to reduce the administrative burden of
participation in the ASCQR Program on ASCs where feasible and
practicable. For this reason, we have decided not to finalize the
proposal to change the deadline at this time. We will instead maintain
the August 15 submission deadline for all measures submitted via a CMS
online data submission tool.
However, we note that we are not changing the May 15 submission
deadline for ASC-8, which is submitted via a non-CMS online data
submission tool. As stated in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66986), we finalized a submission deadline of May
15 for ASC-8 in order to enable ASCs to use data summarizing the
results of their previous influenza vaccination campaign to set targets
and make plans for the next influenza season; to enable us to post and
for the public to review the summary data before the start of the next
influenza season; and to align this measure's submission deadline with
the Hospital IQR and OQR Programs. We continue to believe that the May
15 submission deadline is appropriate for ASC-8, and therefore are not
changing the submission deadline for this measure to August 15 at this
time. We will consider whether there is another way to reduce ASC
burden and expedite public reporting of these data in the future.
After consideration of the public comments we received, we are not
finalizing the proposal to implement a

[[Page 70536]]

May 15 submission deadline for data submitted using a CMS online data
submission tool. Instead, the ASCQR Program will continue to use the
currently adopted submission deadlines for these measures; that is, the
August 15 submission deadline for ASC-6, ASC-7, ASC-9, ASC-10, and ASC-
11. The ASCQR Program also will continue to use the currently adopted
May 15 submission deadline for ASC-8, which is submitted via a non-CMS
online data submission tool (the CDC's NHSN Web site). Furthermore,
consistent with the policy we are finalizing above regarding the August
15 submission deadline, we are codifying our policies for quality
measures for which data are submitted via a CMS online data submission
tool with the August 15 submission deadline at 42 CFR 416.310(c)(1)(ii)
instead of May 15 as originally proposed. In addition, we are
finalizing our proposal to codify our existing policies regarding the
data collection time periods for measures involving online data
submission and the deadline for data submission via a non-CMS online
data submission tool at 42 CFR 416.310(c)(2). However, we proposed to
include the word ``calendar'' in the proposed codification of this
policy at 42 CFR 416.310(c)(2). This word was not part of the finalized
policy and we believe this word is unnecessary. We have made a
technical change to not include this word in the final regulation.
4. Claims-Based Measure Data Requirements for the ASC-12: Facility 7-
Day Risk-Standardized Hospital Visit Rate After Outpatient Colonoscopy
Measure for the CY 2018 Payment Determination and Subsequent Years
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66970
through 66979), we adopted ASC-12: Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient Colonoscopy (NQF #2539) in the
ASCQR Program for the CY 2018 payment determination and subsequent
years. At the time we adopted this measure, it was not NQF-endorsed; it
has subsequently been endorsed by the NQF. Unlike the other claims-
based measures adopted for the ASCQR Program, this claims-based measure
does not require any additional data submission, such as QDCs. In the
CY 2015 OPPS/ASC final rule with comment period (79 FR 66985), we
finalized the policy to use paid Medicare fee-for-service (FFS) claims
from the calendar year 2 years before the payment determination year.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39346), we proposed to
align our policy regarding the paid claims to be included in the
calculation for claims-based measures not using QDCs with our policy
regarding the paid claims to be included for the claims-based measures
using QDCs.
Therefore, beginning with the CY 2018 payment determination, we
proposed to use claims for services furnished in each calendar year
that have been paid by the MAC by April 30 of the following year of the
ending data collection time period to be included in the data used for
the payment determination. We believe that this claim paid date would
allow ASCs sufficient time to submit claims and at the same time allow
CMS sufficient time to complete required data analysis and processing
to make payment determinations and to supply this information to the
MACs. For example, for the CY 2018 payment determination, for
calculating ASC-12, we would use claims for services furnished in CY
2016 (January 1, 2016 through December 21, 2016) that were paid by the
MAC by April 30, 2017.
We proposed to codify this policy at proposed new 42 CFR
416.310(b).
We invited public comment on our proposal regarding the paid claims
to be included in the data used for ASC-12 beginning with the CY 2018
payment determination, and our proposal to codify this proposal and our
existing policies.
We did not receive any public comments on these proposals.
Therefore, we are finalizing our policy regarding paid claims to be
included in the calculation for claims-based measures not using QDCs,
and codifying this proposal and our existing policies at 42 CFR
416.310(b). We inadvertently did not include the word ``paid'' in the
proposed codification of this policy at 42 CFR 416.310(b) and have made
this technical change to the final regulation.
5. Indian Health Service (IHS) Hospital Outpatient Departments Not
Considered ASCs for the Purpose of the ASCQR Program
Indian Health Service (IHS) hospital outpatient departments are
able to bill Medicare for ASC services and be paid based on the ASC
rates for services under the ASC payment system as described in Section
40.2.1, Chapter 19 of the Medicare Claims Processing Manual and Section
260.1, Chapter 15 of the Medicare Benefit Policy Manual (http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c19.pdf, http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c15.pdf). We have considered these entities to
be ASCs for purposes of the ASCQR Program due to their payment under
the ASC payment system. These entities are included under Section 260.1
(Definition of Ambulatory Surgical Centers), Chapter 15 of the Medicare
Benefit Policy Manual.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39346), we proposed
that these facilities not be considered ASCs for purposes of the ASCQR
Program, beginning with the CY 2017 payment determination. As stated in
the manuals, in order to bill for ASC services, these IHS hospital
outpatient departments must meet the conditions of participation for
hospitals defined in 42 CFR part 482 and are not certified as separate
ASC entities. Because these IHS hospital outpatient departments are
required to meet the conditions of participation for hospitals, which
state that the hospital's governing body must ensure that its quality
assessment and performance improvement program involves all hospital
departments and services, they should be included in the hospitals'
ongoing, hospital-wide, data-driven quality assessment and performance
improvement programs (42 CFR 482.21), which we believe ensures that
these IHS hospital outpatient departments engage in continuous quality
improvement efforts outside of participation in CMS' quality reporting
programs. For these reasons, we proposed that IHS hospital outpatient
departments that bill Medicare for ASC services under the ASC payment
system are not to be considered as ASCs for the purposes of the ASCQR
Program. These facilities would not be required to meet ASCQR Program
requirements and would not receive any payment reduction under the
ASCQR Program. We proposed to codify this proposal at proposed new 42
CFR 416.305(d).
We invited public comment on this proposal and our proposal to
codify it.
We did not receive any public comments on the proposal not to
consider IHS hospital outpatient departments ASCs for the purposes of
the ASCQR Program or the proposal to codify this policy and, therefore,
are finalizing and codifying this policy as proposed at 42 CFR
416.305(d).
6. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53641 through 53642) for a complete discussion of our policy not to
require validation of claims-based measures (beyond the usual claims
validation activities conducted by our MACs) or Web-based measures for
the ASCQR

[[Page 70537]]

Program. In the CY 2016 OPPS/ASC proposed rule (80 FR 39346 through
39347), we did not propose any changes to this policy.
7. Extraordinary Circumstances Extensions or Exemptions for the CY 2018
Payment Determination and Subsequent Years
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53642 through 53643)
and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75140
through 75141), we adopted procedures for extraordinary circumstance
extensions or exemption requests for the submission of information
required under the ASCQR Program.\63\ Specifically, CMS may grant an
extension or exemption for the submission of information in the event
of extraordinary circumstances beyond the control of an ASC, such as
when an act of nature affects an entire region or locale, or a
systematic problem with one of our data collection systems directly or
indirectly affects data submission. We may grant an extension or
exemption as follows:
---------------------------------------------------------------------------

\63\ In the CY 2015 OPPS/ASC final rule with comment period (79
FR 66987), we stated that we will refer to the process as the
``Extraordinary Circumstances Extensions or Exemptions'' process
rather than the ``Extraordinary Circumstances Extensions or
Waivers'' process.
---------------------------------------------------------------------------

(1) Upon request by the ASC. Specific requirements for submission
of a request for an extension or exemption are available on the
QualityNet Web site; or
(2) At the discretion of CMS. CMS may grant extensions or
exemptions to ASCs that have not requested them when CMS determines
that an extraordinary circumstance has occurred.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39347), we did not
propose any changes to these requirements. However, we proposed to
codify these existing procedures at proposed new 42 CFR 416.310(d). We
invited public comment on our proposal to codify our existing policies.
We did not receive any public comments on the proposal to codify
our policies regarding extraordinary circumstances extensions or
exceptions in the ASCQR Program and, therefore, are finalizing it as
proposed at 42 CFR 416.310(d).
8. ASCQR Program Reconsideration Procedures
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 through 53644)
and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75141),
we set forth our requirements for an informal reconsideration process.
Specifically, an ASC may request reconsideration of a decision by CMS
that it has not met the requirements of the ASCQR Program for a
particular payment determination year by submitting a reconsideration
request (signed by a person who has authority to sign on behalf of the
ASC) to CMS by March 17 of the affected payment determination year. A
reconsideration request must contain the following information:
ASC CCN and related NPI(s);
The name of the ASC;
The CMS-identified reason for not meeting the requirements
of the ASCQR Program for the affected payment determination year as
provided in any CMS notification to the ASC;
The ASC's basis for requesting reconsideration. The ASC
must identify its specific reason(s) for believing it met the ASCQR
Program requirements for the affected payment determination year and
should not be subject to the reduced ASC annual payment update;
The ASC-designated personnel contact information,
including name, email address, telephone number, and mailing address
(must include physical mailing address, not just a post office box);
and
A copy of all materials that the ASC submitted to comply
with the requirements of the affected ASCQR Program payment
determination year. With regard to information on claims, ASCs are not
required to submit copies of all submitted claims, but instead may
focus on the specific claims at issue. For these claims, ASCs should
submit relevant information, which could include copies of the actual
claims at issue.
Upon receipt of a request for reconsideration, CMS will do the
following:
Provide an email acknowledgement, using the contact
information provided in the reconsideration request, notifying the ASC
that the request has been received; and
Provide a formal response to the ASC contact, using the
information provided in the reconsideration request notifying the ASC
of the outcome of the reconsideration process.
For those ASCs that submit a timely reconsideration request, the
reconsideration determination is the final ASCQR Program payment
determination. For ASCs that do not submit a timely reconsideration
request, the CMS determination is the final payment determination.
There is no appeal of any final ASCQR Program payment determination.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39347), we proposed
one change to these requirements. Under our current reconsideration
procedures, ASCs are required to submit reconsideration requests by
March 17 of the affected payment determination year (77 FR 53643
through 53644). However, we recognize that, in some payment years,
March 17 may fall outside of the business week. Therefore, we proposed
that, beginning with the CY 2017 payment determination, ASCs must
submit a reconsideration request to CMS by no later than the first
business day on or after March 17 of the affected payment year . We
proposed to codify these existing procedures and the proposed change to
the deadline at proposed new 42 CFR 416.330.
We invited public comment on our proposal to change the
reconsideration request submission deadline and our proposal to codify
our existing policies.
We did not receive any public comments on the proposal to change
the reconsideration request submission deadline for the ASCQR Program
or the proposal to codify this policy and our existing reconsideration
policies and, therefore, are finalizing them at 42 CFR 416.330. We are
making a technical change to add the word ``timely'' at 42 CFR
416.330(d) to clarify that the reconsideration determination is the
final ASCQR Program payment determination for an ASC that submits a
timely reconsideration request.

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

1. Statutory Background
We refer readers to section XV.C.1. of the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75131 through 75132) for a detailed
discussion of the statutory background regarding payment reductions for
ASCs that fail to meet the ASCQR Program requirements.
2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet the
ASCQR Program Requirements for a Payment Determination Year
The national unadjusted payment rates for many services paid under
the ASC payment system equal the product of the ASC conversion factor
and the scaled relative payment weight for the APC to which the service
is assigned. Currently, the ASC conversion factor is equal to the
conversion factor calculated for the previous year updated by the MFP-
adjusted CPI-U update factor, which is the adjustment set forth in
section 1833(i)(2)(D)(v) of the Act. The MFP-adjusted CPI-U update
factor is the Consumer Price Index for all urban consumers (CPI-U),
which currently is the annual update for the ASC payment

[[Page 70538]]

system, minus the MFP adjustment. As discussed in the CY 2011 MPFS
final rule with comment period (75 FR 73397), if the CPI-U is a
negative number, the CPI-U would be held to zero. Under the ASCQR
Program, any annual update will be reduced by 2.0 percentage points for
ASCs that fail to meet the reporting requirements of the ASCQR Program.
This reduction applied beginning with the CY 2014 payment rates. For a
complete discussion of the calculation of the ASC conversion factor, we
refer readers to section XII.G. of this final rule with comment period.
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499
through 68500), in order to implement the requirement to reduce the
annual update for ASCs that fail to meet the ASCQR Program
requirements, we finalized our proposal that we would calculate two
conversion factors: a full update conversion factor and an ASCQR
Program reduced update conversion factor. We finalized our proposal to
calculate the reduced national unadjusted payment rates using the ASCQR
Program reduced update conversion factor that would apply to ASCs that
fail to meet their quality reporting requirements for that calendar
year payment determination. We finalized our proposal that application
of the 2.0 percentage point reduction to the annual update may result
in the update to the ASC payment system being less than zero prior to
the application of the MFP adjustment.
The ASC conversion factor is used to calculate the ASC payment rate
for services with the following payment indicators (listed in Addenda
AA and BB to this final rule with comment period, which are available
via the Internet on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,''
and ``Z2,'' as well as the service portion of device-intensive
procedures identified by ``J8.'' We finalized our proposal that payment
for all services assigned the payment indicators listed above would be
subject to the reduction of the national unadjusted payment rates for
applicable ASCs using the ASCQR Program reduced update conversion
factor.
The conversion factor is not used to calculate the ASC payment
rates for separately payable services that are assigned status
indicators other than payment indicators ``A2,'' ``G2,'' ``J8,''
``P2,'' ``R2,'' and ``Z2.'' These services include separately payable
drugs and biologicals, pass-through devices that are contractor-priced,
brachytherapy sources that are paid based on the OPPS payment rates,
and certain office-based procedures, certain radiology services and
diagnostic tests where payment is based on the MPFS nonfacility PE RVU-
based amount, and a few other specific services that receive cost-based
payment. As a result, we also finalized our proposal that the ASC
payment rates for these services would not be reduced for failure to
meet the ASCQR Program requirements because the payment rates for these
services are not calculated using the ASC conversion factor and,
therefore, not affected by reductions to the annual update.
Office-based surgical procedures (performed more than 50 percent of
the time in physicians' offices) and separately paid radiology services
(excluding covered ancillary radiology services involving certain
nuclear medicine procedures or involving the use of contrast agents)
are paid at the lesser of the MPFS nonfacility PE RVU-based amounts or
the amount calculated under the standard ASC ratesetting methodology.
Similarly, in section XII.D.2.b. of the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66933 through 66934), we finalized our
proposal that payment for the new category of covered ancillary
services (that is, certain diagnostic test codes within the medical
range of CPT codes for which separate payment is allowed under the OPPS
and when they are integral to an ASC covered surgical procedure) will
be at the lesser of the MPFS nonfacility PE RVU-based amounts or the
rate calculated according to the standard ASC ratesetting methodology.
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68500),
we finalized our proposal that the standard ASC ratesetting methodology
for this type of comparison would use the ASC conversion factor that
has been calculated using the full ASC update adjusted for
productivity. This is necessary so that the resulting ASC payment
indicator, based on the comparison, assigned to these procedures or
services is consistent for each HCPCS code regardless of whether
payment is based on the full update conversion factor or the reduced
update conversion factor.
For ASCs that receive the reduced ASC payment for failure to meet
the ASCQR Program requirements, we believe that it is both equitable
and appropriate that a reduction in the payment for a service should
result in proportionately reduced coinsurance liability for
beneficiaries. Therefore, in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68500), we finalized our proposal that the
Medicare beneficiary's national unadjusted coinsurance for a service to
which a reduced national unadjusted payment rate applies will be based
on the reduced national unadjusted payment rate.
In that final rule with comment period, we finalized our proposal
that all other applicable adjustments to the ASC national unadjusted
payment rates would apply in those cases when the annual update is
reduced for ASCs that fail to meet the requirements of the ASCQR
Program (77 FR 68500). For example, the following standard adjustments
would apply to the reduced national unadjusted payment rates: The wage
index adjustment, the multiple procedure adjustment, the interrupted
procedure adjustment, and the adjustment for devices furnished with
full or partial credit or without cost. We believe that these
adjustments continue to be equally applicable to payment for ASCs that
do not meet the ASCQR Program requirements.
In the CY 2014 and CY 2015 OPPS/ASC final rules with comment
periods (78 FR 75132 and 79 FR 66981 through 66982), we did not make
any changes to these policies. In the CY 2016 OPPS/ASC proposed rule
(80 FR 39347 through 39348), we did not propose any changes to these
policies.

XV. Short Inpatient Hospital Stays

A. Background on the 2-Midnight Rule

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through
50954), we discussed CMS' longstanding policy on how Medicare
contractors review inpatient hospital and CAH admissions for payment
purposes. In that final rule, we discussed previously existing Medicare
policy contained in the Section 10, Chapter 1 of the Medicare Benefit
Policy Manual (MBPM) that stated that when a beneficiary receives a
minor surgical procedure or other treatment in the hospital that is
expected to keep him or her in the hospital for only a few hours (less
than 24 hours), the services generally should be billed as outpatient
hospital services, regardless of the hour the beneficiary comes to the
hospital, whether he or she uses a bed, and whether he or she remains
in the hospital past midnight. We noted that we have been clear that
this billing instruction does not override the clinical judgment of the
physician to keep the beneficiary at the hospital, to order specific
services, or to determine appropriate levels of nursing care or
physical locations within the hospital. Rather, this instruction
provided a benchmark to ensure that all beneficiaries received
consistent application of their Medicare Part A benefit to whatever
clinical services were medically necessary.

[[Page 70539]]

However, due to persistently large improper payment rates in short-
stay hospital inpatient claims, requests to provide additional guidance
regarding the proper billing of those services, and concerns about
increasingly long stays of Medicare beneficiaries as outpatients due to
hospital uncertainties about payment, we modified and clarified our
general rule in the regulations with respect to Medicare payment for
inpatient hospital admissions. Specifically, in the FY 2014 IPPS/LTCH
PPS final rule, we provided guidance for payment purposes that
specified that, generally, a hospital inpatient admission is considered
reasonable and necessary if a physician or other qualified practitioner
(collectively, ``physician'') orders such admission based on the
expectation that the beneficiary's length of stay will exceed 2
midnights or if the beneficiary requires a procedure specified as
inpatient-only under Sec. 419.22 of the regulations. We finalized at
Sec. 412.3(d)(1) of the regulations that services designated under the
OPPS as inpatient only procedures would continue to be appropriate for
inpatient hospital admission and payment under Medicare Part A. In
addition, we finalized a benchmark providing that surgical procedures,
diagnostic tests, and other treatments would be generally considered
appropriate for inpatient hospital admission and payment under Medicare
Part A when the physician expects the patient to require a stay that
crosses at least 2 midnights and admits the patient to the hospital
based upon that expectation. Conversely, when a beneficiary enters a
hospital for a surgical procedure not specified as inpatient-only under
Sec. 419.22(n), a diagnostic test, or any other treatment, and the
physician expects to keep the beneficiary in the hospital for only a
limited period of time that does not cross 2 midnights, the services
would be generally inappropriate for payment under Medicare Part A,
regardless of the hour that the beneficiary came to the hospital or
whether the beneficiary used a bed.
We finalized a policy at Sec. 412.3(d)(2) (originally designated
as Sec. 412.3(e)(2) and later redesignated as Sec. 412.3(d)(2)) of
the regulations that if an unforeseen circumstance, such as beneficiary
death or transfer, results in a shorter beneficiary stay than the
physician's reasonable expectation of at least 2 midnights, the patient
may still be considered to be appropriately treated on an inpatient
basis for payment purposes, and the hospital inpatient payment may be
made under Medicare Part A.
In addition to the new hospital admission guidance, we also
finalized two distinct, although related, medical review policies, a 2-
midnight ``benchmark'' and a 2-midnight ``presumption,'' effective for
admissions on or after October 1, 2013. The 2-midnight benchmark, which
is described in more detail below, represents guidance to reviewers to
identify when an inpatient admission is generally appropriate for
Medicare coverage and payment, while the 2-midnight presumption relates
to instructions to medical reviewers regarding the selection of claims
for medical review. Specifically, under the 2-midnight presumption,
inpatient hospital claims with lengths of stay greater than 2 midnights
after the formal admission following the order are presumed to be
appropriate for Medicare Part A payment and are not the focus of
medical review efforts, absent evidence of systematic gaming, abuse, or
delays in the provision of care in an attempt to qualify for the 2-
midnight presumption.
With respect to the 2-midnight benchmark, the starting point is
when the beneficiary begins receiving hospital care either as a
registered outpatient or after inpatient admission. That is, for
purposes of determining whether the 2-midnight benchmark is met and,
therefore, whether an inpatient admission is appropriate for Medicare
Part A payment, we consider the physician's expectation including the
total time spent receiving hospital care--not only the expected
duration of care after inpatient admission, but also any time the
beneficiary has spent (before inpatient admission) receiving outpatient
services, such as observation services, treatments in the emergency
department, and procedures provided in the operating room or other
treatment area. From the medical review perspective, while the time the
beneficiary spent as an outpatient before the admission order is
written is not considered inpatient time, it is considered during the
medical review process for purposes of determining whether the 2-
midnight benchmark was met and, therefore, whether payment is
appropriate under Medicare Part A. For beneficiaries who do not arrive
through the emergency department or are directly receiving inpatient
services (for example, inpatient admission order written prior to
admission for an elective admission), the starting point for medical
review purposes is when the beneficiary starts receiving medically
responsive services following arrival at the hospital. For Medicare
payment purposes, both the decision to keep the patient at the hospital
and the expectation of needed duration of the stay must be supported by
documentation in the medical record based on factors such as
beneficiary medical history and comorbidities, the severity of signs
and symptoms, current medical needs, and the risk of an adverse event
during hospitalization.
With respect to inpatient stays spanning less than 2 midnights
after admission, we instructed contractors that, although such claims
would not be subject to the presumption, the admission may still be
appropriate for Medicare Part A payment because time spent as an
outpatient should be considered in determining whether there was a
reasonable expectation that the hospital care would span 2 or more
midnights. In other words, even if an inpatient admission was for only
1 Medicare utilization day, medical reviewers are instructed to
consider the total duration of hospital care, both pre- and post-
inpatient admission, when making the determination of whether the
inpatient stay was reasonable and necessary for purposes of Medicare
Part A payment.
We continue to believe that use of the 2-midnight benchmark gives
appropriate consideration to the medical judgment of physicians and
also furthers the goal of clearly identifying when an inpatient
admission is appropriate for payment under Medicare Part A. More
specifically, as we described in the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50943 through 50954), factors such as the procedures being
performed and the beneficiary's condition and comorbidities apply when
the physician formulates his or her expectation regarding the need for
hospital care, while the determination of whether an admission is
appropriately billed and paid under Medicare Part A or Part B is based
upon the physician's medical judgment regarding the beneficiary's
expected length of stay. We have not identified any circumstances where
the 2-midnight benchmark restricts the physician to a specific pattern
of care because the 2-midnight benchmark, like the previous 24-hour
benchmark, does not prevent the physician from ordering or providing
any service at any hospital, regardless of the expected duration of the
service. Rather, this policy provides guidance on when the hospitalized
beneficiary's care is appropriate for coverage and payment under
Medicare Part A benefits as an inpatient, and when the beneficiary's
care is appropriate for coverage and payment

[[Page 70540]]

under Medicare Part B benefits as an outpatient.
On the other hand, we also acknowledge that certain procedures may
have intrinsic risks, recovery impacts, or complexities that would
cause them to be appropriate for inpatient coverage under Medicare Part
A regardless of the length of hospital time the admitting physician
expects a particular patient to require. We believe that the OPPS
inpatient-only list of procedures identifies those procedures and,
therefore, procedures on that list are not subject to the 2-midnight
benchmark for purposes of inpatient hospital payment. We explained in
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50943 through 50954) that
we might specify additional exceptions to the generally applicable
benchmark through subregulatory guidance, including manual
instructions. Accordingly, since publication of the final rule, we have
accepted and considered suggestions from stakeholders regarding
potential ``rare and unusual'' circumstances under which an inpatient
admission that is expected to span less than 2 midnights would
nonetheless be appropriate for Medicare Part A payment.
In January 2014, we identified newly initiated mechanical
ventilation (when medically necessary and excluding anticipated
intubations related to minor surgical procedures or other treatment) as
the first such rare and unusual exception to the 2-midnight benchmark.
We announced this exception by posting it on the CMS Web site. In the
FY 2015 IPPS/LTCH PPS final rule (79 FR 50147), we invited further
feedback on suggested exceptions to the 2-midnight benchmark, in
recognition that there could be additional rare and unusual
circumstances that we have not identified that justify payment as an
inpatient admission under Medicare Part A, absent an expectation of
care spanning at least 2 midnights.
With respect to the 2-midnight benchmark, we have been clear that
this instruction does not override the clinical judgment of the
physician regarding the need to keep the beneficiary at the hospital,
to order specific services, or to determine appropriate levels of
nursing care or physical locations within the hospital. Rather, as with
the previous 24-hour benchmark in the MBPM, this instruction provides a
benchmark to ensure that all beneficiaries receive consistent
application of their Medicare Part A benefit to medically necessary
clinical services.
As part of our efforts to provide education to stakeholders on the
2-midnight rule, CMS has hosted numerous ``Open Door Forums,''
conducted national provider calls, and shared information and answers
to frequently asked questions on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html.
In addition, we instructed MACs to conduct a ``Probe and Educate''
process for inpatient claims with dates of admission on or after
October 1, 2013 through September 30, 2014, to assess provider
understanding and compliance with the new policy. We also prohibited
Recovery Auditor post-payment medical reviews of inpatient hospital
patient status for claims with dates of admission between October 1,
2013 and September 30, 2014. On April 1, 2014, the Protecting Access to
Medicare Act of 2014 Pub. L. 113-93) was enacted. Section 111 of Pub.
L. 113-93 permitted CMS to continue medical review activities under the
MAC Inpatient Probe and Educate process through March 31, 2015. The
same law also extended the prohibition on Recovery Auditor reviews of
inpatient hospital patient status for claims with dates of admission
through March 31, 2015, absent evidence of systematic gaming, fraud,
abuse, or delays in the provision of care by a provider of services. On
April 16, 2015, the Medicare Access and CHIP Reauthorization Act of
2015 (Pub. L. 114-10) was enacted. Section 521 of Pub. L. 114-10
permitted CMS to further extend the medical review activities under the
MAC hospital Probe and Educate process for inpatient claims through
September 30, 2015, and extended the prohibition of Recovery Auditor
reviews of inpatient hospital patient status for claims with dates of
admission through September 30, 2015. CMS announced in August 2015 that
it will not approve Recovery Auditors to conduct patient status reviews
for dates of admission of October 1, 2015 through December 31, 2015.
(We refer readers to the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html for
more information on this announcement.) MACs have completed the first
and second rounds of probe reviews and provider education and were
instructed to complete a third round of probe reviews on or before
September 30, 2015. Throughout the Probe and Educate process to date,
we have seen positive effects and improved provider understanding of
the 2-midnight rule. For example, the second round of probe and educate
denial rates were lower than those in the first round, which may
reflect improved provider understanding of the 2-midnight rule after
the implementation of the first round of provider education. In
addition, anecdotal reports indicate that providers found that the
education provided as a result of probe reviews was effective in
promoting a better understanding of the policy.
In response to industry feedback, including suggestions to alter
the Recovery Audit Program, on December 30, 2014, we announced a number
of changes to the Recovery Audit Program. To address hospitals'
concerns that they do not have the opportunity to rebill for medically
necessary Medicare Part B inpatient services by the time a medical
review contractor has denied a Medicare Part A inpatient claim, we
changed the Recovery Auditor ``look-back period'' for patient status
reviews to 6 months from the date of service in cases where a hospital
submits the claim within 3 months of the date that it provides the
service. We established incrementally applied Additional Documentation
Request (ADR) limits for providers that are new to Recovery Auditor
reviews and will establish limits on ADRs that are based on a
hospital's compliance with Medicare rules and that are diversified
across all claim types of a facility. We also indicated that we plan to
establish a requirement that Recovery Auditors must complete complex
reviews within 30 days, and failure to do so will result in the loss of
the Recovery Auditor's contingency fee, even if an error is found.
Finally, we plan to require Recovery Auditors to wait 30 days before
sending a claim to the MAC for adjustment to allow the provider to
submit a discussion period request to the Recovery Auditor before the
MAC makes any payment adjustments. We plan to complete implementation
of these changes through modifications to the current Recovery Auditor
contracts.

B. Policy Change for Medical Review of Inpatient Hospital Admissions
Under Medicare Part A

While we have been clear that the 2-midnight benchmark does not
override the clinical judgment of the physician regarding the need to
keep the beneficiary at the hospital, to order specific services, or to
determine appropriate levels of nursing care or physical locations
within the hospital, some stakeholders have argued that the 2-midnight
benchmark removes physician judgment from the decision to

[[Page 70541]]

admit a patient for inpatient hospital services. We disagree. We
continue to believe that the 2-midnight benchmark provides, for payment
purposes, clear guidance on when a hospital inpatient admission is
appropriate for Medicare Part A payment, while respecting the role of
physician judgment. However, we believe the concerns raised by
stakeholders merit continued consideration.
In light of the aforementioned stakeholder concern and in our
continued effort to develop the most appropriate and applicable
framework for determining when payment under Medicare Part A is
appropriate for inpatient admissions, in the CY 2016 OPPS/ASC proposed
rule (80 FR 39350 through 39351), we proposed to modify our existing
``rare and unusual'' exceptions policy to allow for Medicare Part A
payment on a case-by-case basis for inpatient admissions that do not
satisfy the 2-midnight benchmark, if the documentation in the medical
record supports the admitting physician's determination that the
patient requires inpatient hospital care despite an expected length of
stay that is less than 2 midnights. For payment purposes, the following
factors, among others, would be relevant to determining whether an
inpatient admission where the patient stay is expected to be less than
2 midnights is nonetheless appropriate for Part A payment:
The severity of the signs and symptoms exhibited by the
patient;
The medical predictability of something adverse happening
to the patient; and
The need for diagnostic studies that appropriately are
outpatient services (that is, their performance does not ordinarily
require the patient to remain at the hospital for 24 hours or more).
We noted that, under the existing rare and unusual policy, only one
exception--prolonged mechanical ventilation--has been identified to
date. Upon further consideration and based on feedback from
stakeholders, we stated our belief that there may be other patient-
specific circumstances where certain cases may nonetheless be
appropriate for Part A payment, absent an expected stay of at least 2
midnights, and that such circumstances should be determined on a case-
by-case basis. We proposed a revised policy under which, for purposes
of Medicare payment, an inpatient admission would be payable under Part
A if the documentation in the medical record supports either the
admitting physician's reasonable expectation that the patient will
require hospital care spanning at least 2 midnights, or the physician's
determination based on factors such as those identified above that the
patient requires formal admission to the hospital on an inpatient
basis.
Accordingly, we proposed to revise Sec. 412.3(d)(1) of the
regulations to reflect this modification. Existing Sec. 412.3(d)(1)
specifies, in relevant part, that if the physician expects to keep the
patient in the hospital for only a limited period of time that does not
cross 2 midnights, the services are generally inappropriate for
inpatient admission and inpatient payment under Medicare Part A,
regardless of the hour that the patient came to the hospital or whether
the patient used a bed. We proposed to revise Sec. 412.3(d) to state
that when the admitting physician expects a hospital patient to require
hospital care for only a limited period of time that does not cross 2
midnights, the services may be appropriate for payment under Medicare
Part A if the physician determines and documents in the patient's
medical record that the patient requires a reasonable and necessary
admission to the hospital as an inpatient. We noted that, in general,
we would expect that with most inpatient admissions where the stay is
expected to last less than the 2-midnight benchmark, the patient will
remain in the hospital at least overnight. However, we acknowledged
that the patient can be unexpectedly discharged or transferred to
another hospital and not actually use a hospital bed overnight. We
proposed that cases for which the physician determines that an
inpatient admission is necessary, but that do not span at least 1
midnight, would be prioritized for medical review. In addition to the
proposed substantive changes discussed earlier in this section, we also
proposed to revise existing paragraphs (d)(1) and (d)(2) for clarity.
Under the proposed policy change, for stays for which the physician
expects the patient to need less than 2 midnights of hospital care and
the procedure is not on the inpatient only list or on the national
exception list, an inpatient admission would be payable on a case-by-
case basis under Medicare Part A in those circumstances under which the
physician determines that an inpatient stay is warranted and the
documentation in the medical record supports that an inpatient
admission is necessary.
We did not propose any changes for hospital stays that are expected
to be greater than 2 midnights; that is, if the physician expects the
patient to require hospital care that spans at least 2 midnights and
admits the patient based on that expectation, the services are
generally appropriate for Medicare Part A payment. (We note that this
policy applies to hospital admissions where the patient is reasonably
expected to stay at least 2 midnights, and payment will still be
appropriate where the medical record supports the admitting physician's
reasonable expectation that the patient would stay at least 2
midnights, but the actual stay was less due to unforeseen
circumstances, such as unexpected patient death, transfer, clinical
improvement, or departure against medical advice.) We also did not
propose to change the 2-midnight presumption.
Our existing policy provides for payment under Part A based upon
the admitting physician's clinical judgment that a patient will require
hospital care that is expected to span at least 2 midnights. The
proposed change would also allow for payment under Part A on a case-by-
case basis for stays expected to last less than the 2-midnight
benchmark, based upon the admitting physician's clinical judgment that
inpatient hospital admission is appropriate. Consistent with
longstanding Medicare policy, the decision to formally admit a patient
to the hospital is subject to medical review.
Under our proposed revision to the policy for cases not meeting the
2-midnight benchmark, where the medical record does not support a
reasonable expectation of the need for care crossing at least 2
midnights, and for inpatient admissions not related to a surgical
procedure specified by Medicare as inpatient-only under Sec. 419.22(n)
or for which there was not a national exception (currently, there is an
exception for new onset mechanical ventilation), payment of the claim
under Medicare Part A will be subject to the clinical judgment of the
medical reviewer. Consistent with our current practices, under our
proposed revised policy, the medical reviewer's clinical judgment would
involve the synthesis of all submitted medical record information (for
example, progress notes, diagnostic findings, medications, nursing
notes, and other supporting documentation) to make a medical review
determination on whether the clinical requirements in the relevant
policy have been met. In addition, Medicare review contractors must
abide by CMS policies in conducting payment determinations, but are
permitted to take into account evidence-based guidelines or commercial
utilization tools that may aid such a decision. While Medicare review
contractors may continue to use commercial screening tools to help
evaluate the inpatient

[[Page 70542]]

admission decision for purposes of payment under Medicare Part A, such
tools are not binding on the hospital, CMS, or its review contractors.
This type of information also may be appropriately considered by the
physician as part of the complex medical judgment that guides his or
her decision to keep a beneficiary in the hospital and formulation of
the expected length of stay. Some members of the hospital industry have
argued that Medicare should adopt specific criteria for medical review
entities to use when reviewing short-stay hospital claims. We invited
public comments on whether specific medical review criteria should be
adopted for inpatient hospital admissions that are not expected to span
at least 2 midnights and, if so, what those criteria should be.
Although CMS reviewers will take into consideration the physician's
decision to admit a beneficiary, the admission must be reasonable and
necessary and supported by clear documentation in the patient's medical
record in order to be covered under Medicare Part A. Likewise, in order
to be covered under Medicare Part A, the care furnished must also be
reasonable and necessary. Section 1862(a)(1) of the Act prohibits
payment under the Medicare program for services that are not reasonable
and necessary for the diagnosis or treatment of illness or injury. In
cases where CMS reviewers find that an inpatient admission is not
medically reasonable and necessary and thus not appropriate for payment
under Medicare Part A, we note that the beneficiary's patient status
remains ``inpatient'' as of the time of the inpatient admission, and is
not changed to outpatient, because the beneficiary was formally
admitted as an inpatient and there is no provision to change a
beneficiary's status after he or she is discharged from the hospital,
as stated in CMS Ruling 1455-R (78 FR 16617). In these cases, the
hospital will not receive payments for the beneficiary under Medicare
Part A but may be able to submit a Medicare Part B inpatient claim for
the Part B services that would have been payable to the hospital had
the beneficiary originally been treated as an outpatient.
We note that our proposed change in policy for payment of hospital
care expected to last less than 2 midnights does not negate another
longstanding policy, recognizing that there are certain situations in
which a hospital inpatient admission is rarely appropriate for Medicare
Part A payment. We continue to believe, as stated above and as stated
in the MBPM, that when a beneficiary receives a minor surgical
procedure or other treatment in the hospital that is expected to keep
him or her in the hospital for only a few hours (less than 24 hours),
the services should generally be billed as outpatient hospital
services, regardless of the hour the beneficiary comes to the hospital,
whether he or she uses a bed, and whether he or she remains in the
hospital past midnight (Section 10, Chapter 1 of the MBPM).
Accordingly, we would expect it to be rare and unusual for a
beneficiary to require inpatient hospital admission after having a
minor surgical procedure or other treatment in the hospital that is
expected to keep him or her in the hospital for only a few hours and
not at least overnight. We stated in the proposed rule that we will
monitor the number of these types of admissions and plan to prioritize
these types of cases for medical review.
Comment: Several commenters expressed appreciation for CMS'
proposal and stated their belief that the proposal is more reflective
of the agency's longstanding policy that recognizes the important role
of physician judgment and individual patient needs in the hospital
admission decision-making process. Commenters in support of the
proposed policy also expressed appreciation that CMS did not propose a
change to the 2-midnight presumption, which maintains the certainty
that patient stays of 2 midnights or longer after admission are
presumptively appropriate as inpatient cases.
Response: We appreciate the commenters' support and agree that our
proposed policy continues to recognize the important role of physician
judgment and individual patient needs in the hospital admission
decision-making process while also maintaining the certainty that
patient stays of 2 midnights or longer after admission are generally
appropriate for payment under Medicare Part A and will generally only
be selected for review in circumstances of fraud or gaming.
Comment: A number of commenters who supported the proposal
requested that CMS provide hospitals with the important details, tools,
and time necessary to effectively implement changes to the 2-midnight
policy the agency may finalize. Some commenters making this request
specifically asked that CMS consider a March 31, 2016 enforcement date,
for potential changes to the 2-midnight policy. A few commenters who
supported the proposal asked CMS to clarify in the final rule if this
proposal means CMS intends to return to its policy position prior to
the implementation of the 2-midnight rule, with the exception of cases
where the patient stays 2 midnights after admission and is presumed to
be a medically necessary inpatient.
Response: Consistent with our annual rulemaking process, we believe
that there is sufficient time between the date the final rule becomes
available (on or before November 1, 2015) to the public and the
effective date of the policy (January 1, 2016) for hospitals to become
familiar with and adopt any changes necessitated by the final policies
outlined in this final rule with comment period, including adoption of
our proposed changes to the 2-midnight rule, and therefore do not see a
reason to delay the effective date of this policy beyond January 1,
2016. We also believe that the details pertinent to the final policy on
2-midnights are sufficiently set forth in this final rule with comment
period and its supporting documents and guidance and that all tools
necessary for the effective implementation of the final policy have
been made available to hospitals, physicians and other stakeholders.
In response to comments requesting that we clarify whether the
proposed policy is a return to the policy that was in effect prior to
the implementation of the 2-midnight rule (with the exception of cases
where the patient stays 2 midnights and is presumed to be a medically
necessary inpatient), we explicitly note that our proposal is not a
return to the policy prior to the adoption of the 2-midnight rule. The
proposed policy continued to employ the 2-midnight rule (both the 2-
midnight benchmark and the 2-midnight presumption) and proposed to
allow for greater flexibility in determining when an admission that
does not meet the 2-midnight benchmark should nonetheless be payable.
This is distinct from the policy that was in effect prior to the
adoption of the 2-midnight rule in the form of manual guidance that
stated that when a beneficiary receives a minor surgical procedure or
other treatment in the hospital that is expected to keep him or her in
the hospital for only a few hours (less than 24 hours), the services
generally should be billed as outpatient hospital services, regardless
of the hour the beneficiary comes to the hospital, whether he or she
uses a bed, and whether he or she remains in the hospital past
midnight.
Comment: Several commenters, including MedPAC and the American
Medical Association (AMA), recommended that CMS rescind the 2-midnight
rule in its entirety. Some of the commenters stated that any time-based
admission policy would interfere

[[Page 70543]]

with physician judgment. In addition, MedPAC expressed concern that the
2-midnight rule may provide hospitals with an incentive to lengthen
hospital stays in order to avoid scrutiny and that longer stays
generally increase costs and expose Medicare beneficiaries to greater
physical risk while also conflicting with the general incentives of the
prospective payment system to reduce hospital lengths of stay. MedPAC
also stated that the Commission recommended that CMS withdraw the 2-
midnight rule because it becomes redundant in light of MedPAC
recommendations related to the Recovery Audit Program. The AMA
expressed concern that the 2-midnight rule places considerable burden
on the admitting physician and erodes the ability of physicians and
providers to improve health outcomes through personalized, evidence-
based clinical care because it detracts from admission criteria that
depend upon clinical judgment.
Response: We appreciate this comment from MedPAC and others but we
do not believe that rescinding the 2-midnight rule is the best course
of action at this time. Specifically, we continue to believe that it is
prudent and essential to continue to maintain the 2-midnight
presumption whereby cases with an actual length of stay of at least 2
midnights after admission would generally not be selected for medical
review. We note that stakeholders and commenters in support of the
proposed policy, including several major hospital associations, have
cited their support for maintaining the 2-midnight presumption because
it affords hospitals and physicians some certainty that inpatient
admissions spanning at least 2 midnights after admission will generally
be considered to be appropriate for Medicare payment under Part A and
will not be selected for medical review, absent evidence of systematic
gaming, abuse, or delays in the provision of care. This provision of
the 2-midnight rule would no longer be valid if the 2-midnight rule was
rescinded in entirety. We understand MedPAC's concern that hospitals
may lengthen hospital stays to avoid scrutiny and will continue to
monitor the claims data to detect any shifts in hospital practices
pertaining to beneficiaries' length of stay, or any evidence of
systematic gaming, abuse, or delays in the provision of care in an
attempt to qualify for the 2-midnight presumption. We are cognizant of
concerns related to unnecessarily elongated hospital admissions, and
will be monitoring for such patterns of systematic delays indicative of
fraud or abuse. If a hospital is unnecessarily holding beneficiaries to
qualify for the 2- midnight presumption, CMS and/or its contractors may
conduct review on any of its inpatient claims, including those which
surpassed 2 midnights after admission. In addition, as we have stated
above, the 2-midnight rule does not override the clinical judgment of
the physician regarding the need to keep the beneficiary at the
hospital, to order specific services, or to determine appropriate
levels of nursing care or physical locations within the hospital. We
also believe that the documentation requirements for admitting
physicians are not overly burdensome because they are consistent with
Medicare's longstanding documentation requirements, which predated the
adoption of the 2-midnight rule.
With respect to MedPAC's comment that the 2-midnight rule may not
be necessary in light of its recommended changes to the Recovery Audit
Program, we believe that the planned changes to the Recovery Audit
Program will help reduce provider concerns within this arena, but
should be accompanied by the outlined changes to the 2-midnight policy.
Comment: Several commenters asked that CMS not adopt any changes to
the 2-midnight rule. Many of these commenters expressed concern that
further changes to the existing policy would cause confusion. Many
commenters requested that CMS not adopt the ``physician judgment''
exception to the 2-midnight rule without explicit instructions and
detailed case examples to help them understand when physician judgment
can override the 2-midnight expectation. Another commenter believed
that the proposed policy will likely be used by the QIOs and RACs as a
way to deny appropriate inpatient claims, thus increasing the
administrative burden on providers and worsening the appeals backlog.
One commenter expressed concern that the proposed policy could create
an opportunity for gaming by creating a market for independent parties
to create and sell ``exception'' letters to hospitals that could be
used to inappropriately ``document'' case-by-case exceptions to the 2-
midnight rule.
Response: While we understand commenters' desire to not have CMS
adopt any changes to the current 2-midnight rule and recognize that the
proposed policy allows for added discretion in determining when
inpatient admission is appropriate for payment under Medicare Part A,
we believed it was appropriate to address concerns raised by hospital
and physician stakeholders that the current policy potentially had the
unintended consequence of interfering with the practice of medicine. We
maintain that neither our current policy nor the policy being adopted
in this final rule interferes with the practice of medicine, but rather
both policies address Medicare payment and medical review for purposes
of Medicare payment. We believe that allowing greater flexibility for
determining when an admission that does not meet the benchmark should
nonetheless be payable is appropriate and is supported by several
hospital organizations.
In response to the commenter who suggested that the proposed policy
will likely be used by the QIOs and Recovery Auditors as a way to deny
appropriate inpatient claims, we note that, under the proposed
modification to the existing exceptions policy, we would allow Medicare
Part A payment on a case-by-case basis for inpatient admissions that do
not satisfy the 2-midnight benchmark, to acknowledge other patient-
specific circumstances where certain admissions may nonetheless be
appropriate for Medicare Part A payment. We would expect such
circumstances to be supported in the medical documentation, which would
be subject to medical review. Further, under the ``2-midnight
presumption,'' inpatient hospital claims with lengths of stay greater
than 2 midnights after the formal admission following the order are
presumed to be appropriate for Medicare Part A payment and will not be
the focus of medical review efforts, absent evidence of systematic
gaming, abuse, or delays in the provision of care in an attempt to
qualify for the 2-midnight presumption. We do not believe that the
proposed policy will be used by any medical review contractors as a way
to deny appropriate inpatient claims. Contractors are instructed to
issue claim decisions that are consistent and compliant with all
applicable policies and instructions, including the 2-midnight
regulations.
In addition, we intend to educate all medical review entities,
including the QIOs (who assumed responsibility of patient status
reviews as of October 1, 2015), CERT contractor, Recovery Auditors,
MACs, Supplemental Medical Review Contractor, and appeals contractors,
of final policy changes and anticipate that the new policy will be
interpreted consistently. CMS typically provides this type of education
to its contractors through the use of interactive calls/clinical
discussions or, as appropriate, technical direction. We also intend to
continue to monitor our contractors through both internal and
independent third party ``accuracy

[[Page 70544]]

reviews'' of the medical review decisions and will provide education to
the review entities if areas of inconsistency in medical review
decision-making or policy interpretation are identified.
In response to comments about the proposed policy increasing the
appeals backlog, we believe the additional flexibility provided by the
proposed policy could potentially result in fewer denials and therefore
fewer appeals. The proposed policy would allow for claims that may have
been denied under the previous rule to be paid if certain criteria are
met, despite not meeting the 2-midnight benchmark. However, we do not
anticipate a significant impact on the volume of appeals as a result of
the proposed policy.
In response to the commenters' concern that the proposed policy
would create an opportunity for gaming, we will continue to monitor
hospital admission practices and look for any evidence of gaming. In
the event that evidence of gaming is found, CMS will take appropriate
action against that provider.
Comment: A number of commenters supported a proposal for a 1-
midnight rule under which any Medicare beneficiary who required
overnight hospital care (other than a patient in the ED or routine
recovery following surgery or a procedure) would be admitted and the
hospital paid by diagnosis related group (DRG) under Medicare Part A.
The ``1-midnight rule'' proposal also called for the creation of an
``extended outpatient evaluation'' APC to replace outpatient
observation, and for admission orders to become effective at midnight
on the day the order was given, except in the case of late ED arrivals,
for which the order would not be effective until the second midnight.
These commenters also suggested that the admission order should not be
required to be authenticated prior to discharge and instead recommended
that it be authenticated prior to the claim being submitted. In
addition, the ``1-midnight'' proposal suggested that the inpatient only
list would no longer be necessary because any surgical patient who
required a medically necessary overnight stay following routine
recovery would be admitted and those patients who were stable before
midnight post-surgery would be billed as outpatients. In addition,
these commenters suggested that, in order to address more beneficiaries
paying the inpatient deductible amount under the suggested 1-midnight
rule, the inpatient deductible could be reduced such that a beneficiary
would pay one-third of the deductible for the first night, two-thirds
for two nights and the full inpatient deductible for three nights or
more.
Response: While we appreciate this alternative policy option put
forth by the commenters, we believe that a ``1-midnight rule'' would
present several challenges. Generally, patients who are seen and
appropriately treated and discharged without requiring an overnight
stay in the hospital represent the lowest acuity patients receiving
treatment in an HOPD. We are concerned that a ``1-midnight rule,'' as
outlined by the commenters, could potentially create a negative
incentive for hospitals to hold such low acuity patients in the
hospital longer to receive higher inpatient payment under Medicare Part
A and could be prone to gaming, especially in light of the suggested
comments that would make changes to the inpatient order requirements.
We believe that the ``1-midnight'' rule, as put forth by the
commenters, would create opportunities for relatively low acuity
patients who would otherwise not appropriately qualify for Medicare
Part A payment, to potentially be eligible for Medicare Part A payment.
We note that this is additionally troublesome due to the high volume of
the aforementioned relatively low acuity patients currently treated in
the hospital outpatient setting that could potentially be held in the
hospital longer to receive higher inpatient payment under Medicare Part
A.
In addition, this proposal could result in additional costs to the
Medicare program as all overnight hospital stays (other than a patient
in the ED or routine recovery following surgery or a procedure) would
be newly eligible for Part A payment. In order to account for the
additional costs that the program would incur under this approach, we
might determine that it would be appropriate to make an even greater
downward adjustment to payment rates than the original -0.2 percent
adjustment currently in effect. We are not prepared to propose a
further adjustment at this time, as we are still evaluating claims data
to determine the impact of the original -0.2 percent adjustment. In
addition, due to statutory differences in cost sharing under Medicare
Part A versus Part B, the substantial influx of cases that would be
newly eligible for Part A payment under this ``1-midnight rule''
proposal would potentially subject Medicare beneficiaries to greater
cost-sharing requirements, as the inpatient deductible could be higher
than the Part B copayment that would be applied if the services had
been billed as outpatient services under Part B. The commenter's
suggested fractional deduction of the inpatient deductible (one-third
for 1 night, two-thirds for 2 nights, and the full deductible for a
stay of 3 nights or more) is not permitted under existing statute.
In light of all of the challenges associated with this proposal for
a 1-midnight rule, we are not accepting this alternative to our
proposal. Moreover, as we did not propose any changes to our existing
policy requiring a physician's order for hospital admission, the
changes to that policy prescribed in this ``1-midnight rule'' proposal
are outside the scope of the proposed rule.
Comment: Other commenters presented individual alternatives to the
proposal such as: (1) CMS could eliminate the classification of
hospital stays into observation or inpatient days and classify all
medically necessary hospital stays on a hospital floor as inpatient
stays; (2) CMS could automatically deem any beneficiary in a hospital
setting, including emergency room or observation, an inpatient after 24
hours and cap beneficiary liability at the Part A inpatient deductible
amount; (3) CMS could automatically deem any beneficiary in observation
greater than 72 hours an inpatient and pay hospitals an MS-DRG payment;
and (4) CMS could define an inpatient as a patient who requires a bed
in a hospital beyond the normal recovery time or for extended testing
that cannot be safely performed in a lower level of care outside the
hospital, and could make certain related payment adjustments.
Response: While we appreciate the various alternatives to our
proposal presented by the commenters, we note that all four of the
alternative proposals would allow for an inpatient hospital admission
without a signed physician order. It is our current policy that a
hospital admission must be initiated by a signed physician order to
admit the patient as an inpatient. We did not propose nor are we
finalizing any changes to that policy at this time. Therefore, we are
not accepting any of the individual alternatives to our proposal
suggested by the commenters.
Comment: One commenter suggested that CMS (1) clarify that
inpatient hospital admissions with expected lengths of stay less than 2
midnights are neither rare nor unusual; (2) reemphasize that inpatient
care and observation services are not the same level of care and,
therefore, inpatient hospital admissions are not appropriate as a
substitute for lengthy (greater than 2 midnights) outpatient hospital
stays; (3) allow the 2-midnight benchmark to serve exclusively as a
medical review

[[Page 70545]]

threshold to determine the general appropriateness for claim payment;
and (4) realign its policy with existing guidance by asserting that,
regardless of the expected length of stay, documentation of the medical
necessity as well as the need for inpatient hospital care is the
requisite component of every inpatient admission appropriately paid
under Medicare Part A.
Response: In light of this comment, we would like to clarify that
our proposed modification to the current exceptions process does not
define inpatient hospital admissions with expected lengths of stay less
than 2 midnights as rare and unusual. Rather, it modifies our current
``rare and unusual'' exceptions policy to allow Medicare Part A payment
on a case-by-case basis for inpatient admissions that do not satisfy
the 2-midnight benchmark. This modification acknowledges other patient-
specific circumstances where certain cases may nonetheless be
appropriate for Part A payment, in addition to continuing to provide an
opportunity for Part A payment in ``rare and unusual'' circumstances
for which there is a national exception.
In addition, as previously stated in this final rule, we continue
to expect it to be rare and unusual for a beneficiary to require
inpatient hospital admission after having a minor surgical procedure or
other treatment in the hospital that is expected to keep him or her in
the hospital for only a few hours and not at least overnight, and thus
such admissions will be prioritized for medical review.
With respect to the comment about hospital level of care, we note
that while we do not refer to ``level of care'' in guidance regarding
hospital inpatient admission decisions, but, rather, have consistently
provided physicians with the aforementioned time-based guidelines
regarding when an inpatient hospital admission is payable under Part A,
we do note that, by definition, there are differences between
observation services furnished in the outpatient setting and services
furnished to hospital inpatients. Specifically, observation services,
as defined in Section 290 of Chapter 4 of the Medicare Claims
Processing Manual, are a well-defined set of specific, clinically
appropriate services, which include ongoing short-term treatment,
assessment, and reassessment, that are furnished while a decision is
being made, regarding whether patients will require further treatment
as hospital inpatients or if they are able to be discharged from the
hospital.
In response to the request that the 2-midnight benchmark be used
exclusively for determining the appropriateness of Part A payment, we
note that we continue to believe that the 2-midnight benchmark and the
2-midnight presumption are effective tools in determining general
appropriateness for Medicare Part A payment and whether a claim should
be subject to medical review, respectively. As stated earlier, we also
believe that there may be other patient-specific circumstances where
certain cases may nonetheless be appropriate for Part A payment, and,
therefore, we will allow Medicare Part A payment on a case-by-case
basis for inpatient admissions that do not satisfy the 2-midnight
benchmark, if the documentation in the medical record supports the
admitting physician's determination that the patient requires inpatient
hospital care, despite an expected length of stay that is less than 2
midnights.
In response to the commenter's request that CMS realign its policy
with existing guidance by asserting that regardless of the expected
length of stay, documentation of the medical necessity, as well as the
need for inpatient hospital care, are the requisite components of every
inpatient admission appropriately paid under Medicare Part A, we note
that, consistent with our longstanding policy, all inpatient admissions
must be medically reasonable and necessary and be supported by
documentation in the patient's medical record.
Comment: Commenters also commented on the following subject areas
in their comments: Self-administered drugs; long observation stays;
hospital admission orders; outpatient observation notice; and the 3-day
inpatient stay requirement for Medicare skilled nursing facility (SNF)
coverage.
Response: We did not include any proposals relating to these areas
in the proposed rule. Therefore, we consider these comments to be
outside the scope of the proposed rule and are not addressing them in
this final rule.
After consideration of the public comments we received, we are
finalizing, without modification, our proposal to revise our previous
``rare and unusual'' exceptions policy to allow for Medicare Part A
payment on a case-by-case basis for inpatient admissions that do not
satisfy the 2-midnight benchmark, if the documentation in the medical
record supports the admitting physician's determination that the
patient requires inpatient hospital care despite an expected length of
stay that is less than 2 midnights. Accordingly, we also are finalizing
our proposal to revise Sec. 412.3(d) to reflect the above policy
modification and to increase clarity.

C. Announcement Regarding Change in Medical Review Responsibilities

Shortly after adopting the 2-midnight rule, we instructed the MACs
to engage in a Probe and Educate process under the 2-midnight rule from
October 2013 through September 2015. We indicated in the CY 2016 OPPS/
ASC proposed rule that, regardless of whether we finalize the policy
proposals outlined under section XV.B. of this final rule with comment
period, no later than October 1, 2015, we would be changing the medical
review strategy and planned to have QIO contractors, rather than the
MACs, conduct these reviews of short inpatient stays. Among the QIO's
statutory duties is the review of some or all of the professional
activities of providers and practitioners in the QIO's service area,
subject to the terms of the QIO contracts, in the provision of health
care items or services to Medicare beneficiaries. Such QIO reviews are
for the purposes of determining whether providers and practitioners are
delivering services that are reasonable and medically necessary,
whether the quality of services meets professionally recognized
standards of care, and, for inpatient services, whether the services
could be effectively furnished on an outpatient basis or in a different
type of inpatient facility. Section 1154(a)(1) of the Act authorizes
QIOs to review whether services and items billed under Medicare are
reasonable and medically necessary and whether services that are
provided on an inpatient basis could be appropriately and effectively
provided on an outpatient basis, while section 1154(a)(2) of the Act
provides for payment determinations to be made based on these QIO
reviews. Section 1154(a)(18) of the Act includes provisions that
involve broad authority for the Secretary to direct additional
activities by QIOs to improve the effectiveness, efficiency, economy,
and quality of services under the Medicare program. These reviews are
integral to the determination of whether items and services should be
payable under the Medicare program.
In addition to the reviews to ensure coverage in accordance with
Medicare standards under sections 1154(a)(1) and (a)(2) of the Act, QIO
case review work is an effort to measurably improve the quality of
health care for Medicare beneficiaries as well as all individuals
protected under the Emergency Medical Treatment and Labor Act (EMTALA)
and to provide peer review. QIOs have longstanding program experience
in

[[Page 70546]]

addressing beneficiary complaints, provider-based notice appeals,
violations of EMTALA, Higher Weighted Diagnosis Related-Group (HWDRG)
coding reviews, and other related responsibilities as articulated in
the Act. Further, in the performance of their current quality
improvement activities and medical reviews, QIOs routinely collaborate
and interact with State survey agencies, MACs, and Qualified
Independent Contractors (QICs).
In addition to their expedited appeal and quality of care review
expertise, QIOs currently perform both coding and medical necessity
reviews. For example, when conducting HWDRG coding reviews, QIOs
already analyze claims submitted by hospitals with proposed changes to
billing codes that would allow the hospital to receive a higher
weighted DRG payment for the care delivered. In these HWDRG reviews,
QIOs ensure that the clinical circumstances in which the care was
provided accurately matches the provider's claim for payment. Further
in those instances when the HWDRG review involves a service provided
during a short inpatient stay, QIOs also perform a corresponding
medical review to validate adherence to the current 2-midnight policy.
QIOs also currently perform reviews to confirm that all services and
items provided were reasonable and medically necessary, consistent with
section 1862(a)(1) or 1862(a)(9) of the Act.
As previously mentioned in this section, we are changing our
medical review strategy for short hospital stays and will have QIO
contractors conduct reviews of short inpatient stays. QIO contractors
are well-suited to conduct these short-stay inpatient reviews because
these reviews fit within the scope of the QIO statutory functions and
because their quality improvement programs are aligned with the HHS'
National Quality Strategy objective to provide ``better care and better
health at lower cost.'' QIOs, by their design, are groups of regional
and national health quality experts, clinicians, and consumers
organized to improve the care delivered to people with Medicare. As
indicated previously, QIOs manage a variety of beneficiary complaints
and quality of care case reviews to ensure consistency in health care
delivery and practice in the inpatient and outpatient setting while
taking into consideration clinical practice guidelines and other local
factors important to beneficiaries, providers, and practitioners, and
the Department. These capabilities will be useful in making case-by-
case review determinations.
To mitigate the perception of a potential conflict of interest
between medical review and quality improvement functions of the QIOs,
on August 1, 2014, the QIO program separated medical case review from
its quality improvement activities in each State under two types of
regional contracts. These include Beneficiary and Family Centered Care
QIOs (BFCC-QIOs) contractors who perform medical case review, and
Quality Innovation Network QIOs (QIN-QIOs) contractors who perform
quality improvement activities and provide technical assistance to
providers and practitioners. In addition, the restructured QIO program
uses a non-QIO a contractor to assist CMS in the monitoring and
oversight of the BFCC-QIO case review activities.
Under the new short-stay inpatient medical review process that we
adopted beginning on October 1, 2015, BFCC-QIOs began to transition to
reviewing a sample of post-payment claims and making a determination of
the medical appropriateness of the admission as an inpatient. As
mentioned earlier in this section, we continue to believe that when a
beneficiary receives a minor surgical procedure or other treatment in
the hospital that is expected to keep him or her in the hospital for
only a few hours (less than 24 hours), the services should generally be
billed as outpatient hospital services, regardless of the hour the
beneficiary comes to the hospital, whether he or she uses a bed, and
whether he or she remains in the hospital past midnight (Section 10,
Chapter 1 of the MBPM). Accordingly, we would expect it to be rare and
unusual for a beneficiary to require inpatient hospital admission after
having a minor surgical procedure or other treatment in the hospital
that is expected to keep him or her in the hospital for a period of
time that is only for a few hours and does not span at least overnight.
We will monitor the number of these types of admissions and plan to
prioritize these types of cases for medical review.
BFCC-QIOs have begun to conduct post-payment reviews of claims and
refer findings to the MACs for payment adjustments. Providers' appeals
of denied claims will be addressed under the provisions of section 1869
of the Act and procedures in 42 CFR part 405. BFCC-QIOs will educate
hospitals about claims denied under the 2-midnight policy and
collaborate with these hospitals in their development of a quality
improvement framework to improve organizational processes and/or
systems. Under the QIO short-stay inpatient review process, those
hospitals that are found to exhibit a pattern of practices, including,
but not limited to: Having high denial rates and consistently failing
to adhere to the 2-midnight rule (including having frequent inpatient
hospital admissions for stays that do not span one midnight), or
failing to improve their performance after QIO educational
intervention, will be referred to the Recovery Auditors for further
medical review.
In addition to the formal QIO medical review process mentioned
above, we intend to continuously monitor and evaluate the changes to
the 2-midnight payment policy and medical review strategy. We will
specifically examine and evaluate applicable claims data and any other
data available in order to determine whether any patterns of case-by-
case exceptions exist that might be appropriately announced as uniform,
national exceptions, to examine the effect of the revised policy on
short-stay inpatient claims and long outpatient observation stays, and
to observe any other trends which might affect beneficiary access,
outcomes, and quality of care. We also will monitor applicable data for
signs of systematic gaming of this policy. We will continue to assess
the 2-midnight payment policy in future years, and, as with all
Medicare payment policies, may make future payment modifications based
on the trends observed.
As mentioned earlier in this section, section 521 of Pub. L. 114-10
extended the prohibition on Recovery Auditor patient status reviews for
claims with dates of admission of October 1, 2013 through September 30,
2015. Under current law, Recovery Auditors may resume such reviews for
dates of admission of October 1, 2015 and later. CMS announced in
August 2015 that it will not approve Recovery Auditors to conduct
patient status reviews for dates of admission of October 1, 2015
through December 31, 2015. (We refer readers to the CMS Web site at:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html for more information on this
announcement.) As announced in the proposed rule, the Recovery Auditors
will conduct patient status reviews focused on those providers that are
referred from the QIOs based on their high denial rates. The number of
claims that a Recovery Auditor will be allowed to review for patient
status will be based on the claim volume of the hospital and the denial
rate identified by the QIO. We stated in the proposed rule that we
would adopt this new medical review strategy

[[Page 70547]]

regardless of whether the 2-midnight rule remains unchanged or is
modified.
As stated earlier, one of the reasons we adopted the 2-midnight
rule was because of concerns about the growing trend of long outpatient
hospital stays. We note that preliminary data suggest that the 2-
midnight rule as it relates to hospital stays spanning at least 2
midnights has been effective in reducing long outpatient hospital
stays. Specifically, our data show that the proportion of outpatient
long-stay encounters (more than 2 days) involving observation services
decreased by 11 percent in FY 2014 compared to FY 2013. The trend in
these data is consistent with our adoption of the 2-midnight rule on
October 1, 2013.
As noted previously, we did not propose to change the 2-midnight
presumption for purposes of medical review. That is, inpatient stays
for which the patient remained in the hospital at least 2 midnights
following formal admission to the hospital will continue to be presumed
appropriate for inpatient hospital payment under Medicare Part A and
will generally not be selected for medical review of patient status
absent evidence of systematic gaming, abuse, or delays in the provision
of care.
Comment: In response to whether CMS should adopt specific national
criteria for medical review of inpatient hospital admissions, and what
those criteria tools should be, several commenters stated that they
would support criteria that took into consideration the severity of the
signs and symptoms exhibited by the patient and other evidence that
would be relevant in determining whether an inpatient admission that
was shorter than 2 midnights would nonetheless be appropriate for Part
A payment.
Several commenters did not believe that CMS should adopt national
medical review standards at this time, given the differences in
clinical presentation and individualized treatments for patients
requiring hospital care. Other commenters suggested that medical review
tools, such as InterQual or Milliman, were useful for documenting a
patient's vital signs and condition at a moment in time, but would not
be useful for retrospective review of the appropriateness of a hospital
admission. The commenters also noted that these tools were expensive
and proprietary for hospitals to use and that selection of one tool
over another would impose administrative burdens on hospital
facilities.
Some commenters recommended that QIO review criteria take into
consideration special populations of patients, treatment locations
within the hospital facility, or specific clinical situations generally
considered to be at higher risk for adverse patient outcomes.
Response: We appreciate the thoughtful comments submitted in
response to our comment solicitation on medical review criteria.
However, even among those commenters who stated that they would support
the adoption of national medical review criteria, we note that no
commenters recommended specific national criteria that could be applied
to medical review of all short-stay hospital cases. We agree with the
commenters that, given the unique clinical circumstances of Medicare
beneficiaries who require hospital care, it is difficult to adopt a set
of clinical standards that are universally applicable based on
diagnostic conditions and may be appropriately utilized on a
retrospective basis. While we acknowledge that some providers may
consider this type of commercial product useful in clinical practice,
we are not adopting such guidelines as binding policy for medical
review purposes. Rather, we believe that the 2-midnight benchmark
captures the individualities and clinical conditions of Medicare
beneficiaries, by focusing on the physician's medical judgment in
forecasting an expected plan of care and corresponding hospital
duration. Accordingly, we are not adopting national medical review
criteria at this time.
QIOs will conduct ``Revised Determination Reviews'' (42 CFR
405.980) on hospital short-stay Medicare Part A claims. QIOs will
conduct patient status reviews to determine the appropriateness of
Medicare Part A payment for these short-stay inpatient hospital
admissions, in accordance with section 1862(a)(1)(A) of the Act. In
conducting these reviews, QIOs will use the information documented in
the patient's medical record, and may use evidence-based guidelines and
other relevant clinical decision support materials as components of
their review activity (we refer readers to 42 CFR 476.100 relating to
setting standards for QIO reviews).
Comment: One commenter suggested that CMS create a tracking
mechanism, such as a condition code, to allow hospitals to attest that
they used nationally recognized criteria (such as InterQual or
Milliman) to determine that inpatient admission was warranted.
Alternatively, one commenter proposed that CMS adopt an identifier to
append to the claim which would alert the medical reviewers that an
inpatient only procedure had been performed.
Response: We appreciate the thoughtful claims processing
recommendations. Because we are not adopting a national set of criteria
at this time, we do not believe a tracking mechanism to identify use of
criteria tools would be helpful for hospitals or review entities. We
acknowledge the difficulties in identifying inpatient only procedures
during medical review (because inpatient only procedures are identified
by the national code set used by hospital outpatient departments
whereas inpatient claims are billed using a separate code set) and will
consider the proposed resolution in the future.
Comment: Several commenters supported the QIO medical review
strategy. However, many commenters urged CMS to delay QIO medical
review activity until January 1, 2016, or later, to align with the new
policy that would be adopted for CY 2016. Other commenters expressed
concern whether the QIOs had the needed operational resources, such as
review staff qualifications and experience, training, electronic record
transfer capability, and MAC points of contact, to competently conduct
the reviews. One commenter stated the need for timeliness measures
associated with the review process.
Response: As stated in the proposed rule, we announced that the
QIOs would begin to conduct medical review on October 1, 2015,
regardless of whether we finalized the policy proposals articulated in
the proposed rule. Accordingly, QIOs assumed responsibility for medical
review activities on October 1, 2015, as it relates to the 2-midnight
rule that is currently in effect. We anticipate that it will take time
for QIOs to transition and they will incrementally increase their
review activities to be fully operational with regard to these reviews
early next year. Beginning January 1, 2016, QIOs will conduct medical
review of short hospital stay claims under the revised 2-midnight
policy adopted in this final rule with comment period.
Comment: Several commenters stated the need for transparency and
for more detailed information regarding the types of claims that would
be subject to QIO review, claim sample sizes, the frequency of reviews,
the claim look back periods, ADR limits, and administrative burden.
Response: We will address the technical medical review questions
posed by commenters in subregulatory guidance. We expect to release
this information on the CMS Web site at: https://www.cms.gov/Medicare/
Quality-Initiatives-Patient-Assessment-Instruments/
QualityImprovementOrgs/

[[Page 70548]]

index.html?redirect=/qualityimprovementorgs/ no later than December 31,
2015.
Comment: Several commenters recommended that CMS provide education
and detailed information regarding the revised medical review criteria
and documentation requirements. One commenter recommended mandatory
documentation instruction for physicians in residency programs because
Medicare funds graduate medical education programs.
Response: QIOs have a longstanding history of provider education
and engagement, through the use of provider meetings, learning and
action networks, provider discussion forums, and posting educational
materials to their Web sites. QIOs may use these and other methods to
educate providers about the review process. We will address technical
medical review questions posed by commenters in subregulatory guidance.
We expect to release this information on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs/ no later than December 31, 2015.
Comment: Some commenters recommended that the QIOs provide a
discussion period prior to making referral to the MACs or Recovery
Auditors.
Response: After conducting medical review, QIOs will evaluate
provider performance and provide interventions that are aligned with
those outcomes. Every provider will receive written claim-specific
information and any corresponding denial reasons that will give the
provider the opportunity to review the QIO's claim decision. The
written notification will include a specific phone number and/or point
of contact for use by providers to request or schedule a QIO education
session.
Through the QIO education session, providers will have the
opportunity to have one-on-one telephonic conferences to ask questions
and receive feedback with a QIO clinician knowledgeable of the reviewed
claims. After the education session, the QIO will provide a final
results letter to the provider. At the completion of these activities,
the QIO will refer any denied claims to the MAC for payment adjustment
and, when appropriate, make a referral to the Recovery Auditors for
those providers requiring further review.
Comment: Several commenters supported transitioning hospital
patient status reviews to the QIOs, while directing Recovery Auditors
to limit their patient status reviews to those providers with ``high
denial rates.'' Tailoring the scope of Recovery Auditor reviews aligns
with MedPAC's recommendation in its June 2015 report, which suggested
that the extent of audits be correlated with a hospital's excessive use
of short inpatient stays.
Other commenters expressed concerns that the standard to which
claims would be assessed was unclear, and that the Recovery Audit
Program's contingency fee payment structure could potentially
incentivize inappropriate claim denials, making such referrals
inappropriate.
Many commenters stated the need for transparency in the medical
review process and requested additional information regarding clinical
decision-making, as well as QIO operations and the process for
identifying providers deemed to be appropriate for Recovery Auditor
referral.
Response: We will address technical medical review questions posed
by the commenters in subregulatory guidance. We expect to release this
information on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs/ no
later than December 31, 2015.
Comment: A few commenters suggested that, in the QIO's assessment
and measurement of provider denial rates, factors such as the number of
short-stay inpatient admissions occurring within a given hospital and
the acuity of populations served by the hospital be taken into
consideration. One commenter recommended that QIOs implement or use a
review test period in order to any identify national trends in provider
denials.
Response: We will address technical medical review questions posed
by the commenters in subregulatory guidance. We expect to release this
information on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs/ no
later than December 31, 2015.
After consideration of the public comments we received, we are not
adopting national medical review criteria at this time. As announced in
the proposed rule, QIOs assumed medical review responsibilities of
short hospital stay claims on October 1, 2015 based on the existing 2-
midnight policy in effect for 2015. Beginning on January 1, 2016, QIOs
will conduct these medical reviews based on the revised 2-midnight
policy adopted in this final rule with comment period. In conducting
these reviews, QIOs will use the information documented in the
patient's medical record, and may use evidence-based clinical
guidelines, and other relevant clinical decision support materials as
components of their review activity in order to determine whether an
inpatient admission where the patient stay is expected to be less than
2 midnights is nonetheless appropriate for Medicare Part A payment.
As mentioned previously, in response to industry feedback,
including suggestions to limit the Recovery Audit Program, on December
30, 2014, we announced a number of changes to the Recovery Audit
Program. We received numerous comments about the Recovery Audit Program
and have summarized and included our responses to them below.
Comment: Several commenters responded to the proposed rule's
announcements related to the changes to be implemented in the Recovery
Audit Program and the Recovery Auditor's role in conducting patient
status reviews of those providers referred by the QIOs for having high
denial rates associated with hospital short stay claims for payment.
Several commenters also provided additional recommendations for
programmatic improvement or requested more information regarding the
operational details of the Recovery Audit medical review processes. In
addition, some commenters recommended delays in the proposed timeframe
for Recovery Auditors to begin conducting patient status reviews.
Response: We note that, while we consider these public comments to
be outside the scope of the proposed rule, we appreciate the thoughtful
feedback provided for our consideration. Providers wishing to provide
any additional suggestions or feedback may do so by emailing them to
[email protected]. Any future changes or additional information related
to the Recovery Audit Program would be identified through subregulatory
instruction and posted on the Recovery Audit Program Web site at:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program/.
Comment: Some commenters recommended that enforcement of the 2-
midnight provision remain under the purview of the Recovery Auditors,
as it is a payment provision, rather than a quality improvement
activity.
Response: We consider these public comments to be outside the scope
of the

[[Page 70549]]

proposed rule because we neither proposed nor sought comments on the
announced changes in medical review activities. However, we point out
that QIOs have previous experience in hospital reviews, and we believe
their positive working relationships with hospitals will be beneficial
in helping to educate providers on how to comply with the revised 2-
midnight rule guidance. Recovery Auditors will review those providers
that fail to comply with CMS' payment policy and, as appropriate, send
claims to the MAC for adjustment.
Comment: One commenter mentioned the positive experiences it has
had with the Provider Relations Coordinator established by CMS in June
2014, and suggested that the role of the coordinator would be well-
suited to assist providers in the implementation of the new referral
structure.
Response: We consider this comment to be outside the scope of the
proposed rule. However, we appreciate the suggestion and will consider
the feedback in the future. We encourage providers to utilize the
Provider Relations Coordinator and support expanding this role
throughout the medical review process.

D. Comment Solicitation on Potential Short-Stay Payment Policies

We again welcomed stakeholder comments on potential short-stay
payment policies. The most frequent comment received in response to the
proposed rule was that a 1-midnight policy would eliminate the need for
a short-stay payment policy. Comments on the issue of short stay
payment policies ranged from paying the IPPS amount to paying an amount
in between the IPPS and OPPS payment to paying the OPPS amount. Most
commenters did not provide specifics as to how the payment amount
should be determined. As in past comment solicitations on this issue,
there was again no consensus among the commenters who chose to respond.
We have requested public comment on three different occasions on
issues related to when services are appropriately billed and paid under
Medicare Part A as inpatient services or under Medicare Part B as
outpatient services, including potential payment policy options to
address this issue. The public comment process has not produced any
consensus on a recommended payment policy.
We again thank the commenters for their suggestions on the issue of
short-stay payment policies. We did not propose any short-stay payment
policy, but will take these comments into account in any potential
future rulemaking on the issue.

XVI. Transition for Former Medicare-Dependent, Small Rural Hospitals
(MDHs) Under the Hospital Inpatient Prospective Payment System

A. Background on the Medicare-Dependent, Small Rural Hospital (MDH)
Program

Section 1885(d)(5)(G) of the Act provides special payment
protections under the hospital inpatient prospective payment system
(IPPS) to Medicare-dependent, small rural hospitals (MDHs). Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area, has not more than 100 beds, is not a sole
community hospital (SCH), and has a high percentage of Medicare
discharges (that is, not less than 60 percent of its inpatient days or
discharges either in its 1987 cost reporting year or in 2 of its most
recent 3 settled Medicare cost reporting years). MDHs are paid for
their hospital inpatient services based on the higher of the Federal
rate or a blended rate based, in part, on the Federal rate and, in
part, on the MDH's hospital-specific rate. Specifically, the blended
rate is calculated using the Federal rate payment plus 75 percent of
the amount by which the Federal rate payment is exceeded by the MDH's
hospital-specific rate payments. For additional information on the MDH
program and the payment methodology, we refer readers to the FY 2012
IPPS/LTCH PPS final rule (76 FR 51683 through 51684).
As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50022),
under prior law, as specified in section 5003(a) of Pub. L. 109-171
(DRA 2005), the MDH program was to be in effect through the end of FY
2011 only. The program has since been extended several times. Most
recently, section 205 of the Medicare Access and CHIP Reauthorization
Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015, provided
for an extension of the MDH program through FY 2017. Specifically,
section 205 of the MACRA amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act by striking the April 1, 2015 end date
for the MDH program and replacing it with October 1, 2017.

B. Implementation of New OMB Delineations and Urban to Rural
Reclassification

On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which
established revised delineations for Metropolitan Statistical Areas
(MSAs), Micropolitan Statistical Areas, and Combined Statistical Areas,
and provided guidance on the use of the delineations of these
statistical areas. These delineations are based on 2010 decennial
Census data. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950
through 49991), we adopted the new OMB labor market area delineations
beginning in FY 2015. Consequently, there were 105 counties that were
previously located in rural areas that became urban under the new OMB
delineations (79 FR 49953). As noted above, under section
1886(d)(5)(G)(iv) of the Act, an MDH must be located in a rural area.
The transition of certain counties from rural to urban under the
new OMB delineations required MDHs in those counties to apply for rural
status in order to retain their MDH classifications and avoid losing
the special payment protections provided to MDHs. In order to be
approved for a rural reclassification, a hospital that is located in an
urban area must meet one of the following four criteria under section
1886(d)(8)(E)(ii) of the Act (codified at 42 CFR 412.103):
(1) The hospital is located in a rural census tract of an MSA, as
determined under the most recent version of the Goldsmith Modification,
the Rural-Urban Commuting Area (RUCA) codes;
(2) The hospital is located in an area designated by any law or
regulation of such State as a rural area or is designated by such State
as a rural hospital;
(3) The hospital would qualify as a rural referral center (RRC) or
a sole community hospital (SCH) if the hospital were located in a rural
area; and
(4) The hospital meets such other criteria as the Secretary may
specify.
In addition, under section 1886(d)(8)(E) of the Act, in order for a
hospital to reclassify from an urban area to a rural area, the State in
which the hospital is located must have a rural area. In other words, a
hospital may not reclassify from urban to rural under section
1886(d)(8)(E) of the Act in an all-urban State, which, as of October 1,
2014 (when the new OMB delineations became effective), included New
Jersey, Delaware, and Rhode Island. Currently, the all-urban States
continue to be New Jersey, Delaware, and Rhode Island.
MDHs that shifted from rural to urban under the new OMB
delineations may apply for rural reclassification under Sec. 412.103.
In a situation where a hospital could not reclassify to a rural area
under Sec. 412.103 because it is now located in an all-urban State,
the hospital would have lost its MDH status and would be paid for
hospital inpatient

[[Page 70550]]

services at the Federal rate, which may be substantially lower than the
MDH's hospital-specific rate. Given that the MDH program was scheduled
to expire April 1, 2015, but was extended to expire effective October
1, 2017 by section 205 of the MACRA, we stated in the CY 2016 OPPS/ASC
proposed rule (80 FR 39354) that we believe it would be appropriate to
provide a prospective payment rate transition period for MDHs that
cannot retain such status due to their location in a newly redesignated
urban area located in an all-urban State and, therefore, the lack of a
rural area within their State into which they could reclassify.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39354), we proposed
that, effective January 1, 2016, payments to hospitals that lost their
MDH status because they are no longer in a rural area due to the
adoption of the new OMB delineations and are now located in all-urban
States would transition from payments based, in part, on the hospital-
specific rate to payments based entirely on the Federal rate. As stated
earlier, currently, an MDH receives the higher of the Federal rate or
the Federal rate payment plus 75 percent of the amount by which the
Federal rate payment is exceeded by its hospital-specific rate payment.
We proposed that, for discharges occurring on or after January 1, 2016,
and before October 1, 2016, a former MDH in an all-urban State would
receive the Federal rate plus two-thirds of 75 percent of the amount by
which the Federal rate payment is exceeded by its hospital-specific
rate payment. For FY 2017, that is, for discharges occurring on or
after October 1, 2016, and before October 1, 2017, we proposed that
such a former MDH would receive the Federal rate plus one-third of 75
percent of the amount by which the Federal rate payment is exceeded by
the hospital's hospital-specific rate. Beginning FY 2018, that is, for
discharges occurring on or after October 1, 2017, we proposed that
these former MDHs would be paid solely based on the Federal rate.
Payment based on 100 percent of the Federal rate beginning October 1,
2017 would align with the statutory expiration of the MDH program on
October 1, 2017.
We stated in the proposed rule that we believe it is appropriate to
apply these proposed transitional payments for hospitals formerly
located in rural areas and formerly classified as MDHs that are now
located in all-urban States, given the potentially significant payment
impacts for these hospitals and the fact that a hospital may not
reclassify from urban to rural under section 1886(d)(8)(E) of the Act
in an all-urban State. Allowing a transition for such hospitals from
payments based, in part, on the hospital-specific rate to payments
based solely on the Federal rate would minimize the negative impact of
our adoption of the new OMB delineations which caused certain rural
hospitals to lose their MDH status.
We invited public comments on our proposal.
Comment: Commenters supported the proposed payment transition for
former MDHs in all-urban States. One commenter stated that CMS'
proposal would provide a much needed transition period for hospitals
losing MDH status due to location in all-urban States and would be
consistent with longstanding CMS policy to adopt transition periods to
mitigate significant payment impacts accompanying policy changes.
Response: We appreciate the commenters' support of our proposal.
Comment: One commenter who supported the proposed transition urged
CMS to also provide such a transition to all hospitals that lost MDH
status as a result of implementation of the new OMB delineations which,
for reasons other than location in an all-urban State, were ineligible
for reclassification. The commenter noted that only one MDH was located
in an all-urban State following implementation of the new OMB
delineations, and that being in an all-urban State is only one reason
why a hospital cannot qualify for reclassification under Sec. 412.103
of the regulations. The commenter stated that the other hospitals that
cannot reclassify under Sec. 412.103, if not provided with a
transition period, face the same circumstances that CMS is proposing to
allow other identically situated hospitals to avoid. The commenter
argued that providing payment transition exclusively for that one
hospital and not for all hospitals that are similarly unable to
reclassify to a rural area to maintain MDH status is arbitrary and
capricious. The commenter also questioned why CMS did not provide
similar protection for FY 2015 for MDHs repositioned from rural to
urban areas as a result of implementation of the new OMB delineations
that could not qualify for reclassification under Sec. 412.103 when
that protection was requested in public comments submitted in response
to the FY 2015 IPPS/LTCH PPS proposed rule.
Response: Our rationale behind our proposal to allow for
transitional payment to former MDHs that are located in all-urban
States due to the adoption of the OMB delineations in FY 2015 was that
these hospitals did not have the option to reclassify from urban to
rural under the regulations at Sec. 412.103 due to the lack of a rural
area in their States into which they could reclassify. This is in
contrast to other hospitals that lost MDH status due to becoming urban
and are located in States with both urban and rural areas in that these
hospitals have the option to apply for rural reclassification under
Sec. 412.103. We acknowledge that, in response to the FY 2015 IPPS/
LTCH PPS proposed rule, this same commenter requested that hospitals
losing MDH status as a result of becoming urban under the new OMB
delineations be afforded the 2-year transition period of deemed rural
status provided for CAHs. In the FY 2015 IPPS/LTCH PPS final rule, we
explained that we did not believe that applying a 2-year transition
period of deemed rural status was necessary for provider types other
than CAHs (79 FR 49983). While we agreed that there were potential
payment consequences for a CAH, SCH, or MDH located in an urban area as
a result of the new OMB delineations, we considered the payment
consequences to be greater for CAHs because, unlike SCHs and MDHs, CAHs
are entirely excluded from the IPPS and generally receive payments
based on 101 percent of reasonable cost. We stated that, in addition,
given the different conditions of participation (CoPs) for CAHs, and
that it would be generally more difficult for a CAH to have to meet the
hospital CoPs instead of the CAH CoPs, only a CAH also faces the
potential loss of its ability to continue to participate in the
Medicare and Medicaid programs. Furthermore, we note that, at the time
of the FY 2015 IPPS/LTCH PPS final rule, the MDH program was set to
expire halfway through FY 2015, on March 31, 2015. However, after
consideration of this public comment and due to the fact that the MDH
program has been extended through FY 2017, we believe it is appropriate
to apply a transition payment to all newly urban, former MDHs. We
recognize that, regardless of whether the option to apply for
reclassification is available to a hospital that lost MDH status as a
result of becoming urban due to implementation of the new OMB
delineations in FY 2015, a hospital that cannot reclassify from urban
to rural for any reason may face financial hardship as a result of
losing MDH status. This would be the case if the hospital was in an
all-urban State without a rural area into which it could reclassify or
if the hospital could not meet the requirements for rural
reclassification under Sec. 412.103. We also note that the regulations
for rural

[[Page 70551]]

reclassification under Sec. 412.103 do not allow MDHs, in contrast to
rural referral centers (RRCs) and SCHs, to be approved for
reclassification by virtue of meeting the requirements for MDH status
other than being located in a rural area. For these reasons, and after
consideration of the public comments we received, we are finalizing our
proposed payment transition to former MDHs with a modification. We are
providing for a transition for all former MDHs now located in an urban
area as a result of implementation of the new OMB delineations in FY
2015 and that have not reclassified to a rural area under the
regulations at Sec. 412.103 by January 1, 2016. We believe that this
expanded payment transition will help ensure financial stability and
uninterrupted patient care for all hospitals that lost MDH status due
to implementation of the new OMB delineations.
Comment: One commenter supported CMS' proposal for transition
payments for MDHs but encouraged CMS to retroactively extend the
transition payments for the entire FY 2016 rather than beginning
January 1, 2016. The commenter pointed to the various extensions of the
MDH program as examples of situations where CMS has implemented the law
retroactively.
Response: We appreciate the commenter's request to extend the
transition period to include all of FY 2016. However, we note that the
various extensions of the MDH program referred to by the commenter as
an example of a retroactive implementation are distinguishable from our
proposal because the MDH extensions were mandated by statute.
Therefore, we are finalizing the time period for the transition as
proposed, beginning January 1, 2016.
Comment: One commenter questioned the impact estimate of $9 million
for the proposed transition payments and requested clarification of
CMS' methodology.
Response: After further examination of the data and the methodology
upon which we based our impact estimate, we found that the $9 million
estimated cost of the proposed transition payments included in the
proposed rule was overstated because we did not account for the fact
that the transition period would be effective beginning the second
quarter of FY 2016 (that is, on January 1, 2016), and would not include
12 months of transition payments. We refer the reader to section
XXI.A.4.g. of this final rule with comment period for an updated
estimated impact that reflects 9 months of MDH transition payments in
the first year of the transition, as finalized above, and a description
of the methodology used to calculate that estimate.
In summary, after consideration of the public comments we received,
we are finalizing a policy that, effective January 1, 2016, payments to
hospitals that (1) lost their MDH status because they are no longer in
a rural area due to the implementation of the new OMB delineations in
FY 2015 and (2) have not reclassified from urban to rural under the
regulations at Sec. 412.103 before January 1, 2016, will transition
from payments based, in part, on the hospital-specific rate to payments
based entirely on the Federal rate. For discharges occurring on or
after January 1, 2016, and before October 1, 2016, these former MDHs
will receive the Federal rate plus two-thirds of 75 percent of the
amount by which the Federal rate payment is exceeded by the hospital's
hospital-specific rate payment. For FY 2017, that is, for discharges
occurring on or after October 1, 2016, and before October 1, 2017,
these former MDHs will receive the Federal rate plus one-third of 75
percent of the amount by which the Federal rate payment is exceeded by
the hospital's hospital-specific rate. For FY 2018, that is, for
discharges occurring on or after October 1, 2017, these former MDHs
will be paid based solely on the Federal rate.

XVII. Final Rule: Appropriate Claims in Provider Cost Reports;
Administrative Appeals by Providers and Judicial Review

A. Proposed Changes Included in the FY 2015 IPPS/LTCH PPS Proposed Rule

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28206 through
28217; CMS-1607-P), we proposed to revise the Medicare cost reporting
regulations in 42 CFR part 413, subpart B, by requiring a provider to
include an appropriate claim for a specific item in its Medicare cost
report in order to receive or potentially qualify for Medicare payment
for the specific item. If the provider's cost report does not include
an appropriate claim for a specific item, we proposed that payment for
the item will not be included in the notice of program reimbursement
(NPR) issued by the Medicare administrative contractor (MAC) (formerly
known as fiscal intermediary and herein referred to as ``contractor'')
or in any decision or order issued by a reviewing entity (as defined in
42 CFR 405.1801(a)) in an administrative appeal filed by the provider.
In addition, we proposed to revise the appeals regulations in 42 CFR
part 405, subpart R, by eliminating the requirement that a provider
must include an appropriate claim for a specific item in its cost
report in order to meet the dissatisfaction requirement for
jurisdiction before the Provider Reimbursement Review Board (Board).
The proposal also specified the procedures for Board review of whether
the provider's cost report meets the proposed substantive reimbursement
requirement of an appropriate cost report claim for a specific item. We
also proposed technical revisions to other Board appeals regulations to
conform those regulations to the main revisions (described above) to
the cost reporting regulations and the provider appeals regulations,
and proposed similar revisions to the Part 405, Subpart R regulations
for appeals before the contractor hearing officers.
We received numerous public comments in response to our proposals
to revise the Medicare cost reporting and provider appeals regulations.
Commenters raised concerns about the breadth of the proposed provisions
and questioned the interpretations we provided in the preamble to the
FY 2015 IPPS/LTCH proposed rule. To allow us proper time to evaluate
and respond to most of these public comments, in the FY 2015 IPPS/LTCH
PPS final rule, we decided to finalize only certain related general
provisions and to address the more specific public comments at a later
time, in a subsequent rulemaking document, as appropriate. In section
XVII.B. of this final rule, we summarize the changes we made in the FY
2015 IPPS/LTCH PPS final rule. In section XVII.C. of this final rule,
we discuss the various provisions of the FY 2015 IPPS/LTCH PPS proposed
rule that we did not include in the FY 2015 IPPS/LTCH PPS final rule,
present summaries of the public comments we received and our responses
to those comments, and specify our finalized policies.

B. Summary of Related Changes Included in the FY 2015 IPPS/LTCH PPS
Final Rule

In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 through
50201), we made related revisions to the provider appeals regulations
that were, or were not, included in the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28206 through 28217), as follows:
In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to
conform the terminology in Part 405, Subpart R and all subparts of Part
413 from ``intermediary'' or ``fiscal intermediary'' to ``contractor''
pursuant to sections 1816, 1874A and 1878 of the Act. We did not
receive any public comments on our proposal. Therefore, we finalized

[[Page 70552]]

our proposal in the FY 2015 IPPS/LTCH PPS final rule.
We revised Sec. 405.1835 of the regulations to eliminate
provider dissatisfaction as a requirement for Board jurisdiction over
appeals based on untimely contractor reimbursement determinations. This
revision was simply a technical correction to amend Sec. 405.1835 to
conform the regulations to the provisions in section 1878(a)(1)(B) of
the Act for Board appeals based on an untimely contractor
determination. In effect, this amendment to Sec. 405.1835 restored the
full conformity of the regulations with the statutory requirements for
Board jurisdiction over appeals based on untimely contractor
determinations--a conformity that obtained before a 2008 final rule (73
FR 30190) inadvertently imposed a provider dissatisfaction requirement
for Board appeals based on untimely contractor determinations.
Moreover, in order to maintain consistency between the regulations for
Board appeals and the rules for contractor hearing officer appeals, we
also revised Sec. 405.1811 of the regulations to eliminate provider
dissatisfaction as a requirement for contractor hearing officer
jurisdiction over appeals based on untimely contractor determinations.
We found good cause to waive notice-and-comment rulemaking
requirements under section 553(b) of the Administrative Procedure Act
(APA) (5 U.S.C. 553(b)) for these revisions because the revisions were
simply technical corrections that brought Sec. 405.1835 of the Board
appeals regulations into full conformity with section 1878(a)(1)(B) of
the Act, and maintained consistency between Sec. 405.1811 of the
contractor hearing officer appeals regulations and Sec. 405.1835 of
the Board appeals regulations. The revisions did not represent changes
in policy, nor did they have a substantive effect, and the public
interest was best served by timely correction of these technical
errors.
The technical correction to Sec. 405.1835 of the Board appeals
regulations and the corresponding revision to Sec. 405.1811 of the
contractor hearing officer appeals regulations apply to appeals, based
on an untimely contractor determination, that were pending or filed on
or after the October 1, 2014 effective date of the FY 2015 IPPS/LTCH
PPS final rule. These revisions also apply, subject to the rules of
administrative finality and reopening in Sec. 405.1807 and Sec.
405.1885 of the regulations, to appeals pending or filed on or after
the August 21, 2008 effective date of the 2008 final rule (73 FR
30190). We determined that fixing the applicability date, subject to
the rules of administrative finality and reopening in Sec. 405.1807
and Sec. 405.1885 of the regulations, of these amendments by reference
to the August 21, 2008 effective date of the 2008 final rule, was not
impermissibly retroactive in effect because the amendments simply
corrected and clarified longstanding agency policy and practice, and
were procedural in nature. We explained that if the above-described
amendments to Sec. 405.1811 and Sec. 405.1835 were deemed a
retroactive application of a substantive change to a regulation,
section 1871(e)(1)(A) of the Act permits retroactive application of a
substantive change to a regulation if the Secretary determines that
such retroactive application is necessary to comply with statutory
requirements or that failure to apply the change retroactively would be
contrary to the public interest. We determined that any retroactive
application of these amendments to Sec. 405.1811 and Sec. 405.1835
was necessary to ensure full compliance with the statutory provisions
for Board appeals based on untimely contractor determinations (under
section 1878(a)(1)(B) of the Act), and that it was in the public
interest to apply these amendments, subject to the rules of
administrative finality and reopening in Sec. 405.1807 and Sec.
405.1885 of the regulations, to Board appeals and contractor hearing
officer appeals that were initiated or pending on or after the August
21, 2008 effective date of the 2008 final rule.

C. Specific Provisions of the FY 2015 IPPS/LTCH PPS Proposed Rule

We have completed our consideration of the public comments on the
proposed revisions to the cost reporting regulations and the provider
appeals regulations in the FY 2015 IPPS/LTCH PPS proposed rule cited in
section XVII.A. of this final rule. Below we present appropriate
background for and summaries of each proposed provision, respond to the
public comments on those proposals, and explain our finalized policies
for the revisions that we are adopting in this final rule. We refer
readers to the specified sections of the FY 2015 IPPS/LTCH proposed
rule for a more extensive description of the proposals that were
contained in the proposed rule.
1. Background for Payments and Cost Reporting Requirements
For cost reporting years beginning before October 1, 1983, all
providers were reimbursed on a reasonable cost basis for Medicare Part
A (hospital insurance) covered items and services that were furnished
to Medicare beneficiaries. Reasonable cost is defined at section
1861(v)(1)(A) of the Act and implementing regulations at 42 CFR part
413. In the Social Security Amendments of 1983 (Pub. L. 98-21),
Congress added section 1886(d) to the Act, which, effective with cost
reporting periods beginning on or after October 1, 1983, changed the
payment method for inpatient hospital services furnished by short-term
acute care hospitals to a prospective payment system (PPS). In
accordance with section 1886(d) of the Act and implementing regulations
at 42 CFR part 412, a PPS payment is made at a predetermined specific
rate for each hospital discharge (classified according to a list of
diagnosis-related groups (DRGs)), excluding certain costs that are paid
on a reasonable cost basis.
Later statutory amendments expanded the types of providers and
services that are subject to a PPS. The various PPSs for inpatient
hospital services are summarized in Sec. 412.1 of the regulations.
Other PPSs for different types of providers and services are summarized
in Sec. Sec. 413.170, 413.300, 413.330, and 419.1 of the regulations.
As explained in Sec. 413.1(b) of the regulations, if a service is not
subject to a PPS when it is furnished, the provider is paid on the
basis of reasonable cost. (For ease of reference, we will use the terms
``reimbursement'' and ``payment'' interchangeably unless a particular
context calls for the use of one of these terms instead of the other.)
Before October 1, 2005, payments to providers were ordinarily made
through private organizations known as fiscal intermediaries, under
contracts with the Secretary. Section 1874A of the Act, as enacted by
section 911 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, authorized the Secretary to enter into
contracts with entities known as MACs. After a 6-year transition period
(Sec. 421.400(a)), the claims processing and payment functions of the
fiscal intermediaries are now performed by MACs, under contracts with
the Secretary.
For covered items and services paid on a reasonable cost basis, the
contractor pays a provider during its cost reporting period interim
payments that approximate the provider's actual costs. Under a PPS,
providers are generally paid for each patient discharge after a bill is
submitted.
Sections 1815(a) and 1833(e) of the Act provide that no payments
will be made to a provider unless it has furnished the information,
requested by the Secretary, needed to determine the amount of payments
due the provider under the Medicare program. In general,

[[Page 70553]]

providers submit this information through annual cost reports that
cover a 12-month period of time.
All providers participating in the Medicare program are required
under Sec. 413.20(a) to maintain sufficient financial records and
statistical data for proper determination of costs. Moreover, providers
must use standardized definitions and follow accounting, statistical,
and reporting practices that are widely accepted in the hospital and
related fields. Under the provisions of Sec. Sec. 413.20(b) and
413.24(f), providers are required to submit cost reports annually, with
the reporting period based on the provider's accounting year. For cost
years beginning on or after October 1, 1989, section 1886(f)(1) of the
Act and Sec. 413.24(f)(4) of the regulations require hospitals to
submit cost reports in a standardized electronic format, and the same
requirement was later imposed for other types of providers. In
addition, Sec. 412.52 of the regulations requires all PPS hospitals to
meet the recordkeeping and cost reporting requirements of Sec. Sec.
413.20 and 413.24, which include the requirement that the provider must
submit a cost report that generally covers a 12-month period of the
provider's operations.
2. Background for Administrative Appeals by Providers and Judicial
Review
Upon receipt of a provider's cost report, the contractor reviews or
audits the cost report, makes any necessary adjustments to the
provider's Medicare reimbursement for the cost reporting period, and
finally determines the total amount of payment due the provider. This
year-end reconciliation of Medicare payment for the provider's cost
reporting period constitutes a contractor determination, as defined in
Sec. 405.1801(a). Under Sec. Sec. 405.1801(a)(1) and (a)(2) and
405.1803, the contractor must give the provider written notice of the
final contractor determination for the cost period in a notice of the
total amount of program reimbursement. This notice, the NPR, is an
appealable determination, and the contractor determination is final and
binding unless it is revised on appeal or reopening (Sec. 405.1807).
Under section 1878(a) of the Act, a provider that has submitted a
timely cost report may appeal to the Board a final determination of
program reimbursement made by a contractor, as well as certain final
determinations by the Secretary involving payment under the IPPS. The
Secretary's delegate, the Administrator of CMS, may review certain
Board decisions under section 1878(f)(1) of the Act and Sec. 405.1875
of the regulations. The final decision of the Board or the
Administrator is subject to judicial review under section 1878(f)(1) of
the Act and Sec. 405.1877 of the regulations. In addition, by
regulation, providers are given the right to appeal to the Board or to
contractor hearing officers certain other determinations. A CMS
reviewing official may review some contractor hearing officer decisions
under Sec. 405.1834 of the regulations, but there is no judicial
review of decisions by contractor hearing officers or a CMS reviewing
official.
Under section 1878(a)(1)(A), (a)(2), and (a)(3) of the Act, and
Sec. 405.1835(a) of the regulations, a provider may obtain a Board
hearing on a final contractor or Secretary determination if: (1) The
provider is ``dissatisfied'' with a final determination of the
contractor or the Secretary; (2) the amount in controversy is at least
$10,000; and (3) the provider files a request for a hearing to the
Board within 180 days of notice of the final determination of the
contractor or the Secretary. The same jurisdictional requirements
govern provider appeals to contractor hearing officers under Sec.
405.1811(a) of the regulations, except that the amount in controversy
requirement is at least $1,000 but less than $10,000. Under section
1878(a)(1)(A), (a)(3), and (b) of the Act and Sec. Sec. 405.1835(a)
and 405.1837(a) of the regulations, the same jurisdictional
requirements also apply to group appeals to the Board, except the
amount in controversy for a group appeal is at least $50,000.
However, as explained in section XVII.B. of this final rule, the
statutory requirements for Board jurisdiction are somewhat different if
the provider does not receive a final determination of the contractor
on a timely basis. Under sections 1878(a)(1)(B), (a)(2), (a)(3), and
(b) of the Act, a provider may obtain a Board hearing if: (1) The
provider does not receive a final determination of the contractor on a
timely basis, after the provider filed a cost report that complied with
the cost reporting regulations; (2) the amount in controversy is at
least $10,000 (at least $50,000 for a group appeal); and (3) the
provider files a request for a hearing to the Board within 180 days
after notice of the contractor's final determination would have been
received if such contractor determination had been issued on a timely
basis. Moreover, Sec. 405.1835(c)(1) of the regulations (as amended in
the FY 2015 IPPS/LTCH PPS final rule) provides that a contractor
determination is not timely if it is not issued, through no fault of
the provider, within 12 months of the contractor's receipt of the
provider's perfected cost report or amended cost report (as specified
in Sec. 413.24(f) of the regulations). The same jurisdictional
requirements govern provider appeals to contractor hearing officers,
based on an untimely contractor determination, under Sec. 405.1811(c)
(as amended in the final FY 2015 IPPS/LTCH PPS final rule), except that
the amount in controversy requirement is at least $1,000 but less than
$10,000.
3. Background for Appropriate Claims in Provider Cost Reports
Under longstanding Medicare policy as set forth in Sec. 413.24 of
the regulations and Section 115 of the Provider Reimbursement Manual
(PRM), Part 2 (CMS Pub. 15-2), a provider must make an appropriate cost
report claim for a specific item in order to be reimbursed for the
item, whether through the NPR issued by the contractor or as the result
of an administrative appeal or judicial review. For example, as set
forth in Sec. 413.24, providers receiving payment on the basis of
reimbursable cost are required to provide adequate cost data to the
contractor to support payments made for services furnished to
beneficiaries. In addition, as set forth in Section 115 of the PRM,
Part 2, we require that providers make a specific claim for an item in
its cost report, in order to meet the dissatisfaction requirement for
Board jurisdiction. The Medicare cost report has always included
particular ``lines'' for specific allowable costs such as interest
expense and depreciation. If a provider makes a cost report claim for a
cost that is allowable, and reimbursement is claimed in accordance with
Medicare payment policy, the NPR will include appropriate reimbursement
for the cost. (For ease of reference, we use the terms ``specific
item'' or ``item'' to refer to a particular aspect of reasonable cost-
based payment or a specific aspect of payment under a PPS unless a
particular context calls for the use of more specific terms (for
example, the term ``allowable cost'' as used in determining reasonable
cost-based payment).)
If the NPR does not include reimbursement for a specific item
claimed in the cost report or if the provider believes it should have
received more reimbursement for the item, the provider can request a
hearing before the Board (if the amount in controversy is at least
$10,000) or the contractor hearing officers (if the amount in
controversy is at least $1,000 but less than $10,000). However, our
longstanding policy is that an appropriate cost report claim is a

[[Page 70554]]

jurisdictional requirement for an appeal to the Board or the contractor
hearing officers. As explained earlier, section 1878(a)(1)(A) of the
Act provides for a hearing before the Board if the provider has filed a
timely cost report with the contractor, and the provider is
``dissatisfied'' with a final determination of the contractor or the
Secretary. Our view has been that, in order for a provider to be
dissatisfied with a specific aspect of the contractor determination,
the provider must have included an appropriate cost report claim for
the specific item so that the contractor can respond to the provider's
claim in the NPR and thereby potentially produce a specific
reimbursement result about which the provider is dissatisfied.
Thus, under our policy for Board jurisdiction, a provider has to
make a specific claim for an item in its cost report and not be paid in
accordance with that claim in order to meet the dissatisfaction
requirement for Board jurisdiction. Previously, we did not permit a
provider to ``self-disallow'' a specific item, even if the Medicare
contractor had no discretion to award payment for the item. (In self-
disallowing an item, the provider submits a cost report that complies
with Medicare policy for the item and then appeals the item to the
Board; the contractor's NPR then would not include any disallowance of
the item, and therefore the provider would effectively self-disallow
the item.) However, the Supreme Court rejected our longstanding policy
in Bethesda Hospital Association v. Bowen, 485 U.S. 399 (1988). The
Court held that, despite the providers' failure to claim all the
reimbursement they believed should have been made, the plain language
of the dissatisfaction requirement in section 1878(a)(1)(A) of the Act
supported Board jurisdiction because the contractor had no authority to
award reimbursement in excess of a regulation by which it was bound,
and thus it would have been futile for the providers to try to persuade
the contractor otherwise. The Court also stated in dicta, however, that
the dissatisfaction requirement might not be met if providers were to
``bypass a clearly prescribed exhaustion requirement or . . . fail to
request from the intermediary reimbursement for all costs to which they
are entitled under applicable rules'' (Bethesda Hospital Association v.
Bowen, 485 U.S. at 404-05).
Following the Bethesda decision, we no longer required providers to
make a cost report claim for reimbursement of items for which the
contractor did not have the discretion to award payment due to a
regulation or manual provision. However, consistent with the dicta in
the Bethesda decision, we continued to require providers to include
cost report claims for allowable costs. Our policy, as revised in
response to the Bethesda decision, was also challenged in the courts,
and a ``circuit split'' resulted. Compare Little Co. of Mary Hosp. v.
Shalala, 165 F.3d 1162 (7th Cir. 1999) (sustaining our interpretation
of the statutory dissatisfaction requirement for Board jurisdiction)
with Loma Linda Univ. Med. Ctr. v. Leavitt, 492 F.3d 1065 (9th Cir.
2007) (rejecting our interpretation of the dissatisfaction
requirement); Maine General Med. Ctr. v. Shalala, 205 F.3d 493 (1st
Cir. 2000) (same).
In response to the Supreme Court's Bethesda decision and the
ensuing circuit split, we then addressed the dissatisfaction
requirement in notice-and-comment rulemaking. In a 2008 final rule, we
revised Sec. 405.1811(a)(1) and Sec. 405.1835(a)(1) for contractor
and Board hearings, respectively (73 FR 30190, 30195 through 30200,
30244 through 30245, and 30249 through 30250). Under the revised
regulations, in order to preserve its appeal rights, a provider must
either claim an item in its cost report where it is seeking
reimbursement that it believes to be in accordance with Medicare
policy, or self-disallow the item if it is seeking reimbursement that
it believes may not comport with Medicare policy (for example, where
the contractor does not have the discretion to award the reimbursement
sought by the provider). In order to self-disallow an item, the
provider must follow the applicable procedures for filing a cost report
under protest, which are contained currently in Section 115 of the PRM,
Part 2.
As explained in the preamble to the 2008 final rule, we believe the
revised dissatisfaction policy set forth in Sec. 405.1835(a)(1) is a
reasonable interpretation of the dissatisfaction requirement for Board
jurisdiction in section 1878(a)(1)(A) of the Act (73 FR 30195 through
30200). The dissatisfaction requirement in Sec. 405.1835(a)(1)
comports with the Supreme Court's statement (discussed above) that the
statutory dissatisfaction requirement might not be met if a provider
bypassed a clearly prescribed exhaustion requirement or failed to ask
the contractor for reimbursement of all costs to which it is entitled
under applicable rules (Bethesda Hospital Association v. Bowen, 485
U.S. at 404-05; see also Little Co. of Mary Hosp. v. Shalala, 165 F.3d
1162 (7th Cir. 1999) (sustaining our interpretation of the statutory
dissatisfaction requirement for Board jurisdiction on the basis of the
forgoing statements by the Supreme Court); Little Co. of Mary Hosp. v.
Shalala, 24 F.3d 984 (7th Cir. 1994) (same)).
Upon further reflection, however, we determined that the
requirement that a provider either claim reimbursement for a specific
cost, or expressly self-disallow the cost, in its cost report is more
appropriately treated as a cost reporting requirement under sections
1815(a) and 1833(e) of the Act, as the agency cannot make payments to a
provider without sufficient information on all claims for which the
provider believes it should be paid. Indeed, it is eminently reasonable
for the Secretary to require a provider to make an appropriate cost
report claim for a specific item if the provider wants to be paid for
the item. As we explain in detail in the next section, requiring a cost
report claim for full reimbursement or an express self-disallowance of
the cost enables the contractor to review and audit the claim, make any
adjustments that seem appropriate, and include any final payment for
the cost as part of the NPR. Accordingly, in the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28209 through 28212 and 28306 through 28307), we
proposed to revise the cost reporting regulations in Part 413, Subpart
B by adding the substantive reimbursement requirement that a provider
must include an appropriate claim for an item in its cost report. We
proposed that the failure to account appropriately for the item in the
provider's cost report would foreclose payment for the item in the NPR
issued by the contractor and in any decision, order, or other action by
a reviewing entity (as defined in Sec. 405.1801(a) of the regulations)
in an administrative appeal filed by the provider.
However, as explained in the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28208), we recognized that the proposed addition to the cost
reporting regulations of the substantive reimbursement requirement of
an appropriate cost report claim for a specific item would be
potentially duplicative of the existing jurisdictional requirement in
the Board appeals regulations of an appropriate cost report claim. In
order to avoid such duplication, we also proposed in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28212 through 28213 and 28297) to revise
the appeals regulations in Part 405, Subpart R by eliminating the
requirement that a provider must include an appropriate claim for an
item in its cost report in order to meet the

[[Page 70555]]

dissatisfaction requirement for Board jurisdiction.
As explained in section XVII.B. of this final rule, we subsequently
included, in the FY 2015 IPPS/LTCH PPS final rule, a technical
correction to Sec. 405.1835 of the regulations, in which we eliminated
provider dissatisfaction as a requirement for Board jurisdiction over
appeals based on untimely contractor reimbursement determinations. As a
result of this final revision to Sec. 405.1835, the proposed revisions
to this Board appeals regulation in the FY 2015 IPPS/LTCH PPS proposed
rule have effectively been pared down. Under that proposed rule, the
Board jurisdiction requirement of an appropriate cost report claim,
which now applies only to appeals of a final contractor determination
(under Sec. 405.1835(a) of the regulations), would be eliminated. The
FY 2015 IPPS/LTCH PPS proposed rule further provided that our
longstanding requirement of an appropriate cost report claim would be
made a substantive reimbursement requirement in the cost reporting
regulations. These proposed revisions to the cost reporting regulations
and the provider appeals regulations would apply, on a prospective only
basis, to provider cost reporting periods beginning on or after the
effective date of a final rule.

D. Addition to the Cost Reporting Regulations of the Substantive
Reimbursement Requirement of an Appropriate Cost Report Claim

1. Proposed Provisions (New Sec. 413.24(j))
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28209 through
28212, 28306 through 28307), we proposed to add a new paragraph (j) to
Sec. 413.24 of the regulations. Proposed paragraph (j)(1) of Sec.
413.24 provided that in order to receive or potentially qualify for
payment for a specific item, the provider must include in its cost
report an appropriate claim for the specific item. In order to make an
appropriate claim for an item in its cost report, the provider must
either claim payment for the item in its cost report where it is
seeking payment that it believes is consistent with Medicare policy, or
self-disallow the item if the provider is seeking payment that it
believes may not comport with Medicare policy (for example, where the
contractor does not have the authority or discretion to award the
payment sought by the provider). In order to self-disallow a specific
item, the provider would have to follow the applicable procedures for
filing a cost report under protest, which are now contained in Section
115 of the PRM, Part 2 and were included in proposed paragraph (j)(2)
of Sec. 413.24. Specifically, the provider would have to include an
estimated payment amount for each self-disallowed item in the
``protested amount'' line of the cost report, and attach a worksheet
explaining why a self-disallowance is necessary (instead of claiming
payment for the item in its cost report) and describing how it
determined the estimated payment amount for each self-disallowed item.
Proposed paragraph (j)(3) of Sec. 413.24 specified the procedures
for determining whether there is an appropriate cost report claim for a
specific item. The default rule is that the question of whether the
provider's cost report includes an appropriate claim for the specific
item must be determined by reference to the cost report that the
provider submits originally to, and is accepted by, the contractor,
unless one of three exceptions applies. The first exception is that if
the provider submits an amended cost report that is accepted by the
contractor, the question of whether there is an appropriate cost report
claim for the specific item must be determined by reference to such
amended cost report, unless one of the two remaining exceptions
applies. The second exception is that if the contractor adjusts the
provider's cost report, as submitted originally by the provider and
accepted by the contractor or as amended by the provider and accepted
by the contractor, whichever is applicable, with respect to the
specific item, the question of whether there is an appropriate cost
report claim for the specific item must be determined by reference to
the provider's cost report, as such cost report is adjusted for the
specific item in the contractor's final determination (as defined in
Sec. 405.1801(a)), unless the remaining exception applies. The third
exception is that if the contractor reopens either the final contractor
determination for the provider's cost reporting period (in accordance
with Sec. 405.1885) or a revised contractor determination for such
period (issued in accordance with Sec. 405.1889) and adjusts the
provider's cost report with respect to the specific item, the question
of whether there is an appropriate cost report claim for the specific
item must be determined by reference to the provider's cost report, as
such cost report is adjusted for the specific item in the contractor's
most recent revised contractor determination for such period.
In the proposed rule, we stated that providers should make every
effort to comply with the default rule set forth in proposed paragraph
(j)(3) of Sec. 413.24, even though one of the exceptions to the
default rule might come into play later. In order to ensure compliance
with the substantive requirement of an appropriate cost report claim
for a specific item, we stated that the provider should either claim
full payment for, or properly self-disallow, the item in the cost
report that the provider submits originally to the contractor. However,
we indicated that failure to include an appropriate claim for the
specific item in the provider's original ``as submitted'' cost report
would not necessarily foreclose any further opportunity to meet the
requirement of an appropriate cost report claim for the specific item.
Under the first exception to the default rule under proposed paragraph
(j)(3), the provider could include an appropriate cost report claim for
the specific item in an amended cost report, but the contractor has
discretion whether to accept an amended cost report by the provider.
Under the second and third exceptions to the default rule under
proposed paragraph (j)(3), the requirement of an appropriate cost
report claim could be met through the contractor's adjustment of the
provider's cost report, either in the contractor's final determination
for the provider's cost reporting period (as defined in Sec.
405.1801(a)) or, if the final contractor determination is reopened, in
the contractor's revised determination. However, in preparing the final
contractor determination for a provider's cost reporting period, the
contractor would have the discretion as to whether to adjust the
provider's cost report with respect to the specific item and, if so,
how to adjust the cost report for such item. Similarly, after the final
contractor determination is issued, the contractor would have the
discretion as to whether to reopen the final contractor determination
and, if the specific item is reopened, whether to adjust the cost
report for such item and how to make any such adjustment.
In order to exemplify the workings of proposed paragraph (j)(3) of
Sec. 413.24, we included the following in the proposed rule: Consider
a hospital that seeks a Medicare DSH payment adjustment that, on the
provider's view, should be calculated on the basis of 2,000 Medicaid-
eligible patient days in the numerator of the DSH Medicaid fraction (42
CFR 412.106(b)(4)). If the hospital's as submitted cost report claimed
only 1,000 Medicaid-eligible patient days for the numerator of the DSH
Medicaid fraction, and the number of Medicaid-eligible patient days was
not changed in an amended cost report

[[Page 70556]]

by the provider or through adjustments to the cost report by the
contractor, the hospital would have made an appropriate cost report
claim for only 1,000 Medicaid-eligible patient days (instead of 2,000
such days). However, if the provider submitted, and the contractor
accepted, an amended cost report that claimed a total of 1,500
Medicaid-eligible patient days, the provider would have made a valid
cost report claim for 1,500 Medicaid-eligible patient days (instead of
2,000 such days). However, if the hospital asked the contractor, during
the contractor's review and settlement of the provider's cost report,
to count 250 more Medicaid-eligible patient days, and the contractor
agreed to consider those days in the contractor's final determination,
the provider would have made a valid cost report claim of 1,750
Medicaid-eligible patient days (instead of 2,000 such days). Finally,
if the provider next requested, or the contractor initiated on its own
motion, the reopening of the final contractor determination on the
specific issue of the number of Medicaid-eligible patient days for the
DSH Medicaid fraction's numerator, and the contractor did reopen for
that specific issue and it agreed to consider still another 250
Medicaid-eligible patient days in the contractor's revised
determination, the provider would have a valid cost report claim of
2,000 Medicaid-eligible patient days.\64\ At that juncture, the
hospital would have met the requirement of an appropriate cost report
claim for all of the 2,000 Medicaid-eligible patient days, which is the
number of such days that the provider believed from the outset should
be used in determining the numerator of the DSH Medicaid fraction.
---------------------------------------------------------------------------

\64\ In the preamble of the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28209 through 28210), this sentence inadvertently omitted the
additional point regarding the contractor's acceptance of an
additional 250 Medicaid-eligible patient days through a reopening
and revised final contractor determination that finally resulted in
the provider claiming a total of 2,000 Medicaid-eligible patient
days.
---------------------------------------------------------------------------

We stated in the proposed rule our belief that proposed paragraph
(j)(3) of Sec. 413.24 appropriately reflects the usual process in
which a cost report claim that is first made in the cost report that is
submitted originally to, and accepted by, the contractor, might be
altered through an amended cost report by the provider (if the amended
cost report is accepted by the contractor) or through adjustments of
the provider's cost report claim that are made in the contractor's
final determination or, in the event of a reopening, in the
contractor's revised final determination. This process enables a
provider to ensure compliance with the substantive requirement of an
appropriate cost report claim for a specific item, by including in the
cost report that the provider submits originally to, and is accepted
by, the contractor, either a full claim for payment for a specific item
or a proper self-disallowance of the item. In addition, this process
gives a provider additional opportunities to meet the requirement of an
appropriate cost report claim through an amended cost report by the
provider (if the amended cost report is accepted by the contractor) and
adjustments to the provider's cost report claim that are included in
the contractor's final contractor determination or, if there is a
reopening, in the revised final contractor determination. Unlike with
the provider's original as submitted cost report, however, the
contractor has discretion whether to accept an amended cost report;
whether to include particular cost report claim adjustments in the
final contractor determination and, if so, how to determine such
adjustments; and whether to reopen a contractor determination and, if
there is a reopening, how to determine any cost report claim
adjustments that may be included in the revised final contractor
determination. We stated that this ``back and forth'' process between
the provider and the contractor, which is reflected in proposed
paragraph (j)(3) of Sec. 413.24, facilitates appropriate
determinations of program payment and enhances administrative
efficiency. Each of the Medicare contractors has substantial experience
in reviewing and auditing cost reports and in properly determining
payment amounts. The back and forth process between the provider and
the contractor eliminates, or minimizes and sharpens, potential
disagreements, which obviates the need to file some administrative
appeals or narrows the issues in many cases.
In addition, proposed paragraph (j)(4) of Sec. 413.24 included a
provision that, to the extent a provider fails to claim a specific item
appropriately in its cost report, the final contractor determination
(as defined in Sec. 405.1801(a)) may not include payment for the item.
However, if the contractor determines that the provider made an
appropriate cost report claim for a specific item but the contractor
disagrees with material aspects of the provider's claim for the item,
the contractor must make appropriate adjustments to the provider's cost
report and include payment for the specific item in the final
contractor determination in accordance with the contractor's
adjustments to the cost report and to the extent permitted by program
policy.
We proposed under proposed paragraph (j)(5) of Sec. 413.24 that if
a party to an administrative appeal questions whether the provider's
cost report included an appropriate claim for the specific item under
appeal, the reviewing entity (as defined in Sec. 405.1801(a)) must
follow the procedures (which we discuss in detail below) that are set
forth in proposed Sec. 405.1873 (if the appeal was filed originally
with the Board), or the procedures in Sec. 405.1832 (if the appeal was
filed initially with the contractor), for review of whether the
substantive reimbursement requirement of an appropriate cost report
claim for the specific item is satisfied. Those regulations require the
reviewing entity to follow the procedures (discussed above) that are
set forth in paragraph (j)(3) of this section for determining whether
the provider's cost report included an appropriate claim for the
specific item under appeal. Also, the reviewing entity may permit
payment for the specific item under appeal solely to the extent
authorized by Sec. 405.1873(f) (if the appeal was filed originally
with the Board) or by Sec. 405.1832(f) (if the appeal was filed
initially with the contractor).
2. Statutory Authority and Rationale for Proposed Sec. 413.24(j)
In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we
believe the Medicare statute provides ample authority for the proposal
(described in the preceding section of this final rule) to add a new
paragraph (j) to Sec. 413.24 of the regulations. This proposal is well
within the Secretary's general rulemaking authority under sections 1102
and 1871 of the Act. Moreover, proposed Sec. 413.24(j) is an
appropriate exercise of the Secretary's broad authority under sections
1815(a), 1833(e), and 1886(f)(1) of the Act to require providers to
furnish the information needed to determine the amount of payment due a
provider under the Medicare program. As described above, we have relied
on these particular statutory provisions in adopting regulations that
require providers to submit annual cost reports; specify the requisite
contents of cost reports; and impose various procedural requirements
for cost reports (such as time periods for timely submission of cost
reports and certification requirements for cost reports). Moreover, we
have invoked the same statutory provisions in requiring

[[Page 70557]]

providers to report other specific information as a condition for
Medicare payment; we refer readers to, for example, Community Hospital
of Monterey Peninsula v. Thompson, 323 F.3d 782, 790, 795-800 (9th Cir.
2003) (sustaining Medicare's policy that providers must bill
``crossover bad debts'' to the State Medicaid agency because 42 U.S.C.
1395g(a) (that is, section 1815(a) of the Act) specifically granted the
Secretary broad discretion as to what information to require as a
condition of payment to providers under the Medicare program; see also
Maine Med. Ctr. v. Burwell, 775 F.3d 470, 480 (1st Cir. 2015) (the
Secretary is authorized by 42 U.S.C. 1395g(a) (that is, section 1815(a)
of the Act) to require a provider to furnish such information as the
agency may request). Indeed, as explained above, the Secretary's broad
discretion with respect to cost reporting requirements is also
reflected in the Board appeals provisions of section 1878(a) of the
Act, which makes provider compliance with cost reporting requirements a
prerequisite of Board jurisdiction.
In addition to the plainly sufficient statutory authority for
proposed Sec. 413.24(j), we believe there are sound policy reasons for
requiring a provider to include an appropriate claim for an item in its
cost report by either claiming payment for the item (where the provider
believes such claim would comport with Medicare policy), or by self-
disallowing the item (if the provider is seeking payment that it
believes may not be consistent with Medicare policy). This proposal has
three main parts, each of which we addressed in the proposed rule.
First, we believe that if a cost is allowable and the provider does
not disagree with how Medicare determines payment for the cost, the
provider's cost report should include a claim for full payment of the
cost in accordance with the program's payment policy. In such cases, a
cost report claim for full payment of the cost enables the contractor
to review the claim, make any adjustments that seem appropriate, and
include final payment for the cost as part of the NPR. Requiring a cost
report claim for full payment of allowable costs (where the provider
does not disagree with how Medicare determines payment for the cost)
facilitates the contractor's discharge of some of its principal
responsibilities, which include using the contractor's expertise and
experience to review and audit payment claims, making any necessary
adjustments, and including final payment for the cost in the NPR.
Absent some misstep by the contractor in reviewing such a cost report
claim and determining final payment for the item, there would be no
need for the provider to later request reopening or to file an
administrative appeal regarding the item. Even if the provider
disagreed with some aspect of the contractor's payment determination
for the specific item, any such disagreement would be narrowed and
delineated more precisely because our proposal, to require a full cost
report claim for payment of allowable costs, will give the contractor
an opportunity to review and audit the claim and determine the extent
to which (if at all) to include payment for the claim in the NPR.
Therefore, we believe that the interests of administrative finality and
efficiency will be advanced if providers are required to include a cost
report claim for full payment of allowable costs.
The proposed requirement under proposed Sec. 413.24(j) of a cost
report claim for full payment of allowable cost also comports with the
division of responsibilities between the contractors and the Board and
the other reviewing entities (as defined in Sec. 405.1801(a)). At
present, there are 12 contractors, each of which has a fairly large
staff with substantial experience and expertise in reviewing and
auditing cost reports and determining final payment in accordance with
Medicare policy. By contrast, the Board has only five members and a
relatively small staff. We believe it is a waste of scarce resources
and very inefficient for a provider to first raise a clearly allowable
cost in an appeal to the Board when the contractor could have
considered and finally determined payment for such an allowable cost in
the NPR, if the provider had simply made a timely cost report claim for
full payment of the allowable cost. As indicated by the very name of
the Provider Reimbursement Review Board, it is a ``review board'' or
administrative appeals tribunal, not the Medicare program's front line
auditors charged with making the final determination of program
reimbursement for such allowable costs.
Second, there are also sound policy reasons for proposing, under a
new paragraph (j) in Sec. 413.24, that a provider must self-disallow a
specific item if it is seeking payment that it believes may not comport
with Medicare policy (for example, because the provider believes the
contractor does not have the discretion to make the payment sought by
the provider), by following the applicable procedures for filing a cost
report under protest (procedures that, as explained above, are now
contained in Section 115 of the PRM, Part 2, and would be set forth in
proposed paragraph (j)(2) of Sec. 413.24). When a provider self-
disallows an item by accounting for it appropriately in the ``protested
amount'' line of the cost report (instead of claiming payment for the
item), the contractor has an opportunity to correct any misconceptions
that the provider may have had about the item. For example, the
contractor could determine, contrary to the provider's apparent
understanding in self-disallowing a specific item, that the item in
question is actually an allowable cost that is reimbursable in
accordance with program policy. Another example would be that the
contractor might determine, despite the provider's understanding of
Medicare policy and its concomitant self-disallowance, that program
policy has changed and the item is now an allowable cost or a new
payment policy now applies that permits the payment methodology used by
the provider in support of its self-disallowance of the item; we refer
readers to, for example, 75 FR 50275 through 50286 (discussing CMS
Ruling 1498-R, which revised Medicare DSH payment policy in response to
adverse judicial precedent, and made such revisions applicable to open
cost reports and certain pending administrative appeals). In such
cases, the contractor's extensive expertise and experience and its
resources can be brought to bear in reviewing self-disallowed items,
making any necessary corrections, and finally allowing payment for
corrected items in the NPR. Indeed, these kinds of contractor actions
comport with section 1874A(a)(4) of the Act and Sec. 413.20(b) of the
regulations, which require the contractors to furnish providers with
consultative services, education, training, information and
instructions, and technical assistance regarding the interpretation and
application of payment principles and other program policies; be
available to address provider questions and problems on a daily basis;
and facilitate communication between the agency and providers.
Accordingly, we believe our proposed addition of a self-disallowance
requirement to the cost reporting regulations will facilitate
exhaustion of administrative remedies through the contractor's review
and final settlement of the provider's cost report, and when the
contractor corrects errors in a provider's self-disallowance, the need
to appeal to the Board or request reopening could be obviated; we refer
readers to Little Co. of Mary Hospital v. Shalala, 165 F.3d 1162, 1165
(7th Cir. 1999) (the Secretary's requirement of an appropriate cost
report claim for an item

[[Page 70558]]

ensures that the contractor will have the ``first shot'' at determining
any reimbursement for the item, before any appeal to the Board need be
filed).
By requiring the self-disallowance of items that providers believe
may not comport with Medicare policy, proposed Sec. 413.24(j) also
would contribute importantly to other aspects of program
administration. For example, we believe that this proposal would
facilitate provider compliance with the existing requirements in Sec.
413.24(f) that each provider submit a complete, accurate, and timely
cost report, and that the provider's administrator or chief financial
officer certify that the submitted cost report is complete and
accurate. We believe our proposed self-disallowance requirement also
would enhance CMS' ability to accurately estimate the program's
potential liabilities (for example, for purposes of the agency's
preparation of required financial statements). Similarly, we believe
that this proposal would improve the contractors' ability to establish
audit and other workload priorities. In addition, we believe that the
proposed addition of a self-disallowance requirement (for items that
providers believe may not comport with Medicare policy) to the cost
reporting regulations would enable us to better monitor Medicare policy
and potentially adjust our policies in response to a pattern of
provider self-disallowances of a given item. Indeed, the importance of
requiring complete and accurate cost report information is highlighted
by the fact that we use cost report data for a wide variety of purposes
such as setting and refining prospective payment rates; establishing
hospital market basket weights; calculating Medicare and total facility
margins; determining payment for graduate medical education (GME) and
indirect medical education (IME); creating projections for the
President's annual budget and for the annual Medicare Trustees Report;
for various research projects; and for responding to requests from the
public, the Congress, OMB, and other parts of the Administration.
Third, we believe there also are sound reasons for our proposal
that, under a new Sec. 413.24(j), if a provider fails to account
appropriately for an item in its cost report (by making a full claim
for payment for the item or self-disallowing the item if the provider
believes a payment claim would not comport with Medicare policy), the
NPR issued by the contractor may not include payment for the item and
payment also may not be permitted in any decision, order, or other
action by a reviewing entity (as defined in Sec. 405.1801(a)) in an
administrative appeal filed by the provider. Under existing Sec. Sec.
405.1835(a)(1) and 405.1840(b)(3), the consequence of not making an
appropriate cost report claim for an item is that the Board would not
have jurisdiction over the provider's appeal of the item. (Similarly,
under Sec. Sec. 405.1811(a)(1) and 405.1814(b)(3), the contractor
hearing officers would lack jurisdiction for an item if the provider
did not make an appropriate cost report claim for the item.) As
explained below, however, we proposed the elimination of the
jurisdictional requirement of an appropriate cost report claim in
existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) for Board appeals
(and the corresponding jurisdictional requirement in Sec. Sec.
405.1811(a)(1) and 405.1814(b)(3) for contractor hearing officer
appeals), because we believe it is a requirement more appropriately
placed in the cost reporting regulations. Given our longstanding policy
of requiring an appropriate cost report claim for an item, proposed
paragraph (j) of Sec. 413.24 is a natural place to spell out the
consequences of not abiding by this cost reporting requirement. In this
regard, we note that the proposed addition of a new paragraph (j) to
Sec. 413.24 is like the existing paragraph (e) in Sec. 413.20, which
provides for the suspension of Medicare payments if a provider fails to
maintain the records necessary for proper determination of Medicare
reimbursement. Similarly, if a provider fails to include an appropriate
claim for an item in its cost report, the NPR issued by the contractor
will not include payment for the item and payment also will not be
permitted in any decision, order, or other action by a reviewing entity
(as defined in Sec. 405.1801(a)) in an administrative appeal filed by
the provider.
3. Summary of Public Comments, CMS Responses, and Statement of
Finalized Policies for Sec. 413.24(j)
The following public comments were received in response to the FY
2015 IPPS/LTCH PPS proposed rule (79 FR 28206 through 28217). As
explained below, we are finalizing various revisions to the cost
reporting regulations and the provider appeals regulations. These final
revisions will apply, on a prospective only basis, to provider cost
reporting periods beginning on or after the effective date of this
final rule, and to provider appeals regarding provider cost reporting
periods that begin on or after the effective date of this final rule.
Comment: Several commenters questioned the legitimacy of CMS'
policy justifications. The commenters stated that the agency's policy
justifications do not constitute a rational basis for the proposed new
cost report requirements.
Response: As explained in the proposed rule (and as discussed
earlier in this final rule), we believe there are several compelling
policy justifications for the requirement in proposed Sec. 413.24(j)
that a provider include an appropriate claim for an item in its cost
report by either claiming payment for the item (where the provider
believes such claim would comport with Medicare policy), or by self-
disallowing the item (if the provider is seeking payment that it
believes may not be consistent with Medicare policy).
First, we believe that requiring a cost report claim for full
payment of an allowable cost advances the agency's interest in
administrative finality and efficiency. If a cost is allowable and the
provider does not disagree with how Medicare determines payment for the
item, the requirement of an appropriate cost report claim facilitates
the contractor's settlement of the claim. The requirement of a cost
report claim for full payment of an allowable cost also helps preserve
the distinct roles of the contractor and the Board, and conserves Board
resources by avoiding Board appeals involving claims that could have
been considered and settled by the contractor, if the provider had
simply made a timely cost report claim for full payment of the
allowable cost in the cost report.
We also believe that the requirement in proposed Sec. 413.24(j),
that a provider self-disallow a specific item if it is seeking payment
that it believes may not comport with Medicare policy, will facilitate
exhaustion of administrative remedies. It has been our experience that
providers are sometimes mistaken in their belief that payment is not
allowable. This could occur, for example, where the provider
misinterprets the applicable payment policies, where the policies have
changed without the provider's knowledge, or where the provider has
some other reason to believe (albeit erroneously) that a particular
payment will be deemed not allowable. We believe that requiring a
provider to self-disallow a specific item if it is seeking payment that
it believes may not comport with Medicare policy ensures that the
contractor will have the opportunity to employ its expertise and
correct any misconceptions in the first instance, potentially avoiding
unnecessary appeals and narrowing the issues in dispute. Even if the
provider is correct in its belief that payment is

[[Page 70559]]

not allowable, the contractor may still facilitate resolution of the
provider's claim through consultation, discussion, and education about
the applicable Medicare policies.
In addition, we believe that the addition of a self-disallowance
requirement to the cost reporting regulations will advance other
aspects of program administration by facilitating provider compliance
with other cost report requirements, enhancing the agency's ability to
estimate potential liabilities, improving contractors' ability to
establish audit and other workload priorities, and allowing the agency
to better monitor Medicare policy and potentially adjust policy in
response to a pattern of provider self-disallowances.
Lastly, as explained in the proposed rule, we believe the
requirement of an appropriate cost report claim is more appropriately
placed in the cost report regulations than in its current inclusion in
the provider appeals regulations. We believe that proposed Sec.
413.24(j) reflects our longstanding policy of requiring an appropriate
cost report claim for items and that this provision is the natural
place to spell out the consequences of not abiding by this cost
reporting requirement.
Comment: Several commenters questioned whether the ``back and
forth'' process between the provider and the contractor as described in
the proposed rule reflects the reality of the cost report process.
Commenters also questioned whether contractors are equipped and
prepared to engage in the type of back and forth process described in
the proposed rule.
Response: We believe that the back and forth process between the
provider and contractor, as described in the proposed rule (79 FR 28209
through 28210), does reflect the reality of the cost report process,
and contractors regularly engage in the type of back and forth process
described in the proposed rule. In addition to claims processing
functions, contractors regularly engage with providers to furnish
consultative services, education, training, information and
instructions, and technical assistance regarding the interpretation and
application of payment principles and other program policies.
Contractors also address providers' questions and problems on a daily
basis and facilitate communication between the agency and providers. We
selected the specific scenario involving a hospital seeking a Medicare
DSH adjustment based on additional Medicaid-eligible patient days to
exemplify the commonplace interaction between the provider and
contractor. As several commenters acknowledged, contractors frequently
engage with providers in determining whether to accept amended cost
reports or requests for reopening under this specific circumstance. The
regularity of this interaction between the contractor and the provider
is reflected by the sheer volume of cost report amendments and
reopening requests accepted by contractors. Contractors accepted 76
percent of requests from providers to amend cost reports during FY 2014
and 77 percent during FY 2013. In addition, as a result of a contractor
reopening, 2,311 revised NPRs were issued during FY 2014 and 3,636
revised NPRs were issued during FY 2013.
Comment: Several commenters questioned whether contractors would
work with providers to identify situations in which a hospital may have
mistakenly claimed an item under protest, instead of affirmatively
claiming payment for that item through the cost report. The commenters
stated that if a contractor determines that a hospital may have
mistakenly claimed an item under protest instead of affirmatively
claiming payment for that item, because there is no CMS requirement
directing the contractor to add that item to the allowable claims in
the hospital's cost report, the contractor is free to use that error
against the hospital by not reimbursing the hospital for the item in
question and opposing any subsequent appeal on the ground that the
protest was not proper.
Response: Contractors have been directed to work with providers to
identify self-disallowed items that may actually be reimbursable in
accordance with program policy. If a provider seeks payment that it
mistakenly believes may not comport with Medicare policy, and follows
the procedures for self-disallowing the specific item as set forth in
proposed paragraph (j)(2) of Sec. 413.24 by accounting for it
appropriately in the ``protested amount'' line of the cost report, the
provider has fulfilled the substantive reimbursement requirement of an
appropriate cost report claim and may receive or potentially qualify
for reimbursement for the specific item. If the item in question is an
allowable cost that is reimbursable in accordance with Medicare policy,
the contractor has the obligation to pay the provider accurately. We
believe that the contractor's correction of errors in the provider's
self-disallowance would obviate the need for the provider to request a
contractor reopening or Board hearing. If the contractor does not
correct the error, the provider could seek relief through the
administrative appeals process.
Comment: Several commenters stated that the proposed rule assumes a
cost reporting and appeal structure that does not reflect the reality
of the hospital reimbursement process. The commenters alleged that the
proposed rule ignores that providers often lack access to the
information necessary to complete their cost reports in a timely
fashion or otherwise may be unaware of a payment error, through no
fault of their own, when the cost report is filed.
Response: We respectfully disagree with the commenters'
characterization of the proposed rule. Providers have ample time, 5
months after the close of the cost reporting period, to submit cost
reports with appropriate cost report claims. In most cases, the
information a provider needs to make appropriate cost report claims is
easily ascertainable and may be found in the provider's own records.
Therefore, in most instances, providers should not have any difficulty
obtaining the information necessary to complete and submit a cost
report with appropriate claims for each specific item.
We have identified only one circumstance where a provider may have
difficulty obtaining sufficient information to make an appropriate cost
report claim within the allotted time for cost report submission. This
circumstance may occur if a hospital experiences difficulty obtaining
sufficient information from State agencies for the purpose of claiming
DSH Medicaid-eligible patient days. Therefore, as explained below in
our response to the next comment, we will instruct contractors, in this
limited circumstance, that they must accept one amended cost report
submitted within a 12-month period after the hospital's cost report due
date, solely for the specific purpose of revising a claim for DSH by
using updated Medicaid-eligible patient days, after a hospital receives
updated Medicaid eligibility information from the State.
Moreover, for situations in which a provider may be unaware of a
payment error when its cost report is submitted, we believe that
proposed Sec. 413.24(j)(3) offers providers several opportunities to
meet the requirement of an appropriate cost report claim. As detailed
in proposed paragraph (j)(3) of Sec. 413.24, a provider may satisfy
the requirement of an appropriate cost report claim through submission
of an amended cost report (if the amended cost report is accepted by
the contractor), through adjustments of the cost report claim that are
made in the contractor's final determination or, in the event of a
reopening, through cost report adjustments made in the contractor's
revised determination.

[[Page 70560]]

Moreover, proposed Sec. 413.24(j)(5) provides for Board review of
provider compliance with the appropriate cost report claim requirement
in accordance with the procedures set forth in new proposed Sec.
405.1873.
Comment: Commenters recommended that the proposed rule include an
exception for hospitals that rely on information from State agencies
regarding Medicaid-eligible patient days, for the purpose of
calculating DSH payments. The commenters stated that hospitals are not
able to determine a final and complete count of Medicaid-eligible
patient days until well after the deadline for submission of the cost
report to the contractor because of State delays in providing such
information. Several commenters cited retroactive State eligibility
determinations and Medicaid expansion populations as complicating
factors beyond a hospital's control that could substantially impact DSH
payments. The commenters also pointed out that CMS has not promulgated
any standards affirmatively requiring States to make Medicaid
eligibility information available to hospitals for the purpose of
completing the cost report, or requiring States to make this
information available within any specific timeframe. One commenter
stated that the proposal does not provide for an alternative of
requiring States to provide accurate, timely and complete information
to enable hospitals to include the Medicaid-eligible patient days in
their timely submitted cost reports.
Many commenters pointed out that acceptance of an amended cost
report or a reopening for the purpose of adding additional Medicaid-
eligible patient days to calculate DSH payments is at the discretion of
the contractor. Several commenters observed that currently, contractors
typically exercise their discretion in favor of accepting amended cost
reports. However, commenters also claimed that the exercise of
contractor discretion under the proposal may keep a hospital from
receiving the appropriate amount of payment for DSH and impede its
right to appeal contractor DSH payment determinations that
inappropriately omit some Medicaid-eligible patient days for a cost
reporting period.
Another commenter expressed concern that the proposal may also
affect payments for uncompensated care by skewing the distribution of
the pool of insured low income days if additional DSH Medicaid-eligible
patient days were in the calculation for some hospitals but not for
other hospitals due to the sole discretion of the contractor.
Response: In claiming DSH payments, hospitals use State eligibility
determinations and reporting for the purpose of calculating Medicaid-
eligible patient days. In calculating the number of Medicaid-eligible
patient days, the hospital must determine whether the patient was
eligible for Medicaid under a State plan approved under Title XIX of
the Act on the day of service by using the State's informational
retrieval systems used in the administration of Title XIX of the Act,
as required by CMS to provide timely and accurate data (42 CFR part
433, subpart C). The responsibility for collecting, verifying, and
reporting Medicaid eligibility as part of the cost reporting process
lies solely with providers. States are obligated to provide this
information, although hospitals bear the burden of proof with respect
to DSH Medicaid-eligible patient days claimed on the cost report.
Hospitals cannot claim Medicaid-eligible patient days that have not
been verified by State records. We believe that it is reasonable to
continue to place the burden of furnishing the information necessary to
prove eligibility for each Medicaid patient day for DSH calculation
purposes on hospitals because they are best situated to provide and
verify Medicaid eligibility information. Because the hospital has
provided inpatient care for which they billed the relevant payers,
including State Medicaid plans, they will necessarily already be in
possession of much of the required information. We continue to believe
that the mechanisms currently in place enable hospitals to obtain
Medicaid-eligible patient days necessary to calculate DSH payments. In
addition, we believe there is no need to modify State Medicaid plan
regulations to require that State plans verify Medicaid eligibility for
hospitals within a certain time period.
However, we recognize that, in certain limited circumstances, when
the hospital submits the Medicare cost report, it may not possess
sufficient information from a State agency for the purpose of reporting
the total number of Medicaid-eligible patient days due to factors
beyond that hospital's control. In such situations, as one commenter
observed, contractors usually accept amended cost reports to account
for delays a provider may have experienced in obtaining requisite
information from State agencies. We will continue to afford providers
the opportunity to submit amended cost reports and will instruct
contractors, with new instructions in CMS Pub. 100-6, Chapter 8, that
they must accept one amended cost report submitted within a 12-month
period after the hospital's cost report due date, solely for the
specific purpose of revising Medicaid-eligible patient days in order to
calculate DSH payments after a hospital receives updated Medicaid-
eligible patient days from the State. Furthermore, as we anticipate
that, under this process, providers will be able to more accurately
account for Medicaid-eligible patient days on their cost reports, there
is little risk that the distribution pool of insured low-income days
will become skewed and payments for uncompensated care will not be
affected.
Comment: Several commenters pointed out that the 2008 final rule
(73 FR 30190) indicated that necessary information is not always
available to providers when they submit their cost reports. The
commenters characterized the existing regulations as explicitly
recognizing the provider's right to appeal based on information that
was not available or was not known to the provider until after its cost
report was submitted. The commenters stated that when the Board appeal
regulations were revised in 2008, the agency acknowledged that there
may be situations where a provider is uncertain about whether Medicare
payment is correct because it does not have access to necessary
information (for example, Medicaid eligibility information from a State
agency) (73 FR 30194). The commenters stated that this admission in the
2008 rule is incompatible with the new cost report requirements in
proposed Sec. 413.24(j), which would limit reimbursement to only those
items for which an ``appropriate claim'' or ``protest'' is included on
the cost report.
Response: We do not see any inconsistency between our statements in
the 2008 final rule and the cost report claim requirement in proposed
Sec. 413.24(j). In the 2008 rule, we stated that there may be
instances where a provider does not have access to underlying data (for
example, Medicaid eligibility information from a State agency)
sufficient to ascertain whether Medicare payment (for example, the DSH
payment) is incorrect. Consistent with the 2008 rule, we have
acknowledged in this final rule the one circumstance where hospitals
must rely on information from State agencies about Medicaid eligibility
in order to make an appropriate DSH payment adjustment claim in its
cost report. To address this limited circumstance, as discussed above,
we will instruct contractors that they must accept one amended cost
report submitted within a 12-month period after the hospital's original
cost report due date, solely for

[[Page 70561]]

the specific purpose of revising and making an appropriate cost report
claim for DSH Medicaid-eligible patient days after a hospital receives
updated information about Medicaid-eligible patient days from the
State.
Comment: Commenters expressed concern that the SSI fraction of the
DSH payment determination, which is calculated by CMS, is not released
until after the cost report is filed.
Response: The proposal will not have any effect on the process that
CMS uses to calculate SSI fractions for acute care hospitals. CMS and
its contractors will continue to use the data matching process that was
referred to in CMS Ruling 1498-R and finalized at 75 FR 50275 through
50286, including all relevant provisions regarding the timing of the
match process, to calculate relevant SSI fractions for acute care
hospitals. Moreover, while relevant Federal fiscal year SSI ratios may
not be published until after a cost report is filed, providers may use,
and Medicare contractors must accept, the latest available SSI ratios
that have been published to process claims, submit cost reports, and
make tentative settlements (42 CFR 412.106(b)(2) and 413.64(e) and
(f)), until CMS publishes the relevant Federal fiscal year SSI ratio
which shall be used to issue a final determination in an NPR. In
addition, the hospital could seek relief by requesting a reopening of
the final contractor determination or by filing an administrative
appeal.
Comment: Several commenters stated that the time period of 5 months
between the end of a hospital's fiscal year and its cost report due
date is too short for a hospital to capture all data necessary for
direct GME and IME payments. One commenter expressed concern that
direct GME or IME full-time equivalent (FTE) data relating to a prior
year and/or penultimate year could be excluded from a hospital's
calculation of GME or IME payments under the requirement of an
appropriate cost report claim in proposed Sec. 413.24(j). This
commenter suggested that, under the proposal, if the FTE residents in a
prior year's cost report are changed upon the audit or reopening of a
cost report, and the current year cost report is filed using the
original prior year FTE count in the IME and direct GME calculations,
the 3-year rolling average and the prior year resident to bed ratio
would be impacted. The commenter stated that if the contractor does not
correct the current year's incorrect number upon the audit or reopening
of a cost report, under the proposal, a hospital would have no recourse
through the Board.
Response: We respectfully disagree with the commenters' assertion
that the time period of 5 months between the end of a hospital's fiscal
year and its cost report due date is too short for a hospital to
capture all data necessary for GME and IME payments. Under the proposed
rule, direct GME or IME FTE data relating to a prior year and/or
penultimate year would not be excluded from a hospital's calculation of
direct GME or IME payments. A hospital would be able to successfully
resolve this issue with the contractor without needing to seek recourse
through the Board.
Because 42 CFR 412.52 specifies that all hospitals participating in
the prospective payment systems must meet the recordkeeping and cost
reporting requirements of Sec. Sec. 413.20 and 413.24, hospitals are
required to maintain sufficient financial records and statistical data
for proper determination of costs payable under the Medicare program,
which would include direct GME and IME payments. Accordingly, such
information should be maintained by the hospital and be easily
ascertainable. With regard to determining FTE counts, hospitals should
be able to determine FTE counts for the cost reporting year that just
ended based on predetermined rotation schedules for each approved
residency training program. In addition, bed counts for the IME payment
and Medicare utilization for the direct GME payment are available to
the hospital based on a combination of its own patient census records
and on the Provider Statistical and Reimbursement System, which the
hospital uses to complete its Medicare cost report after each fiscal
year end. Therefore, we believe that hospitals have all the information
necessary to accurately complete worksheets E, Part A, and E-4 of the
Medicare cost report within the 5-month time period between the end of
a hospital's fiscal year and its cost report due date.
Furthermore, if a contractor makes an adjustment to a direct GME or
IME payment on a cost report for a given year, the contractor should
bring forward the audit adjustment made in the prior cost year
prospectively to the current cost year and make the adjustment in the
NPR for the current cost year. If the hospital learned of the
adjustment to the prior year shortly after filing its cost report, it
could submit an amended cost report based on the contractor's
adjustment. Although the acceptance of the amended cost report would
ultimately be at the discretion of the contractor, such an amendment
reflecting a prior year adjustment by the contractor should be
accepted, as it is the contractor's responsibility to ensure that the
prior year adjustment is applied prospectively. If the hospital
receives an NPR where the prior adjustment is not reflected in the
current cost year, it could request that the NPR be reopened. Although
requests for reopening are also at the discretion of the contractor,
such a request resulting from an adjustment proposed by the contractor
to a prior cost report should be granted, given the contractor's
responsibility to ensure that the prior year adjustment be applied
prospectively. Also, the hospital could seek relief by filing an
administrative appeal.
Comment: Commenters stated that the time period of 5 months between
the end of a provider's fiscal year and its cost report due date is too
short for a provider to capture all data necessary for bad debt
payments. Several of these commenters stated that providers may not
know all of their bad debt accounts at the time they initially file
their cost reports and they rely on the ability to file cost report
amendments to ensure accurate reimbursement.
Response: We respectfully disagree with the commenters' assertions
that the time period of 5 months between the end of a provider's fiscal
year and its cost report due date is too short for a provider to
capture all data necessary to claim payment for bad debts. Medicare
``bad debts'' arise from uncollectible accounts and notes receivable
that are created or acquired in the process of providing services to a
Medicare patient (42 CFR 413.89). These uncollectible deductibles and
coinsurance amounts are recognized as allowable bad debts in the
reporting period in which the debts are determined to be worthless.
Because bad debts are uncollectible accounts receivable and notes
receivable, the provider should have the usual accounts receivable
records (ledger cards and source documents) to support its claim for a
bad debt for each account included in the cost report. Examples of the
types of information to be retained by a provider may include, but are
not limited to, the beneficiary's name and health insurance number;
admission/discharge dates for Medicare Part A bills and dates of
services for Medicare Part B bills; date of bills; date of write-off;
and a breakdown of the uncollectible amount by deductible and
coinsurance amounts. This type of information should be easily
ascertainable by the provider because it is expected to be maintained
by the provider in the course of normal business in accordance with
Sec. 413.20. Because uncollectible deductibles and coinsurance amounts
are recognized as allowable bad debts in

[[Page 70562]]

the cost reporting period in which the debts are determined to be
worthless by providers under Sec. 413.89, by definition providers
should have sufficient information to claim reimbursement for bad debts
for a particular cost report year within that cost report year, and
thus well within the 5-month time period between the close of the cost
reporting year and the providers' cost report submission date. If all
information needed to establish that a debt is worthless is not
available within a given cost year, the account may not properly be
claimed as a Medicare debt within that period, but might qualify as a
bad debt in a later year.
The same is true for bad debts of dually eligible beneficiaries
whose Medicaid eligibility is determined upon submission of a bill by
the provider. In that situation, a provider is required to obtain a
remittance advice from the State to document the liability of a State's
Medicaid program for the unpaid deductible and coinsurance before a
claim for bad debt can be submitted to Medicare. In this regard,
providers should have the information to claim reimbursement for bad
debts for a dually eligible beneficiary for a particular cost report
year within the 5-month time period between the close of the cost
reporting year and the providers' cost report submission date. In all
situations, if for some reason the provider learns of bad debt that
should have been claimed on its cost report after cost report
submission, the provider may still follow the existing procedures for
submitting an amended cost report to the contractor or submitting a
request for reopening to the contractor. The acceptance of an amended
cost report and granting of the request for reopening remain at the
discretion of the contractor. However, the provider could also seek
relief by filing an administrative appeal.
Comment: Many commenters asserted that the proposed rule would
inappropriately limit providers' capacity to file appeals based on the
discretion of the contractor. The commenters observed that, under the
proposal, the question of whether the provider's cost report includes
an appropriate claim for a specific item must be determined by
reference to the cost report that the provider submits originally to,
and is accepted by, the contractor, unless one of three exceptions
apply. Noting the three exceptions in Sec. 413.24(j)(3) of the
proposed rule, several commenters stated that, under the proposal, a
provider's right to appeal is dependent on the contractor's exercise of
nonreviewable discretion. The commenters pointed out that the
acceptance of an amended cost report or the issuance of a reopening is
entirely at the discretion of the contractor under current Medicare
regulations and a contractor's rejection of an amended cost report or a
reopening request is not subject to judicial review. As a result, the
commenters criticized the proposal as vesting contractors with overly
broad authority and discretion over hospitals' right to appeal items on
the cost report.
Several commenters also asserted that the proposed rule would
prevent providers from correcting items on their cost reports. The
commenters noted that if a hospital does not correctly list an item on
its cost report, its only avenue for correction would be to file an
amended report or request reopening and hope that the contractor
accepts the amended cost report or reopening request. The commenters
stated that if the contractor rejects the amended cost report or
reopening request, the hospital would have no further administrative
remedy under the proposed rule. The commenters stated that contractors
routinely decline to accept amended cost reports or requests for
reopening, often based on workload and resources. The commenters were
concerned with the exercise of contractor discretion under the proposal
and recommended that CMS develop clear and uniform standards for
contractors to use in determining whether to accept an amended cost
report or issue a reopening. In addition, the commenters recommended
that CMS explain how it will monitor and enforce the contractors'
exercise of authority to make such decisions about providers' requests
to amend or reopen cost reports to ensure that the contractors are
fairly and consistently applying the standards for all providers. The
commenters also recommended that the proposal include an exception for
instances where a provider later discovers information that should have
been reported on the cost report.
Response: We acknowledge the commenters' concerns. However, as we
explain in detail below in section XVII.E.1. of this final rule, we do
not agree that the exercise of contractor discretion under the proposed
rule would limit a provider's right to file an administrative appeal.
The proposed rule eliminates the jurisdictional requirement in
Sec. Sec. 405.1835(a) and 405.1811(a) of an appropriate cost report
claim, which makes it easier for a provider to meet the jurisdictional
requirements for an appeal to the Board or the contractor,
respectively. While the proposed Sec. 413.24(j) imposes the
requirement of an appropriate cost report claim as a general
substantive requirement for payment, Sec. 413.24(j) does not impose
any limitations on a provider's administrative appeal rights. On the
contrary, proposed Sec. 413.24(j)(5) specifically addresses
administrative appeals where a party questions provider compliance with
the substantive reimbursement requirement of an appropriate cost report
claim.
We proposed to require that providers include an appropriate claim
for a specific item in their Medicare cost reports in order to receive
or potentially qualify for Medicare payment for the specific item. In
most situations, at the time of filing, the provider should possess all
information needed to file an appropriate claim. We believe that, for
the most part, providers should not have any significant difficulty
identifying items that they believe should be paid by Medicare.
Therefore, under this proposal, the question of whether the provider's
cost report includes an appropriate claim for a specific item will be
determined by reference to the cost report that the provider submits
originally to, and is accepted by, the contractor. There may be
instances where a provider learns of new and material information or
needs to correct an error after filing the cost report, and in such
situations, the provider may submit an amended cost report or request
that the cost report be reopened. Therefore, the proposal in Sec.
413.24(j)(3) includes exceptions where the contractor accepts an
amended cost report or reopens the cost report.
We recognize that the acceptance of amended cost reports and
requests for reopening is at the discretion of the contractor and not
reviewable (Sec. Sec. 413.24(f) and 405.1885(a)(6)). Accordingly, we
understand the commenters' concerns about the potential effects of
contractor discretion under the proposed rule. However, we believe that
the contractors currently exercise discretion with regard to the
acceptance of amended cost reports and reopening requests in an
equitable and consistent manner. We respectfully disagree that
contractors routinely reject amended cost reports and reopening
requests based on workload and resources. This is reflected by the
sheer volume of cost report amendments and reopening requests accepted
by contractors. Contractors accepted 1,828 amended cost reports during
FY 2014 and 1,725 amended cost reports during FY 2013. In addition, as
a result of a contractor reopening, 2,311 revised NPRs were issued
during FY 2014 and 3,636 revised NPRs were issued during FY 2013. We
anticipate that the contractors will continue to exercise

[[Page 70563]]

discretion in an equitable and consistent manner under this proposal.
Therefore, we see no reason to develop any new standards beyond the
current guidance we provide to contractors. We also do not see a need
to increase monitoring of contractor activity beyond the current
monitoring that is performed as part of annual contract reviews.
Comment: One commenter alleged that the proposed rule prevents
contractors from making positive adjustments to cost reports and
eliminates a provider's ability to receive payments for claims that the
provider may fail to include in its cost report.
Response: The proposed rule does not include any provision that
would prevent a contractor from making a positive adjustment to a cost
report if such an adjustment is warranted. On the contrary, proposed
paragraph (j)(4) of Sec. 413.24 provides that if the contractor
determines that the provider made an appropriate cost report claim for
a specific item and that all other substantive reimbursement
requirements for the specific item are satisfied, the final contractor
determination must include reimbursement for the item to the extent
permitted by Medicare policy. Similarly, if the contractor finds an
appropriate cost report claim but it disagrees with material aspects of
the provider's claim for the item, the contractor must make appropriate
adjustments to the provider's cost report and include payment for the
specific item in the final contractor determination in accordance with
the contractor's adjustment to the cost report and to the extent
permitted by program policy. Such adjustments could be monetarily
favorable, unfavorable, or have no reimbursement effect for the
provider.
Proposed paragraph (j)(4) of Sec. 413.24 also provides that, to
the extent a provider fails to claim a specific item appropriately in
its cost report, the final contractor determination may not include
payment for the item. However, a provider's failure to include an
appropriate claim for a specific item in the provider's original ``as
submitted'' cost report does not necessarily foreclose any further
opportunity for the provider to meet the requirement of an appropriate
cost report claim. A provider could seek to remedy such an omission by
submitting an amended cost report, if the amended cost report is
accepted at the discretion of the contractor. The requirement of an
appropriate cost report claim could also be met through the
contractor's adjustment of the provider's cost report, either in the
final contractor determination for the provider's cost reporting period
or, if the final contractor determination is reopened at the discretion
of the contractor, in the contractor's revised final determination.
Moreover, the provider could seek relief by filing an administrative
appeal.
Comment: Commenters stated that the proposed rule would prohibit
providers from pursuing appeals in order to correct errors by CMS that
are not known at the time the provider files the cost report. The
commenters recommended that the proposal include an exception for
situations in which errors in CMS calculations, which are previously
unknown to the provider, are subsequently discovered after filing of
the cost report.
Response: We respectfully disagree with commenters' statement that
the proposed rule prohibits providers from pursuing appeals to correct
errors that CMS may make in payment calculations. Assuming for the sake
of argument that the agency made an error, and that such error was not
known or discoverable until after the provider submitted its cost
report, the proposed rule would not curtail the provider's right to
file an appeal to the Board. On the contrary, proposed paragraph (j)(5)
of Sec. 413.24 provides for Board review of such an alleged CMS error
in accordance with the procedures in proposed Sec. 405.1873. The
provider could first seek Board review of whether its cost report
included an appropriate claim for the specific item under proposed
Sec. 405.1873(a). Proposed Sec. 405.1873(b)(1) provides that the
parties to the appeal must be given an adequate opportunity to submit
factual evidence and legal argument on the question of whether the
provider complied with the general reimbursement requirement of an
appropriate cost report claim; the Board must make findings of fact and
conclusions of law regarding that question; and those findings and
conclusions of the Board must be included in the administrative record
and they must be included in certain overall Board decisions regarding
the appeal.
As the question of whether a provider made an appropriate cost
report claim for a specific payment item is a mixed question of law and
fact, it is well within the Board's decisional authority. However, the
provider in this situation might also be raising a facial challenge to
the lawfulness of a governing regulation for the payment item, in which
case the Board would have no authority to decide that legal question.
As a result, the provider could request expedited judicial review (EJR)
of its facial challenge to the lawfulness of the specific payment
regulation. Under proposed Sec. 405.1873(d)(2), if the Board grants
EJR regarding a question of law that is relevant to the matters at
issue, its EJR decision must include the Board's findings of fact and
conclusions of law (if any) about whether the provider's cost report
included an appropriate claim for the matter at issue, and any such
findings and conclusions are subject to the same provisions in Sec.
405.1842(g)(1), (g)(2), (h)(1), and (h)(3) (regarding further review
and finality) as ``apply to the other parts of the Board's EJR
decision.'' Similarly, proposed Sec. 405.1873(f)(2) addresses the
potential reimbursement effects of an EJR decision that both grants EJR
regarding a question of law that is relevant to the matters at issue,
and also includes the Board's findings of fact and conclusions of law
(if any) about whether the provider's cost report included an
appropriate claim for the matter at issue.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to amend Sec. 413.24 by
reserving paragraph (i) and adding new paragraph (j). New Sec.
413.24(j) requires a provider to include an appropriate claim for a
specific item in its Medicare cost report in order to receive or
potentially qualify for Medicare payment for the specific item. In
order to make an appropriate claim for an item in its cost report, the
provider must either claim payment for the item in its cost report if
it is seeking payment that it believes is consistent with Medicare
policy, or self-disallow the item if the provider is seeking payment
that it believes may not comport with Medicare policy. If the
provider's cost report does not include an appropriate claim for a
specific item, payment for the item will not be included in the NPR
issued by the contractor or in any decision or order issued by a
reviewing entity (as defined in 42 CFR 405.1801(a)) in an
administrative appeal filed by the provider.
We have identified only one circumstance where a provider may have
difficulty obtaining sufficient information to make an appropriate cost
report claim. This circumstance may exist when a hospital experiences
difficulty obtaining sufficient information from State agencies about
Medicaid-eligible patient days, which is necessary to claim a DSH
payment adjustment. Of course, providers have the right to submit
amended cost reports. Moreover, in this limited circumstance, we will
instruct contractors, through new instructions in CMS Pub. 100-6,
Chapter 8, that they

[[Page 70564]]

must accept one amended cost report submitted within 12 months after
the due date for the hospital's cost report (which is 5 months after
the last day of the hospital's fiscal year), solely for the specific
purpose of revising the number of Medicaid-eligible patient days (after
a hospital receives updated Medicaid-eligible patient days from the
State) in order to make an appropriate cost report claim for a DSH
payment adjustment. In our experience, we believe an additional 12
months is sufficient time for States to make Medicaid eligibility
determinations and for hospitals to revise its number of Medicaid-
eligible patient days in order to make an appropriate cost report claim
for a DSH payment adjustment. In submitting such an amended cost
report, the hospital must include: (1) The number of additional
Medicaid-eligible patient days that the hospital is seeking to include
in the DSH calculation; (2) a description of the process that the
hospital used to identify and accumulate the Medicaid-eligible patient
days that were reported and filed in the hospital's Medicare cost
report at issue; and (3) an explanation of why the additional Medicaid-
eligible patient days at issue could not be verified by the State by
the time the hospital's cost report was submitted.

E. Revisions to the Provider Reimbursement Appeals Regulations

1. Elimination of the Jurisdictional Requirement of an Appropriate Cost
Report Claim
a. Proposed Revisions to Sec. Sec. 405.1835 and 405.1840
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28212 through
28213, and 28297 through 28298), we proposed to eliminate the
requirement in existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) of
the regulations that a provider must include an appropriate claim for
an item in its cost report in order to meet the dissatisfaction
requirement for Board jurisdiction. We explained that there is a sound
basis in law and policy for this proposal. We stated that our proposal
to eliminate an appropriate cost report claim as a requirement for
Board jurisdiction is well within the Secretary's general rulemaking
authority under sections 1102 and 1871 of the Act. Moreover, we
explained that this specific proposal is a reasonable interpretation of
the ``dissatisfied'' provision in section 1878(a)(1)(A) of the Act. In
our view, this statutory provision is ambiguous and the interpretation
in the existing appeals regulations, which requires providers to make
appropriate cost report claims in order to meet the dissatisfaction
prerequisite of Board jurisdiction with respect to a specific item, is
a permissible interpretation of the statute. As described above,
however, providers have challenged our interpretation of the statutory
dissatisfaction provision in litigation spanning more than 30 years,
and in public comments on existing Sec. Sec. 405.1835(a)(1) and
405.1840(b)(3) of the regulations that were adopted in the 2008 final
rule (73 FR 30195 through 30200; CMS' response to public comments on
the proposed Board appeals regulations, which were based on our
interpretation of the statutory dissatisfaction provision). Providers
have maintained throughout this litigation and in the referenced public
comments that the statutory dissatisfaction provision does not support
our policy of requiring an appropriate cost report claim as a
prerequisite of Board jurisdiction. We continue to disagree with this
view of the statute, and still believe that the existing regulations
for Board appeals of timely final contractor or Secretary
determinations are based on a permissible interpretation of the
statutory dissatisfaction provision in section 1878(a)(1)(A) of the
Act. As explained above, existing Sec. 405.1835(a)(1) comports with
the Supreme Court's statement that the statutory dissatisfaction
requirement might not be met if a provider bypassed a clearly
prescribed exhaustion requirement or failed to ask the contractor for
payment of all costs to which it is entitled under applicable rules
(Bethesda Hospital Association v. Bowen, 485 U.S. at 404-405).
Furthermore, the U.S. Court of Appeals for the Seventh Circuit has
twice sustained our interpretation of the statutory dissatisfaction
provision, on the basis of the foregoing statements by the Supreme
Court (Little Co. of Mary Hosp., 165 F.3d 1162; Little Co. of Mary
Hosp., 24 F.3d 984). Nonetheless, we believe our proposal, to eliminate
Sec. 405.1835(a)(1)'s jurisdictional requirement of an appropriate
cost report claim, certainly does not conflict with the
``dissatisfied'' provision in section 1878(a)(1)(A) of the Act.
Moreover, as we stated in the proposed rule, this particular
proposal is supported by section 1878(a)(1)(B) of the Act, which
authorizes certain Board appeals if the provider does not receive a
final contractor reimbursement determination on a timely basis.
(Section 405.1835(c) of the existing regulations specifies the time
period and other conditions for Board appeals where the provider does
not receive a final contractor determination on a timely basis.)
Section 1878(a)(1)(B) of the Act does not include a dissatisfaction
provision. Indeed, as explained earlier in section XVII.B. of this
final rule, this was a basis for our revision of Sec. 405.1835 of the
regulations in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199
through 50201 and 50350 through 50351) to eliminate provider
dissatisfaction as a requirement for Board jurisdiction over appeals
based on untimely contractor reimbursement determinations. This
revision was simply a technical correction inasmuch as the amendment to
Sec. 405.1835 conformed the regulations to the provisions in section
1878(a)(1)(B) of the Act for Board appeals based on an untimely
contractor determination. In effect, this amendment to Sec. 405.1835
restored the full conformity of the regulations with the statutory
requirements for Board jurisdiction over appeals based on untimely
contractor determinations--a conformity that obtained before the 2008
final rule (73 FR 30195 through 30199) inadvertently imposed a provider
dissatisfaction requirement for Board appeals based on untimely
contractor determinations.
As a result of our elimination, in the FY 2015 IPPS/LTCH PPS final
rule, of the dissatisfaction requirement for Board jurisdiction over
appeals based on untimely contractor reimbursement determinations,
providers no longer have to submit an appropriate cost report claim as
a requirement for Board jurisdiction over such appeals. Our proposal to
eliminate the requirement under Sec. 405.1835(a)(1) of an appropriate
cost report claim in order to meet the ``dissatisfied'' jurisdictional
provision in section 1878(a)(1)(A) of the Act would make uniform this
aspect of Board jurisdiction over both appeals of timely final
contractor and Secretary determinations and appeals based on untimely
final contractor determinations. Specifically, an appropriate cost
report claim would no longer be required for Board jurisdiction over
appeals of timely final contractor and Secretary determinations just as
the same jurisdictional requirement, of an appropriate cost report
claim, was previously eliminated (in the FY 2015 IPPS/LTCH PPS final
rule) for appeals based on untimely final contractor determinations.
We stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28212)
that, in addition to the sufficient statutory authority for our
proposed elimination of an appropriate cost report claim as a
requirement for Board jurisdiction, there

[[Page 70565]]

are sound policy reasons for this proposal. As explained in section
XVII.D. of this final rule, we believe that, by requiring appropriate
cost report claims in proposed Sec. 413.24(j), complete and accurate
determinations of provider reimbursement will be facilitated as will
many other important aspects of program administration. Thus, because
we would require an appropriate cost report claim in proposed Sec.
413.24(j), it is reasonable to eliminate the Board jurisdiction
requirement in existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) of
an appropriate cost report claim. We note that once this amendment to
the Board appeals regulations becomes effective, this proposal will
facilitate an orderly end to any litigation regarding the Board
jurisdiction requirement of an appropriate cost report claim.
As explained above, our proposed revisions to the cost reporting
regulations and the provider appeals regulations would apply on a
prospective only basis, to provider cost reporting periods beginning on
or after the effective date of this final rule. Until these proposed
regulations take effect, however, the requirement of an appropriate
cost report claim in Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3) of
the regulations will continue to be a requirement for Board
jurisdiction over appeals of timely final contractor reimbursement
determinations. Thus, until the proposed regulations become effective,
the Board and the Administrator of CMS will continue to determine Board
jurisdiction over appeals of timely final contractor determinations by
reference to the appropriate cost report claim requirements of
Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3), along with other
applicable jurisdictional provisions of section 1878 of the Act and
Sec. Sec. 405.1835 and 405.1840 of the regulations. We believe that,
because it is essential to require appropriate cost report claims for
the various reasons that we discussed above, it is necessary and proper
to continue to require an appropriate cost report claim as a
prerequisite of Board jurisdiction under Sec. Sec. 405.1835(a)(1) and
405.1840(b)(3) over appeals of timely final contractor determinations
until the proposed addition to the cost reporting regulations, of the
substantive reimbursement requirement of an appropriate cost report
claim, takes effect.
b. Summary of Public Comments and Our Responses and Finalized Policies
Comment: Some commenters stated that the proposed revisions to
Sec. 405.1835 are contrary to section 1878(a)(1)(B) of the Act, which
provides for appeals to the Board if a final contractor determination
is not issued timely (as specified in the Secretary's regulations at
Sec. 405.1835 (c) and (d)) and all jurisdictional requirements are
satisfied. The commenters further stated that this statutory provision
does not require provider dissatisfaction for appeals based on untimely
final contractor determinations, and the Secretary has conceded this
point in litigation.
Response: We do not believe the FY 2015 IPPS/LTCH PPS proposed rule
is inconsistent with section 1878(a)(1)(B) of the Act. Under this
statutory provision, a provider may appeal to the Board if a final
contractor determination is not issued timely (as specified in the
Secretary's regulations) and all jurisdictional requirements are
satisfied. Section 1878(a)(1)(B) of the Act does not make provider
dissatisfaction a jurisdictional requirement for Board appeals based on
untimely final contractor determinations. By contrast, section
1878(a)(1)(A) of the Act does impose a provider dissatisfaction
requirement for Board jurisdiction over appeals of a timely final
contractor or Secretary determination.
As explained in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50200),
a provider dissatisfaction jurisdictional requirement, for appeals
based on untimely final contractor determinations, was inadvertently
added to the Board appeals regulations in a 2008 final rule (73 FR
30190)--not, as the commenters asserted, in the FY 2015 IPPS/LTCH PPS
proposed rule. Instead, based on the FY 2015 IPPS/LTCH PPS proposed
rule and this final rule, we are eliminating our longstanding
interpretation of the statutory dissatisfaction requirement for Board
jurisdiction over appeals of a timely final contractor or Secretary
determination, an interpretation that required the provider to
establish its dissatisfaction by submitting an appropriate cost report
claim. Under the FY 2015 IPPS/LTCH PPS proposed rule and this final
rule, we are making an appropriate cost report claim a general
substantive requirement for Medicare payment (in new Sec. 413.24(j)),
in addition to eliminating (in Sec. 405.1835(a)) an appropriate cost
report claim as a prerequisite of Board jurisdiction over appeals of a
timely final contractor or Secretary determination under section
1878(a)(1)(A) of the Act.
In effect, the FY 2015 IPPS/LTCH PPS final rule addressed the
commenters' concerns here about whether the regulations for Board
appeals based on untimely final contractor determinations are
consistent with section 1878(a)(1)(B) of the Act. As explained in
section XVII.B. of this final rule, in the FY 2015 IPPS/LTCH PPS final
rule, we made a technical correction to Sec. 405.1835 of the Board
appeals regulations that eliminated the dissatisfaction jurisdictional
requirement for appeals based on untimely final contractor
determinations. Under paragraph (c) of Sec. 405.1835, provider
dissatisfaction is no longer required for appeals based on untimely
final contractor determinations. As a result of this technical
correction, the regulations for Board appeals based on untimely final
contractor determinations are consistent with section 1878(a)(1)(B) of
the Act. Furthermore, given the amendments to Sec. 405.1835(a)(1) in
this final rule and the prior technical correction that added paragraph
(c) to Sec. 405.1835, an appropriate cost report claim is no longer
required for Board jurisdiction over any appeal.
Comment: Commenters asserted that the proposed elimination of the
dissatisfaction requirement for Board jurisdiction is inconsistent with
section 1878(a)(1)(A) of the Act, which provides for appeals of a
timely final contractor or Secretary determination if all
jurisdictional requirements are satisfied. The commenters stated that
the Supreme Court held in Bethesda Hospital Association v. Bowen, 485
U.S. 399 (1988) that provider dissatisfaction is a jurisdictional
requirement for Board appeals based on 42 U.S.C. 1395oo(a)(1)(A) (that
is, section 1878(a)(1)(A) of the Act).
Response: We did not propose in the FY 2015 IPPS/LTCH PPS proposed
rule, and we are not effectuating in this final rule, the elimination
of provider dissatisfaction as a requirement for Board jurisdiction
over appeals of a timely final contractor or Secretary determination
under section 1878(a)(1)(A) of the Act. As the Supreme Court held in
Bethesda Hospital Association, section 1878(a)(1)(A) of the Act plainly
makes provider dissatisfaction a requirement for Board jurisdiction.
Also, this statutory prerequisite of Board jurisdiction over appeals of
a timely final contractor or Secretary determination is clearly
reiterated in the existing text of paragraph (a)(1) of Sec. 405.1835,
and in the preambles for both the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28207 through 28208 and 28212 through 28213) and the technical
correction provision in the

[[Page 70566]]

FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 through 50200).
While we are not eliminating the provider dissatisfaction
requirement for Board jurisdiction over appeals of a timely final
contractor or Secretary determination, we nonetheless can see some
potential for confusion about this matter due to the specific text of
proposed Sec. 405.1835. In the FY 2015 IPPS/LTCH PPS proposed rule (79
FR 28297), paragraph (a) of Sec. 405.1835 retains (and renumbers the
current paragraphs for) the amount in controversy and timely filing
requirements for Board jurisdiction, but the statutory dissatisfaction
requirement was not stated in paragraph (a). This does not mean,
however, that we proposed to eliminate the provider dissatisfaction
requirement for Board jurisdiction over appeals of a timely final
contractor or Secretary determination. As explained above, the preamble
for the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28207 through 28208
and 28212 through 28213) plainly states that provider dissatisfaction
is a prerequisite for Board jurisdiction. Also, under that proposed
rule (79 FR 28297), paragraph (b)(2) of Sec. 405.1835 requires the
provider to explain why it ``disagrees with'' specific aspects of the
final contractor or Secretary determination. We believe the reference
in paragraph (b)(2) to ``disagrees with'' is synonymous with the
references to ``is dissatisfied with'' in section 1878(a)(1)(A) of the
Act. Moreover, proposed paragraph (b)(2)(iii) (79 FR 28297) would
require the provider's cost report to include specific details about
each specific item that ``the provider self-disallows.'' Under our
prior interpretation of the statutory dissatisfaction requirement for
Board jurisdiction (existing paragraph (a)(1) of Sec. 405.1835), a
provider must include a self-disallowance in its cost report for a
specific item that it believes may not be allowable under Medicare
payment policy.
Although we did not propose the elimination of the provider
dissatisfaction requirement for Board jurisdiction over appeals of a
timely final contractor or Secretary determination in the FY 2015 IPPS/
LTCH PPS proposed rule, we have concluded, based on consideration of
the public comments we received, that technical revisions to the
proposed text of paragraph (a) of Sec. 405.1835 are warranted in order
to avoid potential confusion about this matter. Accordingly, in this
final rule, we are revising the proposed introductory text of paragraph
(a) of Sec. 405.1835 (79 FR 28297) by eliminating the proposed
reference to items ``claimed in its cost report,'' a technical revision
that further clarifies our proposed elimination of an appropriate cost
report claim as a requirement for Board jurisdiction. Moreover, we are
revising the proposed text of paragraph (a)(1) of Sec. 405.1835 (79 FR
28297) by revising the dissatisfaction provision in the existing text
of paragraph (a)(1) so that the provider dissatisfaction requirement
for Board jurisdiction over appeals of a timely final contractor or
Secretary determination in Sec. 405.1835(a)(1) will track closely the
references to ``is dissatisfied with'' in section 1878(a)(1)(A) of the
Act. As a result of these technical revisions to the proposed
introductory text of paragraph (a) of Sec. 405.1835 and to the
proposed text of paragraph (a)(1), Sec. 405.1835(a) will state that
the provider has a right to a Board hearing with respect to a final
contractor or Secretary determination if the provider is dissatisfied
with the contractor's final determination of the total amount of
reimbursement due the provider, as set forth in the contractor's
written notice under Sec. 405.1803, and the other requirements for
Board jurisdiction (discussed below) are also satisfied.
We also are adding paragraph (a)(1)(i) to Sec. 405.1835, which is
a technical conforming amendment to the revised dissatisfaction
provision in Sec. 405.1835(a)(1). Under paragraph (a)(1), a provider
could be dissatisfied with any number of the specific aspects of
Medicare payment that are finally determined in the contractor's
original NPR under Sec. 405.1803. However, under our longstanding
``issue specific'' interpretation of the reopening regulations, Board
jurisdiction over an appeal involving a reopening is limited under
Sec. Sec. 405.1887(d) and 405.1889(b) to the specific matters that
were reopened and revised in the contractor's revised NPR. We refer
readers, for example, to HCA Health Services of Oklahoma v. Shalala, 27
F.3d 614 (D.C. Cir. 1994) (the reopening regulations are based on the
Secretary's general rulemaking authority, and the issue specific
interpretation of the reopening rules is reasonable and supportive of
administrative finality). As a technical conforming amendment to the
revised dissatisfaction provision in Sec. 405.1835(a)(1), the issue
specific reopening regulations are cross-referenced in paragraph
(a)(1)(i) of Sec. 405.1835, to specify that if a final contractor
determination is reopened under Sec. 405.1885, any review by the Board
must be limited solely to those matters that are specifically revised
in the contractor's revised final determination (Sec. Sec. 405.1887(d)
and 405.1889(b), and the ``Exception'' under proposed Sec.
405.1873(c)(2)(i)). The referenced ``Exception'' in Sec.
405.1873(c)(2)(i) is a similar cross-reference in new Sec. 405.1873,
which is addressed in section XVII.E.2.a. of this final rule.
However, we are not finalizing the proposed revisions (79 FR 28297)
to paragraphs (a)(2) and (a)(3) of Sec. 405.1835. First, our adoption
of the above-described technical revision to the dissatisfaction
jurisdictional requirement in current paragraph (a)(1) of Sec.
405.1835, obviates any need to renumber either the amount in
controversy jurisdictional requirement in current paragraph (a)(2) or
the timely filing jurisdictional requirement in paragraph (a)(3).
Second, similarly unnecessary are the proposed revisions to the text of
current paragraph (a)(3), which would have reiterated (in proposed
Sec. 405.1835(a)(2)(ii)) our longstanding policy for determining
whether a final contractor determination was issued timely for purposes
of a Board appeal based on section 1878(a)(1)(B) of the Act. This
policy is now stated appropriately in Sec. 405.1835(c), a regulation
we adopted in the technical correction provisions of the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50350 through 50351).
Comment: One commenter stated that proposed Sec.
405.1835(a)(2)(ii) conflicts with the Medicare contractor manual
instructions in CMS Pub. 100-6, chapter 8, sections 10.3 and 90. The
commenter stated that proposed Sec. 405.1835(a)(2)(ii) includes a 12-
month period for issuance of a timely NPR by the contractor, but the
two manual sections together instruct the Medicare contractor to issue
an NPR within a 13-month period. The commenter recommended that CMS
revise the proposed rule by adopting the same 13-month period for
determining the timeliness of the contractor's NPR. The commenter also
suggested an alternative approach that would change the proposed rule's
beginning date for the 12-month period for determining the timeliness
of the contractor's NPR.
Response: We respectfully disagree with the commenter's assertion
that the two manual sections require the Medicare contractor to issue
an NPR within a 13-month period. Our longstanding policy is that if the
contractor does not issue an NPR within 12 months after the date of its
receipt of the provider's perfected or amended cost report, the
provider may appeal to the Board within 180 days after the expiration
of the 12-month period for

[[Page 70567]]

timely issuance of the NPR. As explained in our response to the
immediately preceding comment, this policy is now stated appropriately
in Sec. 405.1835(c), a regulation we adopted in the technical
correction provisions of the FY 2015 IPPS/LTCH PPS final rule (79 FR
50350 through 50351). Accordingly, we do not see any reason to make any
of the revisions suggested by the commenter.
Comment: A number of commenters stated that the proposed rule
conflicts with section 1878(d) of the Act, which authorizes the Board
to address the full range of reimbursement matters covered by a
provider's cost report regardless of whether the Medicare contractor
considered a particular matter in its final determination. The
commenters asserted that the proposal of making an appropriate cost
report claim a substantive prerequisite of reimbursement imposes a new
limit on both the Board's authority and providers' appeal rights that
is contrary to the Medicare statute.
Response: We respectfully disagree with the commenters for three
reasons. First, based on the FY 2015 IPPS/LTCH PPS proposed rule and
this final rule, we are eliminating our longstanding interpretation of
the statutory dissatisfaction requirement for Board jurisdiction over
appeals of a timely final contractor or Secretary determination, an
interpretation that required the provider to establish its
dissatisfaction by submitting an appropriate cost report claim. As
explained above, the elimination of our prior interpretation of the
dissatisfaction prerequisite of Board jurisdiction under section
1878(a)(1)(A) of the Act, as requiring an appropriate cost report
claim, will make it easier for a provider to establish that it meets
the requirements for Board jurisdiction under section 1878(a) of the
Act. The Supreme Court held in Bethesda Hospital Association that the
Board's powers under section 1878(d) of the Act are contingent on the
provider first meeting the threshold requirements for Board
jurisdiction as set forth in section 1878(a) of the Act. We see no
reason why the Board's contingent powers under section 1878(d) of the
Act would somehow be narrowed by our making it easier for a provider to
meet the threshold jurisdictional requirements imposed by section
1878(a) of the Act.
Second, in the preamble to the 2008 final rule (73 FR 30225 through
30226), we addressed the Supreme Court's holding in Bethesda Hospital
Association that the Board's powers under section 1878(d) of the Act
are contingent on the provider first meeting all the requirements for
Board jurisdiction in section 1878(a) of the Act. We also revised Sec.
405.1869 of the regulations (73 FR 30261) to track closely the Supreme
Court's interpretation of section 1878(d) in the Bethesda Hospital
Association decision. However, we did not propose any revisions to
Sec. 405.1869 in the FY 2015 IPPS/LTCH PPS proposed rule, and we did
not receive public comments suggesting specific revisions to that
regulation. We believe that if there were a serious question about
whether this final rule would somehow narrow the Board's contingent
powers under section 1878(d) of the Act, commenters presumably would
have suggested specific revisions to Sec. 405.1869 in order to address
any concerns about the purported effect of the FY 2015 IPPS/LTCH PPS
proposed rule on the Board's powers under section 1878(d) of the Act.
Given that this final rule does not narrow the Board's powers under
section 1878(d) of the Act, we do not believe that revisions to Sec.
405.1869 are necessary.
Third, as discussed below, we are adopting a new Sec. 405.1873,
which addresses in detail Board review of a provider's compliance with
the general reimbursement requirement of an appropriate cost report
claim (as prescribed in new Sec. 413.24(j)). Section 405.1873 does not
narrow the Board's powers under either section 1878(d) of the Act or
the corresponding provisions of Sec. 405.1869, which is not referenced
in Sec. 405.1873. Section 405.1873 provides for full review by the
Board of a provider's compliance with the general reimbursement
requirement of an appropriate cost report claim. Paragraph (a) of Sec.
405.1873 provides for such Board review if any party to an appeal
questions whether the provider's cost report included an appropriate
claim for a specific item. Under paragraph (b)(1) of Sec. 405.1873,
the parties must be given an adequate opportunity to submit factual
evidence and legal argument on the question of whether the provider
complied with the general reimbursement requirement of an appropriate
cost report claim; the Board must make findings of fact and conclusions
of law regarding that question; and those findings and conclusions of
the Board must be included in the administrative record and they must
be included in certain overall Board decisions regarding the appeal.
Moreover, assuming that the provider's appeal meets the requirements
for Board jurisdiction under section 1878(a) of the Act and Sec.
405.1835 of the regulations, there is no indication in Sec. 405.1873
that the Board's contingent powers under section 1878(d) of the Act and
Sec. 405.1869 of the regulations would somehow not apply fully for
purposes of Board review of whether the provider complied with the
general reimbursement requirement of an appropriate cost report claim.
Comment: Several commenters stated that the proposed rule is
inconsistent with section 1878(f)(1) of the Act, which authorizes EJR
if the requirements for Board jurisdiction are satisfied and the Board
lacks the authority to decide a question of law that is relevant to a
matter at issue in the provider's appeal. The commenters stated that
the purpose of the EJR statute is to avoid unnecessary delay in
adjudicating payment disputes where the Board and the Medicare
contractor lack the power to decide the matter at issue. The commenters
further stated that, to the extent the Board and the contractor lack
the power to decide a relevant legal question, it is arbitrary and
capricious to require the provider to protest the matter in its cost
report in order to preserve its statutory right to obtain expedited
judicial review.
Response: We respectfully disagree with these comments for a number
of reasons. The FY 2015 IPPS/LTCH PPS proposed rule did not propose to
require a provider to protest a matter in its cost report in order to
preserve its statutory right to request EJR. Under section 1878(f)(1)
of the Act and Sec. 405.1842 of the regulations, the Board must have
jurisdiction over the provider's appeal before EJR can be granted as to
a legal question that is relevant to a matter at issue but is beyond
the Board's decisional authority. We are now eliminating our
longstanding interpretation of the statutory dissatisfaction
requirement for Board jurisdiction, an interpretation that required the
provider to establish its dissatisfaction by submitting an appropriate
cost report claim. As explained above, this revision makes it easier
for a provider to demonstrate that it meets the requirements for Board
jurisdiction. Given that Board jurisdiction must be established before
EJR can be granted, we see no reason why the elimination of our prior
interpretation of the statutory dissatisfaction requirement for Board
jurisdiction (as requiring an appropriate cost report claim) would
somehow impede or constrain a provider's right to seek EJR. We believe
that the elimination of our prior interpretation of the statutory
dissatisfaction requirement for Board jurisdiction (as requiring an
appropriate cost report claim) should facilitate a provider's exercise
of its

[[Page 70568]]

right to seek EJR because this final rule makes it easier for a
provider to meet the threshold Board jurisdiction prerequisite of any
request for EJR.
We also do not believe that the FY 2015 IPPS/LTCH PPS proposed rule
would undermine the purpose of the EJR statute by causing improper
delay in the adjudication of payment disputes where the Board lacks the
authority to decide a relevant legal question. Under section 1878(f)(1)
of the Act and Sec. 405.1842 of the regulations, a grant of EJR does
not necessarily resolve the entire Board appeal. Rather, section
1878(f)(1) of the Act authorizes EJR if the requirements for Board
jurisdiction are satisfied, and the provider's appeal ``involves a
question of law or regulations relevant to the matters in controversy''
and the Board determines ``that it is without authority to decide the
question.'' While the Board might lack the authority to decide one
legal question ``relevant to the matters at issue,'' the Board could
also have full decisional authority over other questions that are also
relevant to the matters at issue. For example, the Board has no
authority to decide a facial challenge to the lawfulness of a provision
of a payment regulation (42 CFR 405.1867), but the Board can decide the
separate question of whether other undisputed provisions of the same
payment regulation were applied properly by the contractor. The latter
issue (that is, whether the payment regulation was applied properly) is
a mixed question of law and fact that is within the Board's decisional
authority, even though the Board lacks the authority to decide the
former question of whether a provision of the same payment rule is
lawful.
As discussed below, we are adopting as final the proposed new Sec.
405.1873, which addresses Board review of a provider's compliance with
the general reimbursement requirement of an appropriate cost report
claim (as prescribed in new Sec. 413.24(j)). The question of whether a
provider made an appropriate cost report claim for a specific payment
item is a mixed question of law and fact that is well within the
Board's decisional authority. If the provider's appeal also raises a
facial challenge to the lawfulness of the governing regulation for the
same payment item, the Board has no authority to decide that legal
question. However, the mixed question of law and fact (that is, whether
the provider made an appropriate cost report claim for the specific
payment item at issue), which is plainly within the Board's decisional
authority, is just as ``relevant to the matters in controversy''
(section 1878(f)(1) of the Act) as the question of law (that is,
whether the payment regulation is lawful) that is beyond the Board's
decisional authority. Thus, the provider's statutory right to request
EJR of its facial challenge to the lawfulness of the specific payment
regulation is not improperly impeded or delayed by the Board's
discharge of its authority to review and decide the mixed question of
law and fact of whether the provider complied with the general
reimbursement requirement of an appropriate cost report claim for the
same payment item (as prescribed in new Sec. 413.24(j)).
Indeed, the foregoing principles are clearly reflected in new Sec.
405.1873. Under paragraph (d)(2) of Sec. 405.1873, if the Board grants
EJR regarding a question of law that is relevant to the matters at
issue, its EJR decision must include the Board's findings of fact and
conclusions of law (if any) about whether the provider's cost report
included an appropriate claim for the matter at issue, and any such
findings and conclusions are subject to the same provisions in Sec.
405.1842(g)(1), (g)(2), (h)(1), and (h)(3) (regarding further review
and finality) as ``apply to the other parts of the Board's EJR
decision.'' Similarly, paragraph (f)(2) of Sec. 405.1873 addresses the
potential reimbursement effects of an EJR decision that both grants EJR
regarding a question of law that is relevant to the matters at issue,
and also includes the Board's findings of fact and conclusions of law
(if any) about whether the provider's cost report included an
appropriate claim for the matter at issue.
Comment: One commenter asserted that the proposed rule interferes
with a provider's right to introduce evidence in a hearing before the
Board.
Response: We respectfully disagree with this comment. Under section
1878(c) of the Act, a provider may be represented by counsel at a Board
hearing, and introduce evidence and examine and cross-examine witnesses
at such hearing. The regulations elaborate on these hearing rights
(Sec. Sec. 405.1845 through 405.1851, 405.1859, and 405.1861) and
establish additional rights to pre-hearing discovery and subpoenas
(Sec. Sec. 405.1853 and 405.1857). We do not believe the FY 2015 IPPS/
LTCH PPS proposed rule interferes with a provider's right to introduce
evidence in a Board hearing or with any of the provider's Board
procedural rights that are elaborated on, or established in, the above-
referenced regulations.
None of the foregoing Board procedural regulations is mentioned in
revised Sec. 405.1835 or in new Sec. 405.1873. As explained above,
the elimination (in Sec. 405.1835(a)) of our longstanding
interpretation of the statutory dissatisfaction requirement for Board
jurisdiction (an interpretation that required the provider to establish
its dissatisfaction by submitting an appropriate cost report claim)
makes it easier for a provider to demonstrate that it meets the
requirements for Board jurisdiction. We believe this revision to Sec.
405.1835(a), which makes it easier for the provider to establish Board
jurisdiction, has no bearing on a provider's Board procedural rights
under section 1878(c) of the Act or the above-referenced regulations.
More specifically, we see no reason why revisions to the regulations
that make it easier for a provider to establish Board jurisdiction
would somehow interfere with the provider's Board procedural rights
under section 1878(c) of the Act or the above-referenced regulations.
We believe the same is true of our adoption of new Sec. 405.1873,
which addresses in detail Board review of a provider's compliance with
the general reimbursement requirement of an appropriate cost report
claim (as prescribed in new Sec. 413.24(j)). Far from interfering with
a provider's right to introduce evidence in a Board hearing (under
section 1878(c) of the Act) or with any of the provider's Board
procedural rights that are elaborated on, or established in, the
regulations, Sec. 405.1873 provides for full review by the Board of
provider compliance with the general reimbursement requirement of an
appropriate cost report claim (as prescribed in new Sec. 413.24(j)).
Under paragraph (b)(1) of Sec. 405.1873, the parties must be given an
adequate opportunity to submit factual evidence and legal argument on
the question of whether the provider complied with the general
reimbursement requirement of an appropriate cost report claim; the
Board must make findings of fact and conclusions of law regarding that
question; and those findings and conclusions of the Board must be
included in both the administrative record and in certain overall Board
decisions regarding the appeal. Thus, given the broad scope of the
Board's review under new Sec. 405.1873, we see no reason to believe
that this regulation would somehow interfere with a provider's right to
introduce evidence in a Board hearing or with any of the provider's
Board procedural rights that are elaborated on, or established in, the
above-referenced regulations.
Comment: Commenters asserted that shifting the dissatisfaction
provision from a Board jurisdiction requirement (in Sec. 405.1835) to
a cost reporting requirement (in new Sec. 413.24) is

[[Page 70569]]

inconsistent with the PPS payment provisions of section 1886 of the
Act. The commenters stated that most Board appeals now raise PPS
issues, which do not involve cost-based reimbursement. The commenters
further stated that the documentation of costs in provider cost reports
is not relevant to PPS payment, which is set without regard to a
provider's costs.
Response: We did not propose shifting the dissatisfaction provision
from a Board jurisdiction requirement to a cost reporting requirement,
and we are not adopting such provisions in this final rule. As
explained above, the Supreme Court held in Bethesda Hospital
Association that section 1878(a)(1)(A) of the Act clearly makes
provider dissatisfaction a requirement for Board jurisdiction. This
statutory prerequisite of Board jurisdiction over appeals of a timely
final contractor or Secretary determination is plainly stated in the
current text of paragraph (a)(1) of Sec. 405.1835, and in the
preambles for both the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28207
through 28208 and 28212 through 28213) and the technical correction
provision in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 through
50200). Moreover, in this final rule, we are making a technical
revision to the dissatisfaction provision in current paragraph (a)(1)
of Sec. 405.1835 so that the provider dissatisfaction requirement for
Board jurisdiction over appeals of a timely final contractor or
Secretary determination in this regulation will track closely the
references to ``is dissatisfied with'' in section 1878(a)(1)(A) of the
Act.
Based on the provisions of the FY 2015 IPPS/LTCH PPS proposed rule
and this final rule, we are eliminating (in Sec. Sec. 405.1835(a)(1)
and 405.1840(b)(3)) an appropriate cost report claim as a prerequisite
of Board jurisdiction over appeals of a timely final contractor or
Secretary determination under section 1878(a)(1)(A) of the Act.
Furthermore, we are making an appropriate cost report claim a general
substantive requirement for Medicare payment (in new Sec. 413.24(j)).
We understand that many Board appeals now present payment issues
under a PPS. Also, many PPS payments are determined without reference
to a provider's own costs. However, we respectfully disagree that the
adoption of an appropriate cost report claim as a general substantive
requirement for Medicare payment (in new Sec. 413.24(j)) is improper
simply because some PPS appeals are filed with the Board and some PPS
payments are determined without reference to a provider's own costs.
This notion is at odds with the statute and regulations, and with the
actual workings of the Medicare program.
In accordance with 42 CFR 412.52, our longstanding policy is that
hospitals subject to a PPS must meet the cost reporting and
recordkeeping requirements of Sec. Sec. 413.20 and 413.24. This policy
fully comports with the Medicare statute. Section 1815(a) of the Act
generally provides that no payments shall be made to any provider
unless it has furnished such information as the Secretary may request.
In addition, section 1878(a) of the Act makes Board appeal rights
generally contingent on the provider having filed a required cost
report within the time specified in regulations. More specifically,
section 1878(a)(1)(A)(ii) of the Act provides that if a hospital
receives payment under subsection (b) and (d) of section 1886 of the
Act (that is, the PPS statute) and it submits such reports as the
Secretary may require, the hospital may obtain a Board hearing with
respect to such payment.
Contrary to the commenters' assertion, some payments to PPS
hospitals are determined on a reasonable cost basis. For example, PPS
hospitals are reimbursed on a reasonable cost basis for organ
acquisition services (Sec. 412.113(d)). Because PPS hospitals receive
both prospectively determined payments and cost-based payments, the
requisite annual cost report accounts for both types of payment. Upon
reviewing the hospital's cost report, the contractor's final
determination is issued in a written NPR. The definition of
``contractor determination'' (in Sec. 405.1801(a)) and the
requirements for the NPR (in Sec. 405.1803(a)) each refer specifically
to both PPS payments and cost-based payments. Given the above-described
systematic integration of PPS payments and cost-based payments under
the statute and regulations and in the actual workings of the Medicare
program, we believe it is entirely reasonable to make the general
substantive payment requirement of an appropriate cost report claim (in
new Sec. 413.24(j)) apply to PPS payments as well as cost-based
payments.
Comment: Some commenters stated that the proposed rule should only
apply to appeals of a final contractor determination in an NPR, and not
to challenges of final payment determinations by the Secretary such as
those published in the Federal Register. The commenters cited IPPS rate
determinations as an example, stating their belief that the statute
provides a separate avenue of appeal for the Secretary's IPPS
determinations under section 1886(d) of the Act, and the proposed rule
should not apply to appeals from a notice of an IPPS rate
determination. The commenters further stated that the U.S. Court of
Appeals for the District of Columbia Circuit ruled in Washington
Hospital Center v. Bowen, 795 F.2d 139 (D.C. Cir. 1986) that the filing
of a cost report is not required for Board jurisdiction over an appeal
of an IPPS rate determination.
Response: We respectfully disagree with these comments. First, the
proposed rule does not impose new requirements for Board jurisdiction
or otherwise impede Board jurisdiction. On the contrary, the propose
rule eliminates our longstanding interpretation (in Sec. Sec.
405.1835(a)(1) and 405.1840(b)(3)) of the dissatisfaction prerequisite
of Board jurisdiction, as requiring an appropriate cost report claim,
which makes it easier for providers to meet the requirements for Board
jurisdiction. Moreover, our elimination of this interpretation of the
dissatisfaction requirement for Board jurisdiction applies to PPS
appeals based on clause (ii) of section 1878(a)(1)(A) of the Act, as
well as other appeals under clause (i) of that statutory provision.
Also, we are establishing an appropriate cost report claim as a general
substantive requirement for payment (in new Sec. 413.24(j)), but this
regulation does not pertain to the requirements for Board jurisdiction.
Second, for the reasons set forth in our response to the
immediately preceding comment, we do not believe that the general
substantive payment requirement of an appropriate cost report claim (in
new Sec. 413.24(j)) should apply solely to cost-based payments but not
PPS payments. By definition (in Sec. 405.1801(a)), a final contractor
determination encompasses both PPS payments and cost-based payments,
and the term ``contractor determination'' is synonymous with the
phrases ``intermediary's final determination'' and ``Secretary's final
determination'' in clauses (i) and (ii), respectively, of section
1878(a)(1)(A) of the Act. Similarly, the requirements for the NPR (in
Sec. 405.1803(a)) include specific information about PPS payments as
well as information regarding cost-based payments. These regulations
comport with the actual workings of the Medicare program inasmuch as
PPS hospitals receive some payments that are determined on a reasonable
cost basis (Sec. 412.113(b)), in addition to receiving prospectively
determined payments.
Third, we recognize that clause (ii) of section 1878(a)(1)(A) of
the Act provides

[[Page 70570]]

for appeal to the Board of the Secretary's final determination of PPS
payment, but this does not mean that the general substantive payment
requirement of an appropriate cost report claim (in new Sec.
413.24(j)) should not apply to PPS payments. Clause (ii) provides for a
Board hearing with respect to the Secretary's final determination of
PPS payment, but such Board hearings are contingent on the hospital's
submission of ``such reports within such time as the Secretary may
require in order to make payment under such section'' (that is, under
the PPS statute). Under Sec. 412.52, hospitals subject to PPS must
satisfy the same cost reporting and recordkeeping requirements as apply
to other providers pursuant to Sec. Sec. 413.20 and 413.24. Moreover,
the substantive payment requirement of an appropriate cost report claim
(in new Sec. 413.24(j)) is especially well-suited for some PPS
payments. For example, the PPS payment adjustment for hospitals that
serve a significantly disproportionate share of low income patients is
determined on the basis of information about patients' eligibility for
Medicaid benefits and their entitlement to Supplemental Security Income
(SSI) benefits (Sec. 412.106(b)), but the requisite Medicaid and SSI
information is not available until after the close of the hospital's
cost reporting period and so this information is properly included in
the hospital's cost report for such period.
Fourth, in the Washington Hospital Center decision, the U.S. Court
of Appeals for the District of Columbia Circuit held that a hospital
could appeal its target amount (or hospital-specific rate) to the Board
under clause (ii) of section 1878(a)(1)(A) of the Act. The court
reasoned that because the hospital received notice of the target amount
before its cost reporting period began, it could appeal that notice
under clause (ii) without waiting for the end of its fiscal period;
submission of its cost report; and receipt of the contractor's NPR.
However, the target amount applied during the short transition period
from cost-based reimbursement to IPPS. As explained above, hospitals
subject to PPS are still paid on a reasonable cost basis for some items
such as the direct medical education costs of interns and residents in
an approved program (Sec. 412.113(b)). Under PPS, hospitals can also
receive certain payments that are determined on the basis of
information that is not available until after the close of the
hospital's cost reporting period and so such information is properly
included in the hospital's cost report for such period (Sec.
412.106(b); determination of the payment adjustment for PPS hospitals
that serve a significantly disproportionate share of low income
patients is based on information about patients' eligibility for
Medicaid benefits and their entitlement to SSI benefits but such
information is not available until after the end of the hospital's cost
reporting period).
Fifth, we understand that other PPS payment matters could arise
where a hospital believes that, as with the target amount notice in
Washington Hospital Center, it should be allowed to appeal to the Board
under clause (ii) of section 1878(a)(1)(A) of the Act without awaiting
the end of its fiscal year, submission of its cost report, and receipt
of the contractor's NPR. However, we believe that, instead of trying to
identify specific PPS payment matters that are arguably similar to the
target amount notice in Washington Hospital Center, it is more
efficient for the Board to review disputes about whether there was an
appropriate cost report claim for a specific PPS item in accordance
with the procedures established in new Sec. 405.1873. Under Sec.
405.1873, if a party to an appeal questions whether there was an
appropriate cost report claim for a specific PPS item, the Board must
take evidence and argument on that question; issue findings of fact and
conclusions of law on such matter; and include those findings and
conclusions in both the administrative record and certain types of
overall Board decisions.
Comment: One commenter questioned whether the proposed rule would
foreclose repayment for a claim that, based on a post-payment review,
was deemed an overpayment and recouped by a contractor, but, on appeal,
there was a full reversal of the overpayment determination. The
commenter stated that it is a provider that is reimbursed under the
periodic interim payment (PIP) method. The commenter further stated
that specific claims were denied by a Medicare recovery audit
contractor (RAC), and the MAC then recouped the overpayments for such
claims by withholding future Medicare payments that otherwise would
have been paid to the provider. The commenter also stated that when
specific claim denials and overpayment determinations were reversed as
a result of its administrative appeals, the MAC then reprocessed the
specific claims but it did not repay the provider for the overpayment
amounts on the claim denials because it is a PIP provider. The
commenter stated that in order to obtain repayment of the overpayment
amounts, its only option is to appeal the matter to the Board. The
commenter further stated that, due to the time necessary for
administrative review and reversal of the specific claim denials and
overpayment determinations, it would be too late for the provider to
make an appropriate claim in its cost report for repayment of the
overpayment amounts on the specific claims, and so the proposed rule
would foreclose any repayment of the specific claims. The commenter
also stated that the proposed rule should be revised to facilitate
payment pursuant to a prior decision in an appeal and, if necessary,
the filing of a Board appeal.
Response: We do not agree that the proposed rule would foreclose
repayment for a claim that, based on a post-payment review, was deemed
an overpayment and recouped by the MAC, but, on appeal, there was a
full reversal of the overpayment determination. The situation described
by the commenter involved individual claims for Medicare benefits,
which are subject to a separate system of claims determination
procedures and administrative and judicial review under section 1869 of
the Act and Subpart I of 42 CFR part 405. Under this Medicare
administrative appeals process, the MAC issues an initial determination
regarding coverage and any payment for a claim for Medicare benefits.
If the provider is dissatisfied with the initial determination, the
provider may pursue the Medicare administrative appeals process and
judicial review of any final agency decision (Sec. 405.904(a)(2)). The
initial determination is final and binding unless changed through an
appeal (Sec. 405.928). Similarly, each decision in the administrative
appeals process is final and binding unless altered through further
administrative or judicial review (Sec. Sec. 405.958, 405.978,
405.1048, and 405.1130).
The situation described by the commenter apparently involved the
reopening of initial determinations for specific benefit claims; review
and denial of the specific claims by a RAC; issuance by the MAC of
revised determinations for the specific claims and demands for
repayment of the overpayment for each claim (Sec. Sec. 405.980 and
405.982). The commenter stated that after the overpayment amounts were
recouped from the provider, the overpayment determinations for the
specific claims were reversed at some stage of the administrative
appeals process (Sec. 405.984).
When an overpayment determination for a specific claim is reversed
in full through the Medicare administrative appeals process, the
contractor must implement the binding and final appeals decision in
accordance with the Medicare statute and regulations. In

[[Page 70571]]

situations like those described by the commenter, the contractor would
revise the overpayment determination and credit the provider for the
total overpayment amount plus interest (if any) that was recouped
previously from the provider (Sec. 405.379(d)(8)). When crediting the
provider, the contractor would not necessarily repay the provider at
that time. For example, if the provider had not repaid or successfully
appealed an overpayment determination for a second, different
individual benefit claim, the overpayment amount for the first claim
(that is, the overpayment determination that was completely reversed
through the administrative appeals process) would be applied against
the unpaid overpayment amount and accrued interest (if any) that might
be owing for the second claim, before any excess amount is released to
the provider (Sec. Sec. 405.378(j) and 405.379(g)(1)(i) and (g)(4)).
Thus, because the provider would receive this full credit for the
recouped overpayment amount and interest (if any) that was later
reversed in full through the administrative appeals process for
individual benefit claims (under section 1869 of the Act and Subpart I
of 42 CFR part 405), the provider would not need to appeal to the Board
(under section 1878 of the Act and Subpart R of 42 CFR part 405) in
order to receive full credit for the overpayment determination that had
already been reversed in full through the separate appeals process for
individual benefit claims.
Moreover, there are strong incentives for the contractor to
promptly give the provider full credit for the previously recouped
overpayment amount and interest (if any) after the overpayment
determination is reversed in full through the administrative appeals
process. For example, interest might accrue on the overpayment amount
(Sec. 405.378(b) and (j)). Also, the contractor's performance review
under its contract with CMS could be affected negatively (Sec. Sec.
421.120(a) and 421.122(a)).
We recognize that a provider in the situation described by the
commenter still might appeal to the Board in order to ensure that the
provider will receive full credit for the recouped overpayment amount
and interest (if any) that was reversed in full through the Medicare
administrative appeals process for individual benefit claims pursuant
to section 1869 of the Act and Subpart I of 42 CFR part 405. However,
we believe that our proposed new Sec. 405.1873 and other Board appeals
regulations are sufficient for Board review and decision in such
appeals. Under proposed new Sec. 405.1873, if a party to such a Board
appeal were to question the provider's compliance with the general
substantive reimbursement requirement of an appropriate cost report
claim (under new Sec. 413.24(j)), the Board would have to receive
factual evidence and legal argument on such question; issue specific
findings of fact and conclusions of law on that matter; and include
those findings and conclusions in the administrative record and in any
hearing decision or EJR decision (if EJR is granted) regarding the
matter at issue.
As explained above, the statute and regulations require Medicare
contractors to fully credit the provider for any previously recouped
overpayment amount and interest (if any) that is later reversed in full
through the separate appeals process for individual benefit claims, and
we see no reason why a contractor would not comply with these
requirements. As a result, we do not believe the provider would need to
appeal to the Board in order to receive such credit, and our proposed
new Sec. 405.1873 and other Board appeals regulations are sufficient
for Board review and decision in such appeals. Moreover, we note that
the Subpart R regulations address these kinds of issues in the context
of cost reports and NPRs, similarly to how the above-described
provisions in the Subpart I regulations apply to individual benefit
claim determinations and appeals. Specifically, Sec. 405.1803(d)
provides that, for each final administrative appeal decision or final
judicial judgment on the merits of a reimbursement issue that stems
from a cost report and NPR, the contractor must determine the effect of
the final administrative or judicial decision on program reimbursement
for the fiscal period at issue; issue any revised final contractor
determination; and make any additional payment or recoup or offset any
program payment that might be due for the fiscal year at issue.
We believe that, given the similar requirements (discussed above)
for contractor implementation of final administrative decisions on
individual benefit claims, there is no need for a provider to appeal to
the Board in order to receive full credit for an earlier final decision
on such specific claims. However, if the provider still appealed to the
Board, we believe our proposed new Sec. 405.1873 and other Board
appeals regulations would be sufficient for Board review and decision
in such appeals.
Comment: One commenter questioned CMS' decision to continue
enforcement of the Board jurisdictional requirement (in current
Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3)) of an appropriate cost
report claim until the effective date of a final rule that makes an
appropriate cost report claim a general substantive reimbursement
requirement.
Response: In the preambles for both the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28207 through 28208 and 28212 through 28213) and
this final rule, we have explained at length the importance of
requiring an appropriate cost report claim for each payment matter.
Under this final rule, we are establishing (in new Sec. 413.24(j)) an
appropriate cost report claim as a general substantive reimbursement
requirement that will apply to each specific payment item. However,
that general reimbursement requirement will not apply until the
prospective effective date of this final rule. In order to maintain our
longstanding policy of requiring an appropriate cost report claim, our
only recourse is to continue enforcement of the Board jurisdictional
requirement (in current Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3))
of an appropriate cost report claim until this final rule takes effect.
After consideration of the public comments we received, we are
finalizing our proposals as follows. We are adopting our proposal to
eliminate our interpretation (in Sec. Sec. 405.1835(a)(1) and
405.1840(b)(3)) that a provider must make an appropriate cost report
claim for an item in order to meet the dissatisfaction requirement for
Board jurisdiction over appeals of a timely final contractor
determination or Secretary determination. More specifically, we are
adopting technical revisions to the proposed introductory text for
paragraph (a) of Sec. 405.1835 and to proposed paragraph (a)(1) of
Sec. 405.1835 so that the dissatisfaction requirement in the
regulations will more closely track the text of the dissatisfaction
requirement in section 1878(a)(1)(A) of the Act for Board jurisdiction
over appeals of a timely final contractor determination or Secretary
determination. We also are adding a new conforming amendment (that is,
paragraph (a)(1)(i)) to Sec. 405.1835), which is a necessary cross-
reference to certain reopening regulations (Sec. Sec. 405.1887(d) and
405.1889(b)) and to a provision in new Sec. 405.1873 (that is,
paragraph (c)(2)(i)) that cross-references the same reopening
regulations. In addition, we are finalizing without modification our
proposal (79 FR 28298) to amend Sec. 405.1840 by removing paragraph
(b)(3).
We are not adopting the proposed revisions (79 FR 28297) to either
of the other two requirements for Board jurisdiction over appeals of a
timely

[[Page 70572]]

final contractor or Secretary determination. Our adoption of the above-
described technical revision to proposed paragraph (a)(1) of Sec.
405.1835 obviates any need to renumber the amount in controversy
jurisdictional requirement in current paragraph (a)(2) or the timely
filing jurisdictional requirement in current paragraph (a)(3). The
proposed revisions to the text of current paragraph (a)(3) of Sec.
405.1835 are not necessary because the essential provisions of such
proposal are now contained appropriately in Sec. 405.1835(c), a
regulation we adopted in the technical correction provisions of the FY
2015 IPPS/LTCH PPS final rule (79 FR 50350 through 50351).
We are finalizing without modification the proposed revisions (79
FR 28297) to paragraphs (b)(1), (b)(2) introductory text, and
(b)(2)(iii) of Sec. 405.1835. Also, we are adopting a technical
conforming revision to current paragraph (b)(3) of Sec. 405.1835.
Specifically, we are adding the term ``final'' before the phrase
``contractor or Secretary determination'' in paragraph (b)(3). This
technical revision is necessary to conform paragraph (b)(3) of Sec.
405.1835 to our revision in this final rule of the definition of
``contractor determination'' in Sec. 405.1801(a) (discussed in section
XVII.E.4.b. of this final rule).
We also are adopting, in paragraphs (e)(1) and (e)(2) of Sec.
405.1835, the same text that we proposed (79 FR 28297) as revisions to
paragraphs (c)(1) and (c)(2) of Sec. 405.1835. When the proposed rule
was published, paragraph (c) of Sec. 405.1835 addressed the addition
of issues to a pending Board appeal. However, paragraph (c) was later
redesignated as paragraph (e) of Sec. 405.1835 in the technical
correction provisions of the FY 2015 IPPS/LTCH PPS final rule (79 FR
50350 through 50351). Accordingly, we are adopting the text of the
proposed amendments (to paragraphs (c)(1) and (c)(2) of Sec. 405.1835)
in paragraphs (e)(1) and (e)(2) of Sec. 405.1835 which now addresses
the addition of issues to a pending Board appeal. However, we are not
finalizing the proposed revision (79 FR 28297) to paragraph (c)(3) of
Sec. 405.1835, because the essential provisions of such proposal are
now contained appropriately in Sec. 405.1835(e)(3), a regulation we
adopted in the technical correction provisions of the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50350 through 50351).
2. Board Review of Compliance With Cost Report Claim Requirements Under
Sec. 413.24(j)
a. Proposed Addition of New Sec. 405.1873
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28213 through
28215 and 28298 through 28300), we proposed to add a new Sec. 405.1873
to the Board appeals regulations, which would address how the Board
should proceed when any party to an appeal questions whether a provider
made an appropriate cost report claim (as required by proposed Sec.
413.24(j)) for a specific item under appeal. We explained that this new
regulation is necessary to forestall potential confusion about how the
substantive reimbursement requirement in proposed Sec. 413.24(j) of an
appropriate cost report claim for a specific item will pertain to Board
appeals of the same item.
Under paragraph (b)(1) of proposed new Sec. 405.1873, the Board
would consider timely submitted factual evidence and legal argument on,
and then prepare written specific findings of fact and conclusions of
law regarding, the question of whether the provider's cost report
complied with proposed Sec. 413.24(j). The Board would give these
written specific factual findings and legal conclusions to each party
to the appeal, and they must be included in the record of
administrative proceedings for the appeal. Paragraph (b)(2) of proposed
Sec. 405.1873 provides that, upon giving the parties to the appeal the
Board's written factual findings and legal conclusions on the question
of whether the provider's cost report included an appropriate cost
claim for the specific item under appeal, the Board then must proceed
to issue one of four types of overall decisions with respect to such
item. As discussed below, paragraph (d) of proposed Sec. 405.1873
provides that, if the Board issues either of two types of overall Board
decisions regarding the specific item under appeal (that is, a hearing
decision or an expedited judicial review (EJR) decision where EJR is
granted), the Board's written specific factual findings and legal
conclusions (reached under proposed Sec. 405.1873(b)) about whether
there was an appropriate cost report claim for the item, must be
included in such overall Board decision regarding the specific item,
along with the other matters that are already required for a Board
hearing decision or a Board EJR decision where EJR is granted. However,
under paragraph (e) of proposed Sec. 405.1873, if the Board issues
either of two other types of overall Board decisions regarding the
specific item under appeal (that is, a jurisdictional dismissal
decision or an EJR decision where EJR is denied), the Board's written
specific factual findings and legal conclusions (pursuant to proposed
Sec. 405.1873(b)) must not be included in the overall Board decision
regarding the specific item. In any event, the Board's factual findings
and legal conclusions about whether there was an appropriate cost
report claim for the item must be included in the record of
administrative proceedings for the appeal in accordance with Sec.
405.1865 of the regulations.
We believe that, in order to ensure full and appropriate
implementation of both the addition of the substantive reimbursement
requirement of an appropriate cost report claim (in proposed Sec.
413.24(j)) and the elimination of the Board jurisdiction requirement of
an appropriate cost report claim (in existing Sec. Sec. 405.1835(a)(1)
and 405.1840(b)(3)), it is necessary to foreclose certain types of
Board decisions, orders, and other actions. Accordingly, in order to
give full force and effect to our proposed elimination of the Board
jurisdiction requirement of an appropriate cost report claim, paragraph
(c)(1) of new Sec. 405.1873 would prohibit a denial of jurisdiction, a
declination to exercise jurisdiction, the imposition of a sanction, and
various other actions by the Board, if any such jurisdictional
decision, order, sanction, or other specified action is based on (in
whole or in part) the Board's determination that the provider's cost
report did not meet the proposed substantive reimbursement requirement
under proposed Sec. 413.24(j) of an appropriate cost report claim for
the specific item.
In some cases, the Board jurisdiction requirement of an appropriate
cost report claim has been addressed in different but related terms.
For example, Board jurisdiction has been denied based on the absence,
in the final contractor determination or Secretary determination under
appeal, of an adjustment, revision, correction, or other change to the
specific item under appeal. Another example is that Board jurisdiction
also has been denied due to the lack of a particular determination by
the contractor or the Secretary regarding the specific item under
appeal, in the final contractor determination or Secretary
determination under appeal. We believe that, in order to give full
force and effect to the proposed elimination of the Board jurisdiction
requirement of an appropriate cost report claim, it is also necessary
to address related terms such as the absence of specific adjustments
and the lack of particular determinations

[[Page 70573]]

regarding the specific item under appeal. Accordingly, paragraph (c)(2)
of proposed new Sec. 405.1873 would prohibit a denial of jurisdiction,
a declination to exercise jurisdiction, the imposition of a sanction,
and various other actions by the Board, if any such jurisdictional
decision, sanction, or other specified action is based on (in whole or
in part) the absence, in the final contractor determination or
Secretary determination under appeal, of an adjustment, revision,
correction, or other change to the specific item under appeal, or the
lack of a particular determination by the contractor or the Secretary
regarding the specific item in the final contractor determination or
Secretary determination under appeal. However, paragraph (c)(2)(i) of
proposed new Sec. 405.1873 includes an important exception: if the
provider's appeal of the specific item is based on the reopening of
such item (under Sec. 405.1885 of the regulations) where the specific
item is not revised, adjusted, corrected, or otherwise changed in a
revised final contractor determination or Secretary determination, the
Board must deny jurisdiction over the specific item under appeal (as
specified in Sec. Sec. 405.1887(d) and 405.1889(b) of the
regulations). The reopening regulations are an exercise of the
Secretary's general rulemaking authority under sections 1102 and 1872
of the Act, and we believe this exception (in proposed Sec.
405.1873(c)(2)(i)) is necessary to ensure consistency with the above-
referenced reopening regulations, our longstanding ``issue specific''
interpretation of the reopening regulations, and the interests of
administrative finality and efficiency. We refer readers, for example,
to HCA Health Services of Oklahoma v. Shalala, 27 F.3d 614 (D.C. Cir.
1994) (the reopening regulations are based on the Secretary's general
rulemaking authority, and the issue specific interpretation of the
reopening rules is reasonable and supportive of administrative
finality).
Under paragraph (d) of proposed Sec. 405.1873, there are two types
of Board decisions that must include any specific findings of fact and
conclusions of law by the Board (reached under paragraph (b) of
proposed Sec. 405.1873), on the question of whether the provider's
cost report included an appropriate claim for the specific item under
appeal. First, paragraph (d)(1) of proposed Sec. 405.1873 provides
that, if the Board issues a hearing decision on the specific item under
appeal (under Sec. 405.1871 of the regulations), the Board's specific
findings of fact and conclusions of law about whether there was an
appropriate cost report claim for the specific item, must be included
in such a hearing decision along with the other matters prescribed in
existing Sec. 405.1871(a). A Board hearing decision addresses whether
the provider has established that it should receive relief on the
matter at issue (as specified in Sec. 405.1871(a)(3)). Under proposed
Sec. 413.24(j), the requirement of an appropriate cost report claim is
a substantive prerequisite of any payment for the specific item, which
applies in addition to other payment requirements for the particular
item (for example, the specific requirements for payment of interest
expense under Sec. 413.153 of the regulations). We believe that,
because a Board hearing decision addresses whether the provider has
established that it meets the substantive requirements for payment of
the item under appeal whereas an appropriate cost report claim is a
substantive prerequisite of any payment for the specific item (under
proposed Sec. 413.24(j)), any factual findings and legal conclusions
about whether there was an appropriate cost report claim should be
included in any hearing decision that might be issued by the Board
regarding the specific item. In addition, we note that if the Board
elects to issue a hearing decision that also includes factual findings
and legal conclusions about whether the other payment requirements for
the specific item were satisfied (in addition to the Board's findings
and conclusions about whether there was an appropriate cost report
claim for the item), such a hearing decision (addressing all the
substantive reimbursement requirements for the specific item) will
safeguard against piecemeal proceedings before the Board and
potentially before the Administrator of CMS and a Federal court.
However, paragraph (d)(1)(ii) of proposed Sec. 405.1873 provides that,
if the Board determines that the provider's cost report did not include
an appropriate claim for the specific item under appeal, the Board has
discretion whether or not to address in its hearing decision whether
the other substantive reimbursement requirements for the specific item
are also satisfied.
Second, paragraph (d)(2) of proposed Sec. 405.1873 provides that,
if the Board issues an EJR decision where EJR is granted regarding the
specific item under appeal (as provided for under Sec. 405.1842(f)(1)
of the regulations), any specific findings of fact and conclusions of
law by the Board (reached under paragraph (b) of proposed Sec.
405.1873) about whether there was an appropriate cost report claim for
the specific item, must be included in such an EJR decision. Section
1878(f)(1) of the Act and Sec. 405.1842 of the regulations authorize
EJR if the requirements for Board jurisdiction over a specific item are
satisfied, and the Board determines that it lacks the authority to
decide a legal question that is relevant to the specific item under
appeal. The Administrator of CMS may review the Board's determination
as to whether there is Board jurisdiction over the specific item, but
the Administrator may not review the Board's determination as to
whether it has the authority to decide a relevant legal question. We
believe that paragraph (d)(2) of proposed Sec. 405.1873 will also
safeguard against piecemeal proceedings before the Board, the
Administrator of CMS, and a Federal court. By requiring a Board EJR
decision that grants EJR to include any factual findings and legal
conclusions (reached under proposed Sec. 405.1873(b)) about whether
there was an appropriate cost report claim for the specific item under
appeal, along with the Board's determinations that the two requirements
for EJR were satisfied (that is, a finding of Board jurisdiction plus
the Board's determination that it lacks the authority to decide a legal
question relevant to the specific item under appeal), piecemeal
proceedings would be minimized or eliminated because the Board EJR
decision will encompass both the question of whether there was an
appropriate cost report claim for the specific item and the relevant
legal question for which EJR was granted (and for which the Board
determined that it has no authority to decide such legal question).
Piecemeal proceedings before the Administrator of CMS would also be
minimized or eliminated because, under proposed Sec. 405.1875(a)(2)(v)
(which we discuss separately below), if the Administrator reviews and
issues an EJR decision on the question of whether there is Board
jurisdiction over the specific item under appeal, the Administrator
will also review, and any decision will address, the Board's specific
findings of fact and conclusions of law about whether there was an
appropriate cost report claim for the specific item. In turn, our
proposal to require an EJR decision that grants EJR to include any
specific factual findings and legal conclusions under proposed Sec.
405.1873(b) would ensure that when a Federal court exercises its EJR
authority under section 1878(f)(1) of the Act and Sec. 405.1842 of the
regulations by reviewing a relevant legal question (for which the Board
determined it has no decisional authority), the court's review

[[Page 70574]]

can also potentially encompass the final specific findings of fact and
conclusions of law by the Board or the Administrator, as applicable,
about whether there was an appropriate cost report claim for the
specific item. If it is determined, in a final EJR decision that grants
EJR, that there was an appropriate cost report claim for the specific
item under appeal, the court may have no occasion to review the final
specific findings of fact and conclusions of law on the question of
whether there was an appropriate cost report claim for the specific
item. However, if it is instead determined, in a final EJR decision
that grants EJR, that the provider's cost report did not include an
appropriate claim for the specific item under appeal, the court can
potentially review in one proceeding the final specific findings of
fact and conclusions of law about whether there was an appropriate cost
report claim for the specific item, along with the relevant legal
question for which EJR was granted (and for which the Board determined
that it has no authority to decide such legal question).
However, paragraph (e) of proposed new Sec. 405.1873 would provide
that there are two other types of Board decisions that must not include
any specific findings of fact and conclusions of law by the Board
(reached under proposed Sec. 405.1873(b)), on the question of whether
the provider's cost report included an appropriate claim for the
specific item under appeal. On the one hand, paragraph (e)(1) of
proposed new Sec. 405.1873 would provide that if the Board issues a
jurisdictional dismissal decision on the specific item under appeal
(under Sec. 405.1840(c)), the Board's specific findings of fact and
conclusions of law about whether there was an appropriate cost report
claim for the specific item must not be included in such a
jurisdictional dismissal decision. When the Board issues a
jurisdictional dismissal decision on a specific item under appeal, the
Board's denial of jurisdiction obviates any need to address the
question of whether the substantive reimbursement requirements that are
specific to the particular item (for example, the specific requirements
for payment for certain depreciation under Sec. 413.134) are
satisfied. Because the requirement of an appropriate cost report claim
for each specific item is also a substantive prerequisite of any
payment for the specific item (as prescribed in proposed Sec.
413.24(j)), a denial of jurisdiction over the specific item also
obviates any need to address the substantive reimbursement requirement
of an appropriate cost report claim in the Board's jurisdictional
dismissal decision.
Similarly, under paragraph (e)(2) of proposed new Sec. 405.1873,
if the Board issues an EJR decision where EJR is denied on the specific
item under appeal (under Sec. 405.1842(f)(2)), the Board's specific
findings of fact and conclusions of law (reached under paragraph (b) of
proposed new Sec. 405.1873) about whether there was an appropriate
cost report claim for the specific item, must not be included in such
an EJR decision. If EJR is denied solely because the Board determines
that it does have the authority to decide the legal question relevant
to the specific item under appeal, the Board would conduct further
proceedings and issue another decision (as specified in Sec.
405.1842(h)(2)(i)). If such further decision is a hearing decision,
under proposed Sec. 405.1873(d)(1), the Board's factual findings and
legal conclusions (under proposed Sec. 405.1873(b)) about whether
there was an appropriate cost report claim must be included in the
Board's hearing decision; if the Board elects to also include in the
hearing decision its factual findings and legal conclusions about
whether the other reimbursement requirements for the specific item are
satisfied, piecemeal proceedings before the Board and potentially
before the Administrator of CMS and a Federal court would be minimized
or eliminated. However, if EJR is denied because the Board lacked
jurisdiction over the specific item under appeal, the Board's factual
findings and legal conclusions about whether there was an appropriate
cost report claim must not be included in such an EJR decision; as
explained above regarding Board jurisdictional dismissal decisions, the
denial of Board jurisdiction in such an EJR decision obviates the need
to address the substantive reimbursement requirement of an appropriate
cost report claim, just as there is no need to consider other payment
requirements for the particular item under appeal.
Paragraph (f) of proposed new Sec. 405.1873 addresses the various
effects of the Board's factual findings and legal conclusions (reached
under paragraph (b) of proposed Sec. 405.1873) regarding whether there
was an appropriate cost report claim in the two types of Board
decisions where such factual findings and legal conclusions must be
included--Board hearing decisions, and Board EJR decisions where EJR is
granted. An appropriate cost report claim for a specific item is a
necessary, but not sufficient, condition for Medicare payment for the
specific item. This is because the requirement of an appropriate cost
report claim for each specific item is a substantive prerequisite of
any payment for the specific item (as prescribed in proposed Sec.
413.24(j)), but all other payment requirements (for example, the
particular requirements for payment for certain bad debts under Sec.
413.89) also must be satisfied. Accordingly, under paragraph (f)(1) of
proposed new Sec. 405.1873, if the Board determines, as part of a
final hearing decision, that the provider's cost report included an
appropriate claim for the specific item under appeal (as prescribed in
Sec. 413.24(j)), payment for the specific item would be made in
accordance with Medicare policy, but only if the Board further
determines in such hearing decision that all the other substantive
reimbursement requirements for the specific item are also satisfied.
Conversely, if the Board determines, in a final hearing decision, that
the cost report lacked an appropriate claim for the specific item under
appeal, payment for the specific item would not be made, regardless of
whether the Board further determines in such hearing decision that the
other substantive reimbursement requirements for the specific item are
satisfied.
Similarly, paragraph (f)(2) of proposed new Sec. 405.1873 provides
that, if the Board or the Administrator of CMS (as applicable)
determines, as part of a final EJR decision where EJR is granted, the
provider's cost report included an appropriate claim for the specific
item under appeal (as prescribed in Sec. 413.24(j)), payment for the
specific item would be made in accordance with Medicare policy, but
only to the extent permitted by the final decision of a Federal court
under the EJR provisions of section 1878(f)(1) of the Act (see also
Sec. Sec. 405.1842 and 405.1877) regarding the legal question that is
relevant to the specific item (but for which the Board determined it
has no decisional authority). By contrast, if the Board or the
Administrator of CMS (as applicable) determines, in a final EJR
decision where EJR is granted, that the cost report lacked an
appropriate claim for the specific item under appeal, payment for the
specific item would not be made unless: (i) The specific factual
findings and legal conclusions by the Board or the Administrator of
CMS, as applicable, about whether there was an appropriate cost report
claim for the specific item are reversed or modified by the final
decision of a Federal court (in accordance with section 1878(f)(1) of
the Act and Sec. 405.1877 of the regulations)); and (ii) only to the
extent permitted by the final decision of a

[[Page 70575]]

Federal court under the EJR provisions of section 1878(f)(1) of the Act
(see also Sec. Sec. 405.1842 and 405.1877 of the regulations)
regarding the legal question that is relevant to the specific item (but
for which the Board determined it has no decisional authority).
b. Summary of Public Comments and Our Responses and Finalized Policies
Following are summaries of public comments that were received in
response to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28206
through 28217).
Comment: One commenter stated that the proposed addition of Sec.
405.1873 would result in an inappropriate intrusion into the Board's
decision making process. The commenter stated that proposed Sec.
405.1873 would hamper the Board's ability to serve an independent role
by imposing strict requirements on the scope and content of Board
review.
Response: We respectfully disagree with this comment. Section
405.1873 authorizes full Board review of provider compliance with the
general substantive reimbursement requirement of an appropriate cost
report claim (as prescribed in new Sec. 413.24(j)). The criteria for
Board review of such matters are set forth in Sec. 413.24(j), but this
is no different than the Board having to review a specific
reimbursement claim by reference to the particular standards set forth
in the pertinent payment regulation. For example, the Board must apply
the specific requirements for reimbursement of interest expense
pursuant to Sec. 413.153, in order to fully consider and decide
whether the specific requirements for interest expense reimbursement
are satisfied. New Sec. 413.24(j) adds the general substantive
reimbursement requirement of an appropriate cost report claim, which
also must be satisfied for reimbursement of interest expense or any
other item. While the Board must review questions about compliance with
the general substantive reimbursement requirement of an appropriate
cost report claim in accordance with the procedures in proposed Sec.
405.1873, the other provisions of section 1878 of the Act and 42 CFR
part 405, subpart R also generally apply to Board review of questions
about whether there was an appropriate cost report claim just as those
other statutory and regulatory provisions generally apply to Board
review of the specific reimbursement requirements for a particular item
like interest expense.
Paragraph (b)(1) of proposed Sec. 405.1873 does not impose
specific limitations on the Board's findings of fact and conclusions of
law regarding the provider's compliance with the general substantive
reimbursement requirement of an appropriate cost report claim (as
prescribed in new Sec. 413.24(j)). However, after the Board reaches
such factual findings and legal conclusions, paragraph (c) of proposed
Sec. 405.1873 would impose certain limits on the Board's actions with
respect to those findings and conclusions. However, the restrictions on
the Board's actions in paragraph (c) are simply aimed at ensuring that
the requirement of an appropriate cost report claim (as prescribed in
new Sec. 413.24(j)) is applied as a general substantive reimbursement
requirement instead of as a jurisdictional requirement that might
otherwise underlie a potential jurisdictional dismissal decision or a
declination of the exercise of jurisdiction by the Board.
The foregoing point is underscored by paragraph (e)(1) of proposed
Sec. 405.1873, which states that if the Board issues a jurisdictional
dismissal decision, such a decision must not include the Board's
findings of fact and conclusions of law regarding the provider's
compliance with the general substantive reimbursement requirement of an
appropriate cost report claim. We believe that proposed paragraph
(e)(1) should further ensure that the requirement of an appropriate
cost report claim (as prescribed in Sec. 413.24(j)) is applied as a
general substantive reimbursement requirement instead of as a
jurisdictional requirement that might otherwise underlie a potential
jurisdictional dismissal decision or a declination of the exercise of
jurisdiction by the Board.
Comment: Some commenters stated that if a provider does not include
an appropriate claim for a specific item in its cost report, it would
not receive payment for that item and it also would lose the ability to
appeal that item to the Board. The commenters stated that the Board
should maintain the ability to make final determinations regarding
claims disagreements.
Response: We believe that proposed new Sec. 413.24(j) and proposed
new Sec. 405.1873 clearly state that a provider can appeal a specific
item to the Board, even if the contractor previously determined that
the cost report did not include an appropriate claim for the particular
item. Also, under proposed Sec. 405.1873(f)(1)(i), reimbursement for
the specific item would be supported if the Board issues a hearing
decision on the merits of the provider's appeal, and the Board rules
that the provider complied with Sec. 413.24(j) and all the specific
requirements for payment of the particular item.
As discussed above, Sec. 413.24(j)(4) states that if a provider's
cost report does not include an appropriate claim for a specific item,
the final contractor determination should not include payment for the
item. However, Sec. 413.24(j)(5) states that if the provider appeals a
specific item to the Board and any party then questions the provider's
compliance with the general substantive reimbursement requirement of an
appropriate cost report claim for the item, the Board should review
such questions in accordance with the procedures set forth in Sec.
405.1873.
Paragraph (d)(1) of proposed Sec. 405.1873 provides that if the
Board issues a hearing decision on the merits of the provider's appeal,
the hearing decision must include the Board's factual findings and
legal conclusions regarding compliance with the general substantive
reimbursement requirement of an appropriate cost report claim.
Moreover, paragraph (f)(1)(i) of proposed Sec. 405.1873 states that if
the Board determines in such hearing decision that the provider's cost
report included an appropriate claim for the specific item at issue,
and that the provider satisfied all the other substantive reimbursement
requirements for such item, the specific item at issue is reimbursable
in accordance with Medicare policy. Thus, a Board hearing decision can
support reimbursement for a specific item, even if the final contractor
determination did not include reimbursement for the item because the
contractor determined that an appropriate cost report claim was not
made.
Comment: One commenter stated that Board jurisdiction over the
appeal of an item would depend on whether the contractor accepted the
provider's specific reporting of the item in its cost report.
Response: We respectfully disagree with this comment. As a result
of our revisions to Sec. 405.1835(a)(1) and removal of Sec.
405.1840(b)(3), an appropriate cost report claim for a specific item is
no longer a jurisdictional requirement for Board appeals. Moreover, as
explained in our response to the preceding comment, we believe that,
under new Sec. 413.24(j) and new Sec. 405.1873, a provider can appeal
a specific item to the Board, even if the contractor previously
determined that an appropriate cost report claim for the item was not
made. Indeed, proposed Sec. 405.1873(f)(1)(i) provides that
reimbursement for the specific item would be supported if the Board
issues a hearing decision on the merits of the

[[Page 70576]]

provider's appeal, and concludes that there was an appropriate cost
report claim for the item at issue and that all the specific
reimbursement requirements for the particular item were satisfied.
Comment: Some commenters stated that the procedures in proposed
Sec. 405.1873 for Board review of compliance with the general
substantive reimbursement requirement of an appropriate cost report
claim would promote piecemeal litigation instead of avoiding it.
Response: We continue to believe that proposed Sec. 405.1873 would
facilitate the avoidance of piecemeal litigation. Under paragraph (d)
of Sec. 405.1873, the Board's factual findings and legal conclusions
about compliance with the general substantive reimbursement requirement
of an appropriate cost report claim under new Sec. 413.24(j) must be
included in any hearing decision or EJR decision where EJR is granted.
Hearing decisions, and EJR decisions where EJR is granted, end the
Board's consideration of the specific item at issue (Sec. Sec.
405.1842(h)(1) and 405.1871(b)(1)). Moreover, if the Administrator of
CMS reviews the Board's hearing decision or the Board jurisdiction
component of the two-part EJR decision (Sec. 405.1875(a)(2)), the
Administrator's decision ends the administrative appeals proceedings
regarding the specific item unless the matter is remanded to the Board
for further proceedings (Sec. 405.1875(e)(4)(iii)). In any event,
piecemeal litigation would be avoided.
Paragraph (e) of Sec. 405.1873 provides that if the Board issues a
jurisdictional dismissal decision, or an EJR decision where EJR is
denied, regarding the specific matter at issue, the Board's factual
findings and legal conclusions about compliance with the general
substantive reimbursement requirement of an appropriate cost report
claim under new Sec. 413.24(j) must not be included in the
jurisdictional dismissal decision or the EJR decision where EJR is
denied. A jurisdictional dismissal decision regarding the specific item
is final and binding unless the decision is reversed or modified by the
CMS Administrator or a Federal court (Sec. 405.1840(c)(3)). If the
Board's jurisdictional dismissal decision were reversed or modified on
review, the matter would typically be remanded for further proceedings
on the merits of the reimbursement matter at issue. This comports with
the general administrative law principle that a remand is the usual
remedy when one issue is finally resolved on administrative or judicial
review, but other issues still must be decided in the same case.
If the Board denies EJR on jurisdictional grounds, our statements
in the preceding paragraph about jurisdictional dismissal decisions
would also apply to EJR decisions where EJR is denied on jurisdictional
grounds. If EJR is denied because the Board determines that it has the
requisite authority to decide all aspects of the matter at issue, the
denial of EJR is an interlocutory decision (Sec. 405.1842(h)(2)). If
the Board later issues a hearing decision on the specific item, its
factual findings and legal conclusions regarding compliance with the
general substantive reimbursement requirement of an appropriate cost
report claim under new Sec. 413.24(j) must be included in the hearing
decision. As explained above, a Board hearing decision or a final
decision by the CMS Administrator, as applicable, would end the
administrative appeals proceedings regarding the specific item. In any
event, piecemeal litigation would be avoided.
Comment: One commenter stated that it is not clear whether the
Board's specific findings of fact and conclusions of law relating to
Sec. 413.24(j) are subject to judicial review.
Response: We believe that, under proposed Sec. 405.1873, the
Board's specific findings of fact and conclusions of law regarding
compliance with Sec. 413.24(j) are subject to judicial review. First,
Sec. 405.1873(b)(1) provides that the Board's factual findings and
legal conclusions must be included in the administrative record.
Judicial review of a final agency decision would be based on the
administrative record under section 1878(f)(1) of the Act, which
incorporates the ``whole record'' provision for judicial review under
the Administrative Procedure Act (APA) (5 U.S.C. 706).
As explained above, the Board's specific findings of fact and
conclusions of law regarding compliance with Sec. 413.24(j) must be
included in any hearing decision or EJR decision where EJR is granted.
In either case, the final agency decision of the Board or the CMS
Administrator, as applicable, is subject to judicial review under
section 1878(f)(1) of the Act (Sec. 405.1877(a)).
Under proposed Sec. 405.1873(e), the Board's specific findings of
fact and conclusions of law regarding compliance with the general
substantive reimbursement requirement of an appropriate cost report
claim (under new Sec. 413.24(j)) must not be included in a
jurisdictional dismissal decision or an EJR decision where EJR is
denied. However, a final jurisdictional dismissal decision by the Board
or the CMS Administrator, as applicable, is subject to judicial review.
If a Federal court reverses or modifies a final jurisdictional
dismissal decision, the merits of the specific payment item at issue
would be remanded. If such remand proceedings were to end with a final
hearing decision or an EJR decision where EJR is granted, the Board's
specific findings of fact and conclusions of law regarding compliance
with Sec. 413.24(j) would be included in such hearing decision or EJR
decision under proposed Sec. 405.1873(d). A final hearing decision or
a final EJR decision where EJR is granted, including the Board's
factual findings and legal conclusions regarding compliance with Sec.
413.24(j), would be subject to judicial review under section 1878(f)(1)
of the Act (Sec. 405.1877(a)).
After consideration of the public comments we received, we are
finalizing new Sec. 405.1873 as proposed without modification.
3. Related Revisions to Sec. 405.1875 Regarding Administrator Review
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28215 through
28216 and 28300), we proposed two revisions to Sec. 405.1875 of the
regulations, which provides for review by the Administrator of CMS of
certain Board decisions, orders, and other actions. We believe these
revisions will facilitate the full and appropriate implementation of
our proposals (discussed above) to add the substantive reimbursement
requirement of an appropriate cost report claim (in proposed Sec.
413.24(j)), to eliminate the Board jurisdiction requirement of an
appropriate cost report claim (in existing Sec. Sec. 405.1835(a)(1)
and 405.1840(b)(3)), and to add specific procedures for Board review of
questions about compliance with the substantive reimbursement
requirement of an appropriate cost report claim (in proposed new Sec.
405.1873).
First, under existing Sec. 405.1875(a)(2) of the regulations, the
Administrator may review a Board hearing decision, a Board dismissal
decision, the Board's jurisdictional determination in an EJR decision
(but not the Board's determination, in an EJR decision, of whether it
has the authority to decide a relevant legal question), and any other
Board decision or action deemed to be final by the Administrator. We
proposed to add a new paragraph (a)(2)(v) to Sec. 405.1875, which
would provide that if the Administrator reviews a Board hearing
decision, or the jurisdictional component of a Board EJR decision where
EJR is granted, regarding a

[[Page 70577]]

specific item, the Administrator's review of such a hearing decision or
such an EJR decision, as applicable, will include, and any decision
issued by the Administrator under Sec. 405.1875(e) of the regulations
will address, the Board's specific findings of fact and conclusions of
law in such hearing decision or EJR decision (as prescribed in proposed
Sec. 405.1873(b) and (d)) on the question of whether the provider's
cost report included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j)). We explained that this
proposed revision to Sec. 405.1875(a)(2) is an important additional
safeguard against piecemeal proceedings in the administrative appeals
process and potentially before a Federal court. As explained above with
respect to proposed Sec. 405.1873(d)(1), if the Board elects to issue
a hearing decision that also includes factual findings and legal
conclusions about whether the other payment requirements for the
specific item were satisfied (in addition to the Board's findings and
conclusions about whether there was an appropriate cost report claim
for the item), all of the payment requirements for the specific item
would be presented in one Board hearing decision for purposes of any
review by the Administrator (under proposed Sec. 405.1875(a)(2)(v))
and a Federal court. Moreover, for the specific reasons set forth above
regarding proposed Sec. 405.1873(d)(2), our proposal to require that
the Board's factual findings and legal conclusions about whether there
was an appropriate cost report claim for the item be included in an EJR
decision where EJR is granted would also minimize or eliminate
piecemeal proceedings before the Board and, given the proposed addition
of Sec. 405.1875(a)(2)(v), before the Administrator of CMS and a
Federal court.
Second, existing Sec. 405.1875(a) requires the Board to promptly
send copies of hearing decisions and EJR decisions to the Office of the
Attorney Advisor. Although the Board often (perhaps typically) sends
copies of dismissal decisions to the Office of the Attorney Advisor,
the Board is not required to so. We proposed to amend the last sentence
of paragraph (a) of Sec. 405.1875 by requiring the Board to promptly
send copies of dismissal decisions to the Office of the Attorney
Advisor. We stated that this proposed revision will facilitate the
Administrator's exercise of his discretion under Sec.
405.1875(a)(2)(ii) as to whether to review specific Board dismissal
decisions. Also, given our proposals to eliminate the Board
jurisdiction requirement of an appropriate cost report claim (in
current Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3)) and to add
procedures for Board review of compliance with the substantive
reimbursement requirement of an appropriate cost report claim (in new
Sec. 405.1873)), we stated that our further proposal to require the
Board to promptly send copies of dismissal decisions to the Office of
the Attorney Advisor will enhance the Administrator's ability to ensure
full and appropriate implementation of our proposed revisions to the
Board appeals regulations.
We did not receive any public comments on our proposed revisions to
Sec. 405.1875. Accordingly, we are finalizing our proposed revisions
to Sec. 405.1875 without modification.
4. Conforming Changes to the Board Appeals Regulations and
Corresponding Revisions to the Contractor Hearing Regulations
a. Technical Corrections to 42 CFR Part 405, Subpart R and All Subparts
of 42 CFR Part 413
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216 through
28217), we proposed a number of technical revisions and conforming
changes to various provisions in part 405, subpart R and part 413. We
proposed a general technical revision of certain terminology that
recurs throughout 42 CFR part 405 subpart R and all subparts of 42 CFR
part 413. Specifically, we proposed to conform the terminology in 42
CFR part 405 subpart R and all subparts of 42 CFR part 413, by
replacing the term ``intermediary'' and its various permutations with
the term ``contractor'' and its own permutations, in accordance with
sections 1816, 1874A, and 1878 of the Act. We did not receive any
public comments on this proposal. Accordingly, we adopted this proposal
as final in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 and
50351).
b. Technical Corrections and Conforming Changes to Sec. Sec. 405.1801
and 405.1803
In accordance with the above-described general technical revision
proposal (that is, to replace the term ``intermediary'' and its various
permutations with the term ``contractor'' and its own permutations
throughout 42 CFR part 405 subpart R and all subparts of 42 CFR part
413), we specifically proposed (79 FR 28216) to replace the term
``intermediary determination'' in Sec. 405.1801(a) with the term
``contractor determination.'' As a result of our ensuing adoption in
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50199 and 50351) of the
above-described general technical revision in terminology, the term
``intermediary determination'' has been replaced by the term
``contractor determination'' in both Sec. 405.1801(a) and Sec.
405.1803(a).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216), we also
proposed to revise the definition of ``intermediary determination''
(now called ``contractor determination'') in Sec. 405.1801(a), to
clarify that such contractor determinations are final as set forth in
section 1878(a) of the Act. Moreover, we proposed to revise the cross-
reference in Sec. 405.1801(b), from the existing Sec. 413.24(f) to
Sec. 413.24 generally, a revision that we believe is appropriate due
to the proposed addition of paragraph (j) to Sec. 413.24. We also
proposed to revise Sec. 405.1803(a) to refer to the final contractor
(instead of intermediary) determination as set forth in Sec.
405.1801(a).
We did not receive any public comments on any of the above-
described proposals. Accordingly, in this final rule, we are adopting
as final the proposal to revise the definition of ``intermediary
determination'' (now called ``contractor determination'') in Sec.
405.1801(a), to clarify that such contractor determinations are final
as set forth in section 1878(a) of the Act. Also, in this final rule,
we are adopting as final the proposal to revise Sec. 405.1801(b) to
include a cross-reference to Sec. 413.24 generally. Moreover, in this
final rule, we are adopting as final the proposal to revise Sec.
405.1803(a) to refer to the final contractor determination as set forth
in Sec. 405.1801(a).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216 and 28295),
we proposed to revise the first cross-reference in Sec. 405.1803(a)
from paragraph (a)(3) of Sec. 405.1835 to proposed paragraph
(a)(2)(ii) of Sec. 405.1835. Although we did not receive any public
comments on this proposal, we are not adopting the proposal in this
final rule.
As explained in section XVII.E.1.b. of this final rule, we are not
finalizing proposed Sec. 405.1835(a)(2)(ii), which would have
reiterated our longstanding policy for determining whether a final
contractor determination was issued timely for purposes of a Board
appeal based on section 1878(a)(1)(B) of the Act. This policy is now
stated appropriately in Sec. 405.1835(c), a regulation we adopted in
the technical correction provisions of the FY 2015

[[Page 70578]]

IPPS/LTCH PPS final rule (79 FR 50350 through 50351).
However, we are adopting in this final rule a conforming amendment
to Sec. 405.1803(a). Specifically, we are revising the first cross-
reference in current Sec. 405.1803(a) from paragraph (a)(3) of Sec.
405.1835 to current paragraph (c)(1) of Sec. 405.1835.
c. Technical Corrections and Conforming Changes to Sec. Sec. 405.1811,
405.1813, and 405.1814
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28216), we also
proposed revisions to the existing regulations for contractor hearing
officer appeals, which are similar to the proposed revisions to the
Board appeals regulations. Specifically, we proposed to eliminate an
appropriate cost report claim as a jurisdictional requirement for
contractor hearing officer appeals (in existing Sec. Sec.
405.1811(a)(1) and 405.1814(b)(3)). As discussed in the next section,
we also proposed to add a new Sec. 405.1832 that (like new Sec.
405.1873 for Board appeals) would detail the procedures for contractor
hearing officer review of compliance with the substantive reimbursement
requirement of an appropriate cost report claim (as prescribed in
proposed Sec. 413.24(j)). In addition, we proposed a technical
revision to the existing cross-references in Sec. 405.1813(a) and (b),
in order to reflect the proposed revisions to Sec. 405.1811. As
explained in the proposed rule, the above-described revisions to the
regulations for contractor hearing officer appeals comport with our
usual practice of adopting similar regulations for both Board appeals
and for contractor hearing officer appeals unless there is a sufficient
reason to do otherwise.
We did not receive any public comments on these technical
correction proposals to the existing regulations for contractor hearing
officer appeals. In this final rule, we are revising the contractor
hearing provisions of Sec. Sec. 405.1811 and 405.1814 to track very
closely the revisions we are adopting (in section XVII.E.1. of this
final rule) to the Board hearing provisions of Sec. Sec. 405.1835 and
405.1840. Accordingly, we are adopting our proposal to eliminate our
interpretation (in Sec. Sec. 405.1811(a)(1) and 405.1814(b)(3)) that a
provider must make an appropriate cost report claim for an item in
order to meet the dissatisfaction requirement for contractor hearing
officer jurisdiction over appeals of a timely final contractor
determination or Secretary determination. More specifically, we are
adopting technical revisions to the proposed introductory text for
paragraph (a) of Sec. 405.1811 and to proposed paragraph (a)(1) of
Sec. 405.1811 for contractor hearing officer appeals that will closely
track our technical revisions to the proposed introductory text for
paragraph (a) of Sec. 405.1835 and to proposed paragraph (a)(1) of
Sec. 405.1835 for Board appeals. Also, as with our adoption of the
conforming amendment in paragraph (a)(1)(i) of Sec. 405.1835 for Board
appeals, we are adopting a very similar conforming amendment in
paragraph (a)(1)(i) of Sec. 405.1811. As with the corresponding
technical revisions and conforming changes in the proposed introductory
text for paragraph (a) of Sec. 405.1835 and to proposed paragraphs
(a)(1) and (a)(1)(i) of Sec. 405.1835(a), these technical revisions
and conforming amendment to Sec. 405.1811(a) will dispel potential
confusion about the dissatisfaction jurisdictional requirement for
contractor hearing officer appeals of a timely final contractor or
Secretary determination.
In addition, we are finalizing without modification our proposal to
amend Sec. 405.1814 by removing paragraph (b)(3), just as we are
removing paragraph (b)(3) of Sec. 405.1840 for Board appeals.
In this final rule, we are similarly revising various other
contractor hearing officer regulations to track very closely the
revisions we are adopting (in section XVII.E.1. of this final rule) to
the Board appeals regulations. We are not adopting the proposed
revisions (79 FR 28295) to either of the other two requirements for
contractor hearing officer jurisdiction over appeals of a timely final
contractor or Secretary determination. Our adoption of the above-
described technical revision to proposed paragraph (a)(1) of Sec.
405.1811 obviates any need to renumber the amount in controversy
jurisdictional requirement in current paragraph (a)(2) or the timely
filing jurisdictional requirement in current paragraph (a)(3). The
proposed revisions to the text of current paragraph (a)(3) of Sec.
405.1811 are not necessary because the essential provisions of such
proposal are now contained appropriately in Sec. 405.1811(c), a
regulation we adopted in the technical correction provisions of the FY
2015 IPPS/LTCH PPS final rule (79 FR 50350 through 50351).
We are finalizing without modification the proposed revisions (79
FR 28297) to paragraphs (b)(1), (b)(2) introductory text, and
(b)(2)(iii) of Sec. 405.1811. Moreover, as with our adoption of a
technical revision to current paragraph (b)(3) of Sec. 405.1835, we
are adding the term ``final'' before the phrase ``contractor or
Secretary determination'' in paragraph (b)(3) of Sec. 405.1811.
We also are adopting, in paragraphs (e)(1) and (e)(2) of Sec.
405.1811, the same text that we proposed (79 FR 28295) as revisions to
paragraphs (c)(1) and (c)(2) of Sec. 405.1811. When the proposed rule
was published, paragraph (c) of Sec. 405.1811 addressed the addition
of issues to a pending contractor hearing officer appeal. However,
paragraph (c) was later redesignated as paragraph (e) of Sec. 405.1811
in the technical correction provisions of the FY 2015 IPPS/LTCH PPS
final rule (79 FR 50349 through 50350). Accordingly, we are adopting
the text of the proposed amendments (to paragraphs (c)(1) and (c)(2) of
Sec. 405.1811) in paragraphs (e)(1) and (e)(2) of Sec. 405.1811 which
now addresses the addition of issues to a pending contractor hearing
officer appeal. However, we are not finalizing the proposed revision
(79 FR 28295) to paragraph (c)(3) of Sec. 405.1811, because the
essential provisions of such proposal are now contained appropriately
in Sec. 405.1811(e)(3), a regulation we adopted in the technical
correction provisions of the FY 2015 IPPS/LTCH PPS final rule (79 FR
50349 through 50350).
d. Addition of New Sec. 405.1832
In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to add new
Sec. 405.1832, which would detail the procedures for contractor
hearing officer review of compliance with the substantive reimbursement
requirement of an appropriate cost report claim (as prescribed in
proposed Sec. 413.24(j)). We did not receive any public comments on
this proposal. Accordingly, in order to maintain uniformity with our
adoption in new Sec. 405.1873 of similar procedures for Board appeals,
we are adopting in this final rule proposed new Sec. 405.1832 as final
without modification.
e. Revisions to Sec. 405.1834
In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to amend
current Sec. 405.1834, which provides for review of contractor hearing
officer decisions by the CMS reviewing official. Specifically, in
accordance with proposed new paragraph (b)(2)(iii) of Sec. 405.1834,
the CMS reviewing official will review, and address in any decision,
the specific factual findings and legal conclusions of contractor
hearing officers regarding compliance with the substantive requirement
of an appropriate cost report claim (as prescribed in proposed Sec.
413.24(j)), as part of the CMS reviewing official's review of a
contractor hearing decision.
We did not receive any public comments on this proposal.
Accordingly, in this final rule, we are

[[Page 70579]]

adopting as final the proposed addition of new paragraph (b)(2)(iii) to
Sec. 405.1834.
f. Technical Corrections and Conforming Changes to Sec. Sec. 405.1836,
405.1837, and 405.1839
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28217 and 28297),
we proposed technical corrections and conforming changes to the Board
appeals regulations at Sec. Sec. 405.1836, 405.1837, and 405.1839. We
explained that these technical revisions are necessary and appropriate
to maintain consistency with our principal proposals (discussed above)
to add the substantive reimbursement requirement of an appropriate cost
report claim (in proposed Sec. 413.24(j)); eliminate the Board
jurisdiction requirement of an appropriate cost report claim (in
existing Sec. Sec. 405.1835(a)(1) and 405.1840(b)(3)); and add
procedures for Board review of compliance with the substantive
reimbursement requirement of an appropriate cost report claim (in
proposed Sec. 405.1873)).
We did not receive any public comments on the proposed revisions to
Sec. Sec. 405.1836 and 405.1839, which would revise the cross-
references in each of these rules to Sec. 405.1835. However, we are
not adopting either of those proposals. As explained above, we are
adopting a technical revision and a conforming change to existing
paragraph (a)(1) of Sec. 405.1835, in order to avoid any potential
confusion about the dissatisfaction jurisdictional requirement for
Board appeals of a timely final contractor or Secretary determination.
Because we are revising the provider dissatisfaction requirement in
existing paragraph (a)(1) of Sec. 405.1835, we are not adopting the
proposed renumbering (79 FR 28297) of the amount in controversy and
timely filing requirements in existing paragraphs (a)(2) and (a)(3),
respectively. As a result, it is not necessary to revise the existing
cross-references in Sec. 405.1836(a) and (b) to the timely filing
provisions of Sec. 405.1835(a)(3), and thus we are not adopting the
proposed revisions to Sec. 405.1836(a) and (b).
For the same reason, it is not necessary to revise the cross-
references in Sec. 405.1839(a)(1) to the amount in controversy
provisions in existing Sec. 405.1835(a)(2) (for Board appeals) and
Sec. 405.1811(a)(2) (for contractor hearing officer appeals).
However, we believe other technical revisions to the cross-
references in Sec. Sec. 405.1836 and 405.1839 are necessary. As
explained in section XVII.B. of this final rule, the FY 2015 IPPS/LTCH
PPS final rule included a technical correction to the Board appeals
regulations (79 FR 50199 and 50351) that eliminated the jurisdictional
requirement of provider dissatisfaction for appeals based on untimely
final contractor or Secretary determinations pursuant to section
1878(a)(1)(B) of the Act. We added paragraphs (c) and (d) to Sec.
405.1835, which govern Board appeals based on untimely final contractor
or Secretary determinations. The good cause extensions provisions of
Sec. 405.1836 and the amount in controversy provisions of Sec.
405.1839 apply to Board appeals based on untimely final contractor or
Secretary determinations (under paragraphs (c) and (d) of Sec.
405.1835) as well as appeals of timely final contractor or Secretary
determinations (under paragraphs (a) and (b) of Sec. 405.1835).
Accordingly, we believe it is necessary to add, in Sec. 405.1836(a)
and (b), cross-references to the timely filing provisions of Sec.
405.1835(c)(2), in addition to the corresponding cross-references to
Sec. 405.1835(a)(3). For the same reason, we believe it is necessary
to add, in Sec. 405.1839(a)(1), cross-references to the amount in
controversy provisions in existing Sec. 405.1835(c)(3) (for Board
appeals) and Sec. 405.1811(c)(3) (for contractor hearing officer
appeals), in addition to the corresponding cross-references to Sec.
405.1835(a)(2) and Sec. 405.1811(a)(2).
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28217 and 28297
through 28298), we also proposed technical corrections and conforming
changes to the Board group appeal provisions of Sec. 405.1837.
Comment: Two commenters questioned the proposed revision to
paragraph (a)(1) of Sec. 405.1837, which states that, in order to
participate in a group appeal, a provider must satisfy individually the
requirements for a Board hearing under Sec. 405.1835(a)(1). The
commenters noted that, under the proposed revisions to Sec. 405.1835,
the $10,000 amount in controversy requirement for a single provider
appeal would be renumbered as paragraph (a)(1) (instead of its existing
designation as paragraph (a)(2)). However, section 1878(b) of the Act
states that the amount in controversy requirement for a single provider
appeal of $10,000 or more does not apply to group appeals; instead, the
amount in controversy requirement for a group appeal is $50,000 or more
in the aggregate.
Response: We agree that, under section 1878(b) of the Act, the
amount in controversy requirement for a single provider appeal of
$10,000 or more does not apply to each group member individually;
rather, the amount in controversy requirement for a group appeal is
$50,000 or more in the aggregate. Therefore, in this final rule, we are
not adopting the proposed revision to paragraph (a)(1) of Sec.
405.1837. Moreover, we believe that existing paragraphs (a)(1) and
(a)(3) of Sec. 405.1837 track the amount in controversy provisions for
group appeals in section 1878(b) of the Act, and therefore no revision
to paragraphs (a)(1) and (a)(3) of Sec. 405.1837(a) is necessary.
However, we believe a technical conforming revision to the
introductory text of paragraph (a) of Sec. 405.1837 (for group
appeals) is warranted in order to conform this provision to our
technical revision to the proposed introductory text of paragraph (a)
of Sec. 405.1835 (for single provider appeals). As explained above in
section XVII.E.1. of this final rule, we are revising the proposed
introductory text of paragraph (a) of Sec. 405.1835 (79 FR 28297) by
eliminating the reference to items ``claimed in its cost report,'' a
technical revision that further clarifies our elimination of an
appropriate cost report claim as a requirement for Board jurisdiction.
We are making a technical conforming revision to the introductory text
of paragraph (a) of Sec. 405.1837 by eliminating its similar reference
to items ``claimed for a cost reporting period,'' which we believe is
necessary to further clarify that our elimination of an appropriate
cost report claim as a requirement for Board jurisdiction applies to
group appeals just like single provider appeals. Under paragraph (a)(1)
of Sec. 405.1837, the jurisdictional requirements for a group appeal
are the same as the jurisdictional requirements for a single provider
appeal, except for the different amount in controversy requirements for
the two types of Board appeals. Thus, our technical revision to the
proposed text of paragraph (a)(1) of Sec. 405.1835(a), which will now
state that the provider has a right to a Board hearing with respect to
a final contractor or Secretary determination if the provider is
dissatisfied with the contractor's final determination of the total
amount of reimbursement due the provider, applies to group appeals as
with single provider appeals. We believe that conforming the
introductory text of paragraph (a) of Sec. 405.1837 (for group
appeals) to the introductory text of paragraph (a) of Sec. 405.1835
(for single provider appeals) will further clarify that our elimination
of an appropriate cost report claim as a Board jurisdiction requirement
applies to group appeals as well as single provider appeals.

[[Page 70580]]

In addition, we believe a technical revision to a cross-reference
in the text of proposed paragraphs (a)(1) and (e)(4) of Sec. 405.1837
is necessary. As explained in section XVII.B. of this final rule, the
FY 2015 IPPS/LTCH PPS final rule included a technical correction to the
Board appeals regulations (79 FR 50199 and 50351) that eliminated the
jurisdictional requirement of provider dissatisfaction for appeals
based on untimely final contractor or Secretary determinations pursuant
to section 1878(a)(1)(B) of the Act. We added paragraphs (c) and (d) to
Sec. 405.1835, which govern Board appeals based on untimely final
contractor or Secretary determinations. However, the group appeal
provisions of Sec. 405.1837 apply to Board appeals based on untimely
final contractor or Secretary determinations (under paragraphs (c) and
(d) of Sec. 405.1835) as well as appeals of timely final contractor or
Secretary determinations (under paragraphs (a) and (b) of Sec.
405.1835). Accordingly, in this final rule, we are adding, in
paragraphs (a)(1) and (e)(4) of Sec. 405.1837, a cross-reference to
Sec. 405.1835(c), in addition to the current cross-reference to Sec.
405.1835(a).

F. Collection of Information Requirements

This document does not impose information collection requirements,
that is, reporting, recordkeeping or third-party disclosure
requirements. Consequently, there is no need for review by the Office
of Management and Budget under the authority of the Paperwork Reduction
Act of 1995 (44 U.S.C 3501 through 3521).

G. Impact of Requiring Appropriate Claims in Provider Cost Reports and
Eliminating That Requirement for Administrative Appeals by Providers

In section VIII. of the preamble to the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28206 through 28217), we discussed our proposal to
revise the Medicare cost report regulations by requiring a provider to
include an appropriate claim for an item in its cost report, which
would be a general substantive requirement for payment in the Medicare
contractor's final determination and in any decision by a reviewing
entity in an administrative appeal. We also discussed our proposal to
revise the Medicare provider appeals regulations by eliminating the
requirement of an appropriate cost report claim in order to meet the
dissatisfaction requirement for Provider Reimbursement Review Board
jurisdiction. In Appendix A of the FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28369), we set out our analyses of the impact of these
proposals.
As discussed in section XVII.D. and XVII.E. of this final rule, we
are finalizing our proposals to revise the Medicare cost report
regulations by requiring a provider to include an appropriate claim for
an item in its cost report, and to eliminate an appropriate cost report
claim as a requirement for Provider Reimbursement Review Board
jurisdiction. There is no impact to the provider resulting from these
finalized revisions.

XVIII. Files Available to the Public via the Internet

The Addenda to the OPPS/ASC proposed rules and the final rules with
comment period are published and available only via the Internet on the
CMS Web site. To view the Addenda to this final rule with comment
period pertaining to CY 2016 payments under the OPPS, we refer readers
to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; select ``1633-FC'' from the list of regulations. All
OPPS Addenda to this final rule with comment period are contained in
the zipped folder entitled ``2016 OPPS 1633-FC Addenda'' at the bottom
of the page. To view the Addenda to this final rule with comment period
pertaining to the CY 2016 payments under the ASC payment system, we
refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html; select ``1633-FC'' from the list of regulations. All ASC
Addenda to this final rule with comment period are contained in the
zipped folders entitled ``Addendum AA, BB, DD1, DD2, and EE''.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39253, 39211, and
39354), we proposed to add new Addenda as supporting documents for the
ease of readers in comprehending the changes we were proposing:
Addendum O, which listed the new and revised CY 2016 Category I and III
CPT codes and their proposed assignment to new comment indicator ``NP''
to indicate that the code is new for the next calendar year or the code
is an existing code with substantial revision to its code descriptor in
the next calendar year as compared to current calendar year with a
proposed APC assignment and that comments would be accepted on the
proposed APC assignment and status indicator (80 FR 39253); and
Addendum Q, which included a crosswalk from the existing CY 2015 APC
numbers to the proposed new CY 2016 APC numbers (80 FR 39354). However,
we now do not believe that Addenda O and Q are necessary for this CY
2016 OPPS/ASC final rule with comment period. Therefore, we are not
including them in the files available on the CMS Web site for this
final rule with comment period.

XIX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and to solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the CY 2016 OPPS/ASC proposed rule (80 FR 39355 through 39358),
we solicited public comments on each of the issues outlined above for
the information collection requirements discussed below.

B. Associated Information Collections Not Specified in Regulatory Text

In the CY 2016 OPPS/ASC proposed rule, we made reference to
proposed associated information collection requirements that were not
discussed in the regulation text contained in the proposed rule. The
following is a discussion of those proposed requirements, any public
comments we received, and our responses to those public comments.
1. Hospital OQR Program
As we stated in section XIV. of the CY 2012 OPPS/ASC final rule
with comment period, the Hospital OQR Program has been generally
modeled after the quality data reporting program for the Hospital IQR
Program (76 FR 74451). We refer readers to the CY 2011 OPPS/ASC final
rule with comment period (75 FR 72111 through 72114), the

[[Page 70581]]

CY 2012 OPPS/ASC final rule with comment period (76 FR 74549 through
74554), the CY 2013 OPPS/ASC final rule with comment period (77 FR
68527 through 68532), the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75170 through 75172), and the CY 2015 OPPS/ASC final rule
with comment period (79 FR 67012 through 67015) for detailed
discussions of Hospital OQR Program information collection requirements
we have previously finalized. The information collection requirements
associated with the Hospital OQR Program are currently approved under
OMB control number 0938-1009.
Below we discuss only the changes in burden resulting from the
provisions in this final rule with comment period.
a. Estimated Burden of Hospital OQR Program Finalized Policies for the
CY 2017 Payment Determination and Subsequent Years
In section XIII. of this final rule with comment period, we are
finalizing the adoption of several changes to the Hospital OQR Program
for the CY 2017 payment determination and subsequent years.
Specifically, we are finalizing our proposals to: (1) Remove the OP-15:
Use of Brain Computed Tomography (CT) in the Emergency Department for
Atraumatic Headache measure, effective January 1, 2016 (no data for
this measure will be used for any payment determination); (2) change
the deadline for withdrawing from the Hospital OQR Program to August 31
and revise 42 CFR 419.46(b) to reflect this change; (3) shift the
quarters on which we base payment determinations; (4) change the data
submission timeframe for measures submitted via the CMS Web-based tool
(QualityNet Web site) to January 1 through May 15; (5) fix a
typographical error to correct the name of our extension and exception
policy to extension and exemption policy; (6) change the deadline for
submitting a reconsideration request to the first business day on or
after March 17 of the affected payment year and make a conforming
change to 42 CFR 419.46(f)(1) to reflect this change; and (7) amend 42
CFR 419.46(f)(1) and 42 CFR 419.46(e)(2) to replace the term ``fiscal
year'' with the term ``calendar year''. While there is burden
associated with filing a reconsideration request, section 3518(c)(1)(B)
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3518(c)(1)(B))
excludes collection activities during the conduct of administrative
actions such as reconsiderations. We do not believe that any of these
changes will increase burden, as further discussed below.
In addition, we are finalizing conforming changes to our validation
scoring process to reflect proposed changes in the APU determination
timeframes. For the CY 2017 payment determination, we are finalizing
that validation will be based on three quarters of data (quarter 2,
quarter 3, and quarter 4 of 2015). For this transition year, we
estimate that the burden associated with validation reporting will be
reduced by 25 percent because hospitals will submit validation data for
three quarters instead of four.
(1) Measure Removed for the CY 2017 Payment Determination and
Subsequent Years
As discussed in section XIII.B.5. of this final rule with comment
period, we are finalizing our proposal to remove the OP-15: Use of
Brain Computed Tomography (CT) in the Emergency Department for
Atraumatic Headache measure beginning with the CY 2017 payment
determination. OP-15 is a claims-based measure. As we noted in the CY
2013 OPPS/ASC final rule with comment period (77 FR 68530), we
calculate claims-based measures using Medicare FFS claims data that do
not require additional hospital data submissions. In addition, public
reporting of OP-15 has been deferred since the CY 2013 OPPS/ASC final
rule with comment period (76 FR 74456 and http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228774991461 under 1.6--Imaging Efficiency, ``OP-15 Use of Brain
Computed Tomography (CT) in the Emergency Department for Atraumatic
Headache''). Therefore, we estimate that there will be no change in
burden based on finalizing the removal of this measure.
(2) Changes to Reporting Requirements for the CY 2017 Payment
Determination and Subsequent Years
In section XIII.E. of this final rule with comment period, we are
finalizing the adoption of several changes to the reporting
requirements for the Hospital OQR Program. Specifically, we are
finalizing our proposals to: (1) Change the deadline for withdrawing
from the program to up to and including August 31 and revise 42 CFR
419.46(b) to reflect this change; (2) shift the quarters on which we
base payment determinations; (3) change the data submission timeframe
for measures submitted via the CMS Web-based tool (QualityNet Web site)
to January 1 through May 15; (4) fix a typographical error to correct
the name our extension and exception policy to extension and exemption
policy; and (5) change the deadline for submitting a reconsideration
request to the first business day on or after March 17 of the affected
payment year and make a conforming change to 42 CFR 419.46(f)(1) to
reflect this change. Although we are finalizing the adoption of our
proposals to change deadlines, these date changes do not change the
amount of time required to enter data. Therefore, the hourly burden and
resultant financial impact will remain the same.
In addition, we are finalizing the adoption of conforming changes
to our validation scoring process to reflect changes in the APU
determination timeframes. For prior payment determinations, we sampled
500 hospitals for validation and estimated that it would take each
hospital 12 hours to comply with the data submission requirements for
four quarters. For the CY 2017 payment determination, we are
transitioning to a new payment determination timeframe; as a result,
only three quarters of data will be used for determining the CY 2017
payment determination, as opposed to four quarters as previously
required. Specifically, for the CY 2017 payment determination,
validation is based on data from validation quarter 2, validation
quarter 3, and validation quarter 4 of 2015. Therefore, we estimate
that data submission for three quarters reduces the number of hours
required by 25 percent (from 12 hours to 9 hours per hospital).
Consistent with prior years (79 FR 67013), we estimate that a hospital
pays an individual approximately $30 per hour to abstract and submit
these data. We estimate a total burden of approximately 4,500 hours
(500 hospitals x 9 hours/hospital) and a total financial impact of
$135,000 ($30/hour x 4,500 hours) for the CY 2017 payment
determination. This is a reduction of 1,500 hours and $45,000 across
all hospitals from last year's estimate attributable to changes in our
validation scoring process.
b. Estimated Burden of Hospital OQR Program Finalized Policies for the
CY 2018 Payment Determination and Subsequent Years
For the CY 2018 payment determination and subsequent years, we are
finalizing the adoption of two new proposals, with a modification to
the manner of data submission for one proposal. First, in section
XIII.B.6.a. of this final rule with comment period, we are finalizing
the adoption of one new measure for the CY 2018 payment determination
and subsequent years: OP-33: External Beam Radiotherapy

[[Page 70582]]

(EBRT) for Bone Metastases (NQF #1822). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39338), we proposed that hospitals could either:
(1) Report aggregate-level data for OP-33 submitted via a CMS Web-based
tool (QualityNet Web site); or (2) submit an aggregate data file for
OP-33 through a vendor (via the QualityNet infrastructure). As we
further explain in section XIII.D.4.b. of this final rule with comment
period, we are finalizing only one mode of data submission for this
measure: data for OP-33 may only be submitted at an aggregate-level via
a CMS Web-based tool (QualityNet Web site).
Consistent with prior years (78 FR 75171), we believe that
submitting a measure through a CMS Web-based tool has two burden
components: First, the time required to abstract the measure data; and
second, the time required to enter these data into a CMS Web-based
tool. In the CY 2015 OPPS/ASC final rule with comment period (79 FR
67013), we estimated that it would take hospitals approximately a total
of 35 minutes to collect chart-abstracted data for 12 Web-based
measures. To calculate the burden associated with a collecting chart-
abstracted data for a single Web-based measure, we divided the total
number of minutes previously estimated (35 minutes) by the number of
measures (12 measures). Therefore, we estimated the burden to collect
chart-abstracted data for a single Web-based measure to be 2.92 minutes
(or 0.049 hours.). Based on our most recent data (Quarter 4 2013-
Quarter 3 2014) for Hospital OQR Program measures, we estimate that the
average hospital will submit 48 cases per year for OP-33. Therefore, we
believe that the average hospital will spend 2.352 hours (0.049 hours/
measure/case x 48 cases) chart-abstracting data for this measure.
In addition, consistent with prior years (78 FR 75171 through
75172), we estimate that each participating hospital will spend 10
minutes (0.167 hours) per measure per year to collect and submit the
data via a CMS Web-based tool. Therefore, we estimate that, in total,
the proposed measure will increase burden by 2.519 hours (2.352 hours +
0.167 hours) per year. Consistent with prior years (79 FR 67013), we
believe that approximately 3,300 hospitals will participate in the
Hospital OQR Program for the CY 2018 payment determination. Therefore,
we estimate a total increase in burden across all participating
hospitals of approximately 8,312.7 hours (2.519 hours/hospital x 3,300
hospitals) per year. Finally, consistent with prior years (79 FR
67013), we estimate that a hospital pays an individual approximately
$30 per hour to abstract and submit these data. Therefore, we estimate
a total financial increase in burden to be $75.57 per hospital (2.519
hours x $30/hour) or $249,381 (8,312.7 hours x $30/hour) across all
participating hospitals as a result of adopting OP-33 for the CY 2018
payment determination and subsequent years.
Second, for the CY 2018 payment determination and subsequent years,
we are finalizing that validation again be based on four quarters of
data. However, those quarters are validation quarter 1, validation
quarter 2, validation quarter 3, and validation quarter 4. For payment
determinations prior to CY 2017, we sampled 500 hospitals for
validation and estimated that it would take each hospital 12 hours to
comply with the data submission requirements for four quarters.
Therefore, we estimate a total burden of approximately 6,000 hours (500
hospitals x 12 hours/hospital) and a total financial impact of $180,000
($30/hour x 6,000 hours) in burden associated with the data validation
process for the CY 2018 payment determination and subsequent years.
This is an increase of 1,500 hours and $45,000 across all hospitals
from the CY 2017 estimate because we will be sampling four quarters, as
we had in prior years, instead of three quarters.
Therefore, we estimate a total financial increase in burden of
$89.21 (2.97 hours x $30/hour) per hospital or $294,390 (9,813 hours x
$30/hour) across all participating hospitals as a result of the
proposals that we are finalizing for the CY 2018 payment determination
and subsequent years.
c. Estimated Burden of Hospital OQR Program Finalized Policies for the
CY 2019 Payment Determination and Subsequent Years
We are not finalizing the adoption of any new proposals for the CY
2019 payment determination and subsequent years. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39330), we proposed to add one new measure for
the CY 2019 payment determination and subsequent years: OP-34:
Emergency Department Transfer Communication (EDTC) (NQF #0291). As
stated in section XIII.B.6.b. of this final rule with comment period,
we are not finalizing that proposed measure. Thus, because we are not
finalizing any changes specifically for the CY 2019 payment
determination and subsequent years, we expect the burden to be
unchanged for the CY 2019 payment determination as compared to the CY
2018 payment determination and subsequent years as discussed above.
We invited public comment on the burden associated with the
proposed information collection requirements which we are finalizing.
We did not receive any public comments on these requirements.
2. ASCQR Program Requirements
a. Background
We refer readers to the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74554), the FY 2013 IPPS/LTCH PPS final rule (77 FR
53672), the CY 2013 OPPS/ASC final rule with comment period (77 FR
68532 through 68533), the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75172 through 75174), and the CY 2015 OPPS/ASC final rule
with comment period (79 FR 67015 through 67016) for detailed
discussions of the ASCQR Program information collection requirements we
have previously finalized.
b. Policy Proposals Finalized Effective Beginning With the CY 2017
Payment Determination
We are finalizing our proposals to codify a number of existing
policies related to program participation and withdrawal, data
collection and submission, public reporting, retention and removal of
quality measures, measures maintenance, extraordinary circumstances
extensions or waivers, and the reconsideration process. We are
codifying only existing policies, with the exception of the finalized
policy proposals discussed below. For existing policies for which we
are finalizing codification, we do not anticipate any additional burden
to ASCs affecting the CY 2017 payment determination or subsequent years
because there are no changes to these policies.
We are not finalizing our proposal to implement a submission
deadline with an end date of May 15 for all data submitted via a Web-
based tool beginning with the CY 2017 payment determination. Instead,
we are maintaining the previously finalized August 15 submission
deadline for the following measures: ASC-6: Safe Surgery Checklist Use;
ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures;
ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk Patients (NQF #0658); ASC-10:
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a
History of Adenomatous Polyps-Avoidance of Inappropriate Use (NQF
#0659); and ASC-11: Cataracts: Improvement in Patient's Visual Function
within 90 Days Following

[[Page 70583]]

Cataract Surgery (NQF #1536). We note that ASC-8: Influenza Vaccination
Coverage among Healthcare Personnel (NQF #0431) will continue under the
May 15 submission deadline previously finalized for this measure. We do
not anticipate additional burden because the data collection and
submission requirements have not changed.
We are finalizing our proposal, beginning with the CY 2017 payment
determination, to not consider IHS hospital outpatient departments that
bill as ASCs to be ASCs for purposes of the ASCQR Program. This final
policy will eliminate the burden associated with participation in the
ASCQR Program for six IHS hospital outpatient departments that
currently are required to participate in the ASCQR Program or be
subject to a possible reduction in payment.
We are finalizing our proposal to make a minor change to the
reconsideration request deadline to ensure our deadline for these
requests will always fall on a business day effective beginning with
the CY 2017 payment determination. We do not anticipate that there will
be any additional burden because the materials to be submitted are
unchanged and the deadline does not result in reduced time to submit a
reconsideration request.
We are finalizing our proposal to publicly display data by the NPI
when the data are submitted by the NPI and to publicly display data by
the CCN when the data are submitted by the CCN, but are not finalizing
our proposal to attribute data submitted by the CCN to all NPIs
associated with the CCN. We are codifying this new revised policy at 42
CFR 416.315. Again, we do not anticipate any additional burden because
this final policy does not alter the administrative or reporting
requirements governing an ASC's participation in the ASCQR Program.
Finally, we are finalizing our proposal, for claims-based measures
not using QDCs, to use claims for services furnished in each calendar
year that have been paid by the MAC by April 30 of the following year
of the ending data collection time period in the measure calculation
for the payment determination year beginning with the CY 2018 payment
determination. We do not anticipate any additional burden to ASCs based
on this final policy affecting the CY 2017 payment determination or
subsequent years because it does not alter the administrative or
reporting requirements governing an ASC's participation in the ASCQR
Program.
c. Claims-Based Measures for the CY 2018 Payment Determination and
Subsequent Years
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68532), the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75172 through 75174), and the CY 2015 OPPS/ASC final rule
with comment period (79 FR 67015 through 67016) for detailed
discussions of the information collection requirements for the six
previously adopted claims-based ASCQR Program measures (five outcome
measures and one process measure). The six previously adopted measures
are: ASC-1: Patient Burn (NQF #0263); ASC-2: Patient Fall (NQF #0266);
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
Implant (NQF #0267); ASC-4: Hospital Transfer/Admission (NQF #0265);
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing; and ASC-12:
Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient
Colonoscopy. The first five of these measures require the reporting of
Quality Data Codes (QDCs), but the sixth measure, ASC-12, while
utilizing data from paid Medicare FFS claims, does not require ASCs to
submit QDCs. For the reasons we discussed in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75172 through 75173) and the CY 2015
OPPS/ASC final rule with comment period (79 FR 67016), we estimate that
the reporting burden to report QDCs for the five claims-based outcome
measures that utilize QDCs will be nominal. We do not anticipate that
ASC-12 will create any additional burden to ASCs for the CY 2018
payment determination and for subsequent years because no additional
data are required from ASCs; only information necessary for Medicare
payment is utilized for calculating this measure.
d. Web-Based Measures for the CY 2018 Payment Determination and
Subsequent Years
We refer readers to the CY 2013 OPPS/ASC final rule with comment
period (77 FR 68532) and the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75172 through 75174) for detailed discussions of the
information collection requirements for the five previously-adopted
Web-based measures, excluding ASC-11, which we proposed for voluntary
inclusion in the ASCQR Program for the CY 2017 payment determination
and subsequent years. The five previously adopted measures are: ASC-6:
Safe Surgery Checklist Use; ASC-7: ASC Facility Volume Data on Selected
ASC Surgical Procedures; ASC-8: Influenza Vaccination Coverage Among
Healthcare Personnel (NQF #0431); ASC-9: Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk
Patients (NQF #0658); and ASC-10: Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a History of Adenomatous Polyps-
Avoidance of Inappropriate Use (NQF #0659).
For the reasons we discussed in the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75173 through 75174), we estimate that the
reporting burden for the ASC-6: Safe Surgery Checklist Use and the ASC-
7: ASC Facility Volume measures will be 1,757 hours (5,260 ASCs x 2
measures x 0.167 hours per ASC) and $52,710 (1,757 hours x $30.00 per
hour) annually for the CY 2018 payment determination and for subsequent
years.
For the reasons discussed in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75173 through 75174), we estimate that the
reporting burden for the ASC-8: Influenza Vaccination Coverage Among
Healthcare Personnel (NQF #0431) measure will be 18,005 hours (5,260
ASCs x 0.083 hours per facility = 437 hours for NHSN registration, and
5,260 ASCs x 0.167 hours per response for 20 workers per facility =
17,568 hours for data submission) and $540,150 (18,005 hours x $30.00
per hour) annually for the CY 2018 payment determination and for
subsequent years.
For the reasons discussed in the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75173 through 75174), we estimate that the
reporting burden for ASCs with a single case per ASC for the chart-
abstracted ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658)
and ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous Polyps-Avoidance of
Inappropriate Use (NQF #0659) measures will be 3,067 hours (5,260 ASCs
x 0.583 hours per case per ASC) and $92,010 (3,067 hours x $30.00 per
hour) annually for the CY 2018 payment determination and for subsequent
years.
In the CY 2015 OPPS/ASC final rule with comment period, we
finalized our proposal that data collection and submission be voluntary
for the CY 2017 payment determination and subsequent years for ASC-11:
Cataracts: Improvement in Patient's Visual Function within 90 Days
Following

[[Page 70584]]

Cataract Surgery (NQF #1536); that is, we will not subject ASCs to a
payment reduction with respect to this measure during the period of
voluntary reporting (79 FR 66984 through 66985). For the reasons
discussed in the CY 2015 OPPS/ASC final rule with comment period (79 FR
67016), we estimate the total burden for this measure for ASCs with a
single case per ASC to be 613 hours (1,052 ASCs x 0.583 hours per case
per ASC) and $18,390 (613 hours x $30.00 per hour) annually for the CY
2018 payment determination and subsequent years.
e. Extraordinary Circumstances Extension or Exemptions Process
For a complete discussion of our ``Extraordinary Circumstances
Extension or Waiver'' process under the ASCQR Program, which we
retitled as the ``Extraordinary Circumstances Extensions or
Exemptions'' process in the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66987), we refer readers to the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53642 through 53643) and the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75140). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39347), we did not propose to make any changes to
this process.
f. Reconsideration
In section XIV.D.8. of this final rule with comment period, we are
finalizing our proposal to make a minor change to the reconsideration
request deadline to ensure our deadline for these requests will always
fall on a business day. We do not anticipate that there will be any
additional burden because the materials to be submitted are unchanged
and the deadline does not result in reduced time to submit a
reconsideration request. We also are finalizing our proposal to codify
our reconsideration request process at 42 CFR 416.330.
While there is burden associated with filing a reconsideration
request, section 3518(c)(1)(B) of the Paperwork Reduction Act of 1995
(44 U.S.C. 3518(c)(1)(B)) excludes collection activities during the
conduct of administrative actions such as reconsiderations.
We invited public comments on the burden associated with these
information collection requirements. We did not receive any public
comments on these requirements.

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 final rule
with comment period, and, when we proceed with a subsequent
document(s), we will respond to those comments in the preamble to that
document.

XXI. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
We have examined the impacts of this final rule with comment
period, as required by Executive Order 12866 on Regulatory Planning and
Review (September 30, 1993), Executive Order 13563 on Improving
Regulation and Regulatory Review (January 18, 2011), the Regulatory
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section
1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4),
Executive Order 13132 on Federalism (August 4, 1999), and the Contract
with America Advancement Act of 1996 (Pub. L. 104-121) (5 U.S.C.
804(2)). This section of the final rule with comment period contains
the impact and other economic analyses for the provisions that we are
finalizing for CY 2016.
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This final rule with comment period has been designated as
an economically significant rule under section 3(f)(1) of Executive
Order 12866 and a major rule under the Contract with America
Advancement Act of 1996 (Pub. L. 104-121). Accordingly, this final rule
with comment period has been reviewed by the Office of Management and
Budget. We have prepared a regulatory impact analysis that, to the best
of our ability, presents the costs and benefits of this final rule with
comment period. We solicited comments on the regulatory impact analysis
in the CY 2016 OPPS/ASC proposed rule (80 FR 39359), and we address the
public comments we received in this section below and in other sections
of this final rule with comment period as appropriate.
2. Statement of Need
This final rule with comment period is necessary to update the
Medicare hospital OPPS rates. It is necessary to make changes to the
payment policies and rates for outpatient services furnished by
hospitals and CMHCs in CY 2016. We are required under section
1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion
factor used to determine the payment rates for APCs. We also are
required under section 1833(t)(9)(A) of the Act to review, not less
often than annually, and revise the groups, the relative payment
weights, and the wage and other adjustments described in section
1833(t)(2) of the Act. We must review the clinical integrity of payment
groups and relative payment weights at least annually. We are revising
the APC relative payment weights using claims data for services
furnished on and after January 1, 2014, through and including December
31, 2014 and processed through June 30, 2015, and updated cost report
information.
This final rule with comment period also is necessary to update the
ASC payment rates for CY 2016, enabling CMS to make changes to payment
policies and payment rates for covered surgical procedures and covered
ancillary services that are performed in an ASC in CY 2016. Because ASC
payment rates are based on the OPPS relative payment weights for the
majority of the procedures performed in ASCs, the ASC payment rates are
updated annually to reflect annual changes to the OPPS relative payment
weights. In addition, we are required under section 1833(i)(1) of the
Act to review and update the list of surgical procedures that can be
performed in an ASC not less frequently than every 2 years.
3. Overall Impacts for the OPPS and ASC Payment Provisions
We estimate that the total decrease in Federal government
expenditures under the OPPS for CY 2016 compared to CY 2015 due to the
changes in this final rule with comment period will be approximately
$133 million. Taking into account our estimated changes in enrollment,
utilization, and case-mix, we estimate, based on the Midsession Review
of the President's FY 2016 Budget, that gross Federal Government OPPS
expenditures for CY 2016 will be approximately $4.1 billion higher
relative to expenditures in CY 2015. This estimate reflects changes in
enrollment, utilization, and case-mix, but does not include the 2.0
percent reduction to the conversion factor to

[[Page 70585]]

address the inflation in OPPS payment rates resulting from excess
packaged payment under the OPPS for laboratory tests that are excepted
from our final CY 2014 laboratory packaging policy, as discussed in
section II.B. of this final rule with comment period, or other payment
changes implemented in this final rule with comment period. Because
this final rule with comment period rule is economically significant as
measured by the threshold of an additional $100 million in expenditures
in 1 year, we have prepared this regulatory impact analysis that, to
the best of our ability, presents its costs and benefits. Table 70
displays the distributional impact of the CY 2016 changes in OPPS
payment to various groups of hospitals and for CMHCs.
We estimate that the update to the conversion factor and other
adjustments (not including the effects of outlier payments, the pass-
through estimates, and the application of the frontier State wage
adjustment for CY 2016) will decrease total OPPS payments by 0.3
percent in CY 2016. The changes to the APC weights, the changes to the
wage indexes, the continuation of a payment adjustment for rural SCHs,
including EACHs, and the payment adjustment for cancer hospitals will
not increase OPPS payments because these changes to the OPPS are budget
neutral. However, these updates will change the distribution of
payments within the budget neutral system. We estimate that the total
change in payments between CY 2015 and CY 2016, considering all
payments, including the adjustment to the conversion factor to address
the inflation in OPPS payment rates resulting from excess packaged
payment under the OPPS for laboratory tests, changes in estimated total
outlier payments, pass-through payments, and the application of the
frontier State wage adjustment outside of budget neutrality, in
addition to the application of the OPD fee schedule increase factor
after all adjustments required by sections 1833(t)(3)(F),
1833(t)(3)(G), and 1833(t)(17) of the Act, will decrease total
estimated OPPS payments by 0.4 percent.
We estimate the total increase (from changes to the ASC provisions
in this final rule with comment period as well as from enrollment,
utilization, and case-mix changes) in Medicare expenditures under the
ASC payment system for CY 2016 compared to CY 2015 to be approximately
$128 million. Because the provisions for the ASC payment system are
part of a final rule with comment period that is economically
significant as measured by the $100 million threshold, we have prepared
a regulatory impact analysis of the changes to the ASC payment system
that, to the best of our ability, presents the costs and benefits of
this portion of this final rule with comment period. Table 71 and Table
72 of this final rule with comment period display the redistributive
impact of the CY 2016 changes on ASC payment, grouped by specialty area
and then grouped by procedures with the greatest ASC expenditures,
respectively.
4. Detailed Economic Analyses
a. Estimated of OPPS Changes in This Final Rule With Comment Period
(1) Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the CY 2016 policy changes on various hospital groups. As we did for
the proposed rule, we post on the CMS Web site our hospital-specific
estimated payments for CY 2016 with the other supporting documentation
for this final rule with comment period. To view the hospital-specific
estimates, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the Web site, select ``regulations and notices'' from
the left side of the page and then select ``CMS-1633-FC'' 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 final rule with comment period. We show
hospital-specific data only for hospitals whose claims were used for
modeling the impacts shown in Table 70 below. We do not show hospital-
specific impacts for hospitals whose claims we were unable to use. We
refer readers to section II.A. of this final rule with comment period
for a discussion of the hospitals whose claims we do not use for
ratesetting and impact purposes.
We estimate the effects of the individual policy changes by
estimating payments per service, while holding all other payment
policies constant. We use the best data available, but do not attempt
to predict behavioral responses to our policy changes. In addition, we
have not made adjustments for future changes in variables such as
service volume, service-mix, or number of encounters. In the CY 2016
OPPS/ASC proposed rule (80 FR 39360), we solicited public comment and
information about the anticipated effects of our proposed changes on
providers and our methodology for estimating them. Any public comments
that we received are addressed in the applicable sections of the final
rule with comment period that discuss the specific policies.
(2) Estimated Effects of OPPS Changes on Hospitals
Table 70 below shows the estimated impact of this final rule with
comment period on hospitals. Historically, the first line of the impact
table, which estimates the change in payments to all facilities, has
always included cancer and children's hospitals, which are held
harmless to their pre-BBA amount. We also include CMHCs in the first
line that includes all providers. We now include a second line for all
hospitals, excluding permanently held harmless hospitals and CMHCs.
We present separate impacts for CMHCs in Table 70, and we discuss
them separately below, because CMHCs are paid only for partial
hospitalization services under the OPPS and are a different provider
type from hospitals. In CY 2016, we are finalizing our proposal to
continue to pay CMHCs under renumbered APC 5851 (existing APC 0172)
(Level 1 Partial Hospitalization (3 services) for CMHCs) and renumbered
APC 5852 (existing APC 0173) (Level 2 Partial Hospitalization (4 or
more services) for CMHCs). We also are finalizing our proposal to pay
hospitals for partial hospitalization services under renumbered APC
5861 (existing APC 0175) (Level 1 Partial Hospitalization (3 services)
for hospital-based PHPs) and APC 5862 (existing APC 0176) (Level 2
Partial Hospitalization (4 or more services) for hospital-based PHPs).
However, as discussed in section VIII.B.1. of this final rule with
comment period, we are making an equitable adjustment to the actual
geometric mean per diem costs so that we pay a higher payment rate for
Level 2 services than Level 1 services. We also are finalizing our
proposal to use a 2 standard deviation trim for CMHCs and
to apply a CCR greater than 5 (CCR>5) hospital service day trim for
hospital-based PHP providers for CY 2016 and subsequent years.
The estimated decrease in the total payments made under the OPPS is
determined largely by the increase to the conversion factor under the
statutory methodology and the adjustment to the conversion factor to
address the inflation in OPPS payment rates resulting from excess
packaged payment under the OPPS for laboratory tests. The
distributional impacts presented do not include assumptions about
changes in volume and service-mix. The conversion factor is updated
annually by the OPD fee schedule increase factor as discussed in detail
in

[[Page 70586]]

section II.B. of this final rule with comment period. Section
1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule
increase factor is equal to the market basket percentage increase
applicable under section 1886(b)(3)(B)(iii) of the Act, which we refer
to as the IPPS market basket percentage increase. The IPPS market
basket percentage increase for FY 2016 is 2.4 percent (80 FR 49510).
Section 1833(t)(3)(F)(i) of the Act reduces that 2.4 percent by the
multifactor productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act, which is 0.5 percentage point for FY
2016 (which is also the MFP adjustment for FY 2016 in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49510)); and sections 1833(t)(3)(F)(ii) and
1833(t)(3)(G)(iv) of the Act further reduce the market basket
percentage increase by 0.2 percentage point, resulting in the OPD fee
schedule increase factor of 1.7 percent. We are using the OPD fee
schedule increase factor of 1.7 percent in the calculation of the CY
2016 OPPS conversion factor. We also are applying a reduction of 2.0
percent to address the inflation in OPPS payment rates resulting from
excess packaged payment under the OPPS for laboratory tests. Section
10324 of the Affordable Care Act, as amended by HCERA, further
authorized additional expenditures outside budget neutrality for
hospitals in certain frontier States that have a wage index less than
1.00. The amounts attributable to this frontier State wage index
adjustment are incorporated in the CY 2016 estimates in Table 70.
To illustrate the impact of the CY 2016 changes, our analysis
begins with a baseline simulation model that uses the CY 2015 relative
payment weights, the FY 2015 final IPPS wage indexes that include
reclassifications, and the final CY 2015 conversion factor. Table 70
shows the estimated redistribution of the increase or decrease in
payments for CY 2016 over CY 2015 payments to hospitals and CMHCs as a
result of the following factors: The impact of the APC reconfiguration
and recalibration changes between CY 2015 and CY 2016 (Column 2); the
wage indexes and the provider adjustments (Column 3); the combined
impact of all of the changes described in the preceding columns plus
the 1.7 percent OPD fee schedule increase factor update to the
conversion factor and the -2.0 percent adjustment to the conversion
factor to address the inflation in OPPS payment rates resulting from
excess packaged payment under the OPPS for laboratory tests (Column 4);
and the estimated impact taking into account all payments for CY 2016
relative to all payments for CY 2015, including the impact of changes
in estimated outlier payments, the frontier State wage adjustment, and
changes to the pass-through payment estimate (Column 5).
We did not model an explicit budget neutrality adjustment for the
rural adjustment for SCHs because we are finalizing our proposal to
maintain the current adjustment percentage for CY 2016. Because the
updates to the conversion factor (including the update of the OPD fee
schedule increase factor), the estimated cost of the rural adjustment,
and the estimated cost of projected pass-through payment for CY 2016
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 will 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 final rule
with comment period will redistribute money during implementation also
will depend on changes in volume, practice patterns, and the mix of
services billed between CY 2015 and CY 2016 by various groups of
hospitals, which CMS cannot forecast.
For hospital-based PHP APCs, the per diem rates calculated from the
equitable adjustment will be budget neutral within all of the OPPS.
Section 1833(t)(2)(E) of the Act states that the Secretary shall
establish, in a budget neutral manner, other adjustments as determined
to be necessary to ensure equitable payments. The authority granted to
the Secretary under this provision is broad. It would not be
appropriate or equitable to pay a lower payment rate for the PHP APC
for Level 2 services, under which 4 or more services are provided, than
for the PHP APC for Level 1 services, under which 3 PHP services are
provided. As a result, we included the equitably adjusted hospital-
based PHP APC Level 1 per diem cost of $191.91, and the equitably
adjusted hospital-based PHP APC Level 2 per diem cost of $222.54 in the
budget neutrality process. The CMHC PHP APC Level 1 geometric mean per
diem costs are $98.88, and the CMHC PHP APC Level 2 geometric mean per
diem costs are $149.64.
Overall, we estimate that the rates for CY 2016 will decrease
Medicare OPPS payments by an estimated 0.4 percent. Removing payments
to cancer and children's hospitals because their payments are held
harmless to the pre-OPPS ratio between payment and cost and removing
payments to CMHCs results in an estimated 0.4 percent decrease in
Medicare payments to all other hospitals. These estimated payments will
not significantly impact other providers.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 70 shows the total number of
facilities (3,953), including designated cancer and children's
hospitals and CMHCs, for which we were able to use CY 2014 hospital
outpatient and CMHC claims data to model CY 2015 and CY 2016 payments,
by classes of hospitals, for CMHCs and for dedicated cancer hospitals.
We excluded all hospitals and CMHCs for which we could not plausibly
estimate CY 2015 or CY 2016 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
final rule with comment period. At this time, we are unable to
calculate a disproportionate share hospital (DSH) variable for
hospitals that are not also paid under the IPPS, since DSH payments are
only made to hospitals paid under the IPPS. Hospitals for which we do
not have a DSH variable are grouped separately and generally include
freestanding psychiatric hospitals, rehabilitation hospitals, and long-
term care hospitals. We show the total number of OPPS hospitals
(3,830), excluding the hold-harmless cancer and children's hospitals
and CMHCs, on the second line of the table. We excluded cancer and
children's hospitals because section 1833(t)(7)(D) of the Act
permanently holds harmless cancer hospitals and children's hospitals to
their ``pre-BBA amount'' as specified under the terms of the statute,
and therefore, we removed them from our impact analyses. We show the
isolated impact on the 57 CMHCs at the bottom of the impact table and
discuss that impact separately below.
Column 2: APC Recalibration--All Changes
Column 2 shows the estimated effect of APC recalibration. Column 2
also reflects any changes in multiple procedure discount patterns or
conditional packaging that occur as a result of the changes in the
relative magnitude of payment weights. As a result of APC
recalibration, we estimate that urban hospitals will experience no

[[Page 70587]]

change, with the impact ranging from an increase of 0.3 percent to a
decrease of 0.6 percent, depending on the number of beds. Rural
hospitals will experience a 0.1 percent increase, with the impact
ranging from an increase of 0.5 percent to a decrease of 0.1 percent,
depending on the number of beds. Major teaching hospitals will
experience an increase of 0.4 percent overall.
Column 3: New Wage Indexes and the Effect of the Provider Adjustments
Column 3 demonstrates the combined budget neutral impact of the APC
recalibration; the updates for the wage indexes with the fiscal year
(FY) 2016 IPPS post-reclassification wage indexes; the cancer hospital
adjustment and the rural adjustment. We modeled the independent effect
of the budget neutrality adjustments and the OPD fee schedule increase
factor by using the relative payment weights and wage indexes for each
year, and using a CY 2015 conversion factor that included the OPD fee
schedule increase and a budget neutrality adjustment for differences in
wage indexes.
Column 3 reflects the independent effects of the updated wage
indexes, including the application of budget neutrality for the rural
floor policy on a nationwide basis. This column excludes the effects of
the frontier State wage index adjustment, which is not budget neutral
and is included in Column 5. We did not model a budget neutrality
adjustment for the rural adjustment for SCHs because we are finalizing
our proposal to continue the rural payment adjustment of 7.1 percent to
rural SCHs for CY 2016, as described in section II.E. of this final
rule with comment period.
We modeled the independent effect of updating the wage indexes by
varying only the wage indexes, holding APC relative payment weights,
service-mix, and the rural adjustment constant and using the CY 2016
scaled weights and a CY 2015 conversion factor that included a budget
neutrality adjustment for the effect of the changes to the wage indexes
between CY 2015 and CY 2016. The FY 2016 wage policy results in modest
redistributions.
We are finalizing the CY 2016 cancer hospital payment adjustment
methodology as proposed. Using updated data, the payment-to-cost ratio
target is 0.92. This results in a 0.1 decrease to the ``all hospitals''
category, because IPPS-exempt cancer hospitals are not included in the
all hospitals category.
Column 4: All Budget Neutrality Changes Combined With the Market Basket
Update and the Adjustment To Address Excess Packaged Payment for
Laboratory Tests
Column 4 demonstrates the combined impact of all of the changes
previously described, the update to the conversion factor of 1.7
percent, and the 2.0 percent reduction due to the adjustment to the
conversion factor to address the inflation in OPPS payment rates
resulting from excess packaged payment under the OPPS for laboratory
tests. Overall, these changes will decrease payments to urban hospitals
by 0.4 percent and to rural hospitals by 0.6 percent. Most classes of
hospitals will receive a decrease in line with the 0.4 percent overall
decrease after the update and the adjustment to the conversion factor
to address excess packaged payment for laboratory tests are applied to
the budget neutrality adjustments.
Column 5: All Changes for CY 2016
Column 5 depicts the full impact of the CY 2016 policies on each
hospital group by including the effect of all of the changes for CY
2016 and comparing them to all estimated payments in CY 2015. Column 5
shows the combined budget neutral effects of Column 2 and 3; the OPD
fee schedule increase; the impact of the frontier State wage index
adjustment; the impact of estimated OPPS outlier payments as discussed
in section II.G. of this final rule with comment period; the change in
the Hospital OQR Program payment reduction for the small number of
hospitals in our impact model that failed to meet the reporting
requirements (discussed in section XIII. of this final rule with
comment period); and the difference in total OPPS payments dedicated to
transitional pass-through payments.
Of those hospitals that failed to meet the Hospital OQR Program
reporting requirements for the full CY 2015 update (and assumed, for
modeling purposes, to be the same number for CY 2016), we included 59
hospitals in our model because they had both CY 2014 claims data and
recent cost report data. We estimate that the cumulative effect of all
of the changes for CY 2016 will decrease payments to all facilities by
0.4 percent for CY 2016. We modeled the independent effect of all of
the changes in Column 5 using the final relative payment weights for CY
2015 and the relative payment weights for CY 2016. We used the final
conversion factor for CY 2015 of $74.173 and the CY 2016 conversion
factor of $73.725 discussed in section II.B. of this final rule with
comment period.
Column 5 contains simulated outlier payments for each year. We used
the 1-year charge inflation factor used in the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49783 through 49784) of 3.7 percent (1.037616) to
increase individual costs on the CY 2014 claims, and we used the most
recent overall CCR in the July 2015 Outpatient Provider-Specific File
(OPSF) to estimate outlier payments for CY 2015. Using the CY 2014
claims and a 3.7 percent charge inflation factor, we currently estimate
that outlier payments for CY 2015, using a multiple threshold of 1.75
and a fixed-dollar threshold of $2,775 will be approximately 0.9
percent of total payments. The estimated current outlier payments of
0.9 percent are incorporated in the comparison in Column 5. We used the
same set of claims and a charge inflation factor of 7.7 percent
(1.076647) and the CCRs in the July 2015 OPSF, with an adjustment of
0.9701, to reflect relative changes in cost and charge inflation
between CY 2014 and CY 2016, to model the CY 2016 outliers at 1.0
percent of estimated total payments using a multiple threshold of 1.75
and a fixed-dollar threshold of $3,250. The charge inflation and CCR
inflation factors are discussed in detail in the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49783 through 49784).
We estimate that the anticipated change in payment between CY 2015
and CY 2016 for the hospitals failing to meet the Hospital OQR Program
requirements will be negligible. Overall, we estimate that facilities
will experience a decrease of 0.4 percent under this final rule with
comment period in CY 2016 relative to total spending in CY 2015. This
projected decrease (shown in Column 5) of Table 70 reflects the 1.7
percent OPD fee schedule increase factor, less 2.0 percent for the
adjustment to the conversion factor to address the inflation in OPPS
payment rates resulting from excess packaged payment under the OPPS for
laboratory tests, less 0.13 percent for the change in the pass-through
estimate between CY 2015 and CY 2016, plus 0.1 percent for the
difference in estimated outlier payments between CY 2015 (0.9 percent)
and CY 2016 (1.0 percent). We estimate that the combined effect of all
of the changes for CY 2016 will decrease payments to urban hospitals by
0.4 percent. Overall, we estimate that rural hospitals will experience
a 0.6 percent decrease as a result of the combined effects of all of
the changes for CY 2016, with the greater decrease relative to urban

[[Page 70588]]

hospitals primarily a result of wage index changes in CY 2016.
Among hospitals by teaching status, we estimate that the impacts
resulting from the combined effects of all changes will result in an
increase of 0.1 percent for major teaching hospitals and a decrease of
0.7 percent for nonteaching hospitals. Minor teaching hospitals will
experience an estimated decrease of 0.5 percent.
In our analysis, we also have categorized hospitals by type of
ownership. Based on this analysis, we estimate that voluntary hospitals
will experience a decrease of 0.3 percent, proprietary hospitals will
experience a decrease of 1.1 percent, and governmental hospitals will
experience a decrease of 0.3 percent.

Table 70--Estimated Impact of the CY 2016 Changes for the Hospital Outpatient Prospective Payment System
--------------------------------------------------------------------------------------------------------------------------------------------------------
All budget
neutral changes
(combined cols.
2, 3) with market
Number of APC New wage index basket update and
hospitals recalibration and provider adjustment to All changes
(all changes) adjustments address excess
packaged payment
for laboratory
tests
(1) (2) (3) (4) (5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *................................................... 3,953 0.0 0.0 -0.3 -0.4
ALL HOSPITALS (excludes hospitals permanently held harmless and 3,830 0.0 -0.1 -0.4 -0.4
CMHCs)............................................................
URBAN HOSPITALS.................................................... 2,980 0.0 0.0 -0.4 -0.4
LARGE URBAN (GT 1 MILL)........................................ 1,641 0.0 0.0 -0.3 -0.3
OTHER URBAN (LE 1 MILL.)....................................... 1,339 -0.1 0.0 -0.5 -0.5
RURAL HOSPITALS.................................................... 850 0.1 -0.4 -0.6 -0.6
SOLE COMMUNITY................................................. 380 0.1 -0.4 -0.6 -0.6
OTHER RURAL.................................................... 470 0.0 -0.4 -0.7 -0.7
BEDS (URBAN):
0-99 BEDS...................................................... 1,054 -0.6 -0.4 -1.2 -1.3
100-199 BEDS................................................... 847 -0.3 0.0 -0.6 -0.6
200-299 BEDS................................................... 458 -0.2 0.1 -0.4 -0.4
300-499 BEDS................................................... 406 0.0 0.0 -0.3 -0.3
500 + BEDS..................................................... 215 0.3 0.0 -0.1 -0.1
BEDS (RURAL):
0-49 BEDS...................................................... 338 0.5 -0.5 -0.3 -0.2
50-100 BEDS.................................................... 311 0.0 -0.3 -0.6 -0.6
101-149 BEDS................................................... 113 -0.1 -0.3 -0.8 -0.7
150-199 BEDS................................................... 48 0.1 -0.4 -0.6 -0.7
200 + BEDS..................................................... 40 0.1 -0.6 -0.9 -1.0
REGION (URBAN):
NEW ENGLAND.................................................... 150 0.6 -0.7 -0.4 -0.4
MIDDLE ATLANTIC................................................ 349 -0.2 0.4 -0.1 0.0
SOUTH ATLANTIC................................................. 472 -0.1 0.0 -0.5 -0.6
EAST NORTH CENT................................................ 481 -0.1 0.1 -0.4 -0.4
EAST SOUTH CENT................................................ 185 -0.1 -0.5 -0.9 -1.0
WEST NORTH CENT................................................ 185 0.1 -0.5 -0.8 -0.7
WEST SOUTH CENT................................................ 530 0.0 -0.4 -0.7 -0.8
MOUNTAIN....................................................... 200 0.0 0.0 -0.4 -0.5
PACIFIC........................................................ 379 -0.2 0.7 0.2 0.3
PUERTO RICO.................................................... 49 -2.5 -1.3 -4.0 -4.1
REGION (RURAL):
NEW ENGLAND.................................................... 22 0.9 -0.6 -0.1 0.1
MIDDLE ATLANTIC................................................ 56 0.3 -1.0 -1.1 -0.7
SOUTH ATLANTIC................................................. 125 -0.3 0.3 -0.3 -0.4
EAST NORTH CENT................................................ 121 -0.2 -0.2 -0.7 -0.7
EAST SOUTH CENT................................................ 163 0.1 -0.6 -0.9 -1.0
WEST NORTH CENT................................................ 103 0.3 -0.7 -0.7 -0.5
WEST SOUTH CENT................................................ 176 0.1 -1.3 -1.6 -1.7
MOUNTAIN....................................................... 60 0.3 0.0 0.0 -0.3
PACIFIC........................................................ 24 -0.1 1.0 0.5 0.5
TEACHING STATUS:
NON-TEACHING................................................... 2781 -0.3 -0.1 -0.7 -0.7
MINOR.......................................................... 718 -0.1 0.0 -0.4 -0.5
MAJOR.......................................................... 331 0.4 0.0 0.1 0.1
DSH PATIENT PERCENT:
0.............................................................. 20 -1.3 0.1 -1.5 -1.6
GT 0-0.10...................................................... 341 -0.6 0.0 -1.0 -1.0
0.10-0.16...................................................... 299 -0.2 -0.1 -0.6 -0.6
0.16-0.23...................................................... 661 -0.3 -0.1 -0.7 -0.7
0.23-0.35...................................................... 1120 0.0 -0.1 -0.4 -0.5
GE 0.35........................................................ 806 0.2 0.1 0.0 0.0

[[Page 70589]]

DSH NOT AVAILABLE **........................................... 583 4.5 -0.2 3.9 3.6
URBAN TEACHING/DSH:
TEACHING & DSH................................................. 954 0.1 0.0 -0.2 -0.2
NO TEACHING/DSH................................................ 1453 -0.4 -0.1 -0.8 -0.8
NO TEACHING/NO DSH............................................. 19 -1.3 0.1 -1.5 -1.6
DSH NOT AVAILABLE **........................................... 554 4.3 -0.1 3.9 3.5
TYPE OF OWNERSHIP:
VOLUNTARY...................................................... 2010 0.0 0.0 -0.3 -0.3
PROPRIETARY.................................................... 1304 -0.3 -0.3 -1.0 -1.1
GOVERNMENT..................................................... 516 0.2 -0.1 -0.3 -0.3
CMHCs.............................................................. 57 24.5 -0.6 23.4 23.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) includes all CY 2016 OPPS policies and compares those to the CY 2015 OPPS.
Column (3) shows the budget neutral impact of updating the wage index by applying the FY 2016 hospital inpatient wage index, including all hold harmless
policies and transitional wages. The final rural adjustment continues our current policy of 7.1 percent so the budget neutrality factor is 1. The
budget neutrality adjustment for the cancer hospital adjustment is 0.9994 because the payment-to-cost ratio is 0.92 for the CY 2016 OPPS.
Column (4) shows the impact of all budget neutrality adjustments and the addition of the 1.7 percent OPD fee schedule update factor (2.4 percent reduced
by 0.5 percentage points for the productivity adjustment and further reduced by 0.2 percentage point in order to satisfy statutory requirements set
forth in the Affordable Care Act). Column 4 also includes the -2.0 percent adjustment to the conversion factor to address the inflation in OPPS
payment rates resulting from excess packaged payment under the OPPS for laboratory tests.
Column (5) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier
payments, and applying the frontier State wage adjustment.
* These 3,953 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
hospitals.

(3) Estimated Effects of OPPS Changes on CMHCs
The last line of Table 70 demonstrates the isolated impact on
CMHCs, which furnish only partial hospitalization services under the
OPPS. In CY 2015, CMHCs are paid under two APCs for these services:
existing APC 0172 (Level 1 Partial Hospitalization (3 services) for
CMHCs) (renumbered APC 5851 for CY 2016) and existing APC 0173 (Level 2
Partial Hospitalization (4 or more services) for CMHCs) (renumbered APC
5852 for CY 2016). Hospitals are paid for partial hospitalization
services under existing APC 0175 (Level 1 Partial Hospitalization (3
services) for hospital-based PHPs) (renumbered APC 5861 for CY 2016)
and existing APC 0176 (Level 2 Partial Hospitalization (4 or more
services) for hospital-based PHPs) (renumbered APC 5862 for CY 2016).
We use our standard ratesetting methodology to derive the payment rates
for each APC based on the cost data derived from claims and cost data
for the provider-type-specific APC. For CY 2016, we are finalizing our
proposal to continue the provider-type-specific APC structure that we
adopted in CY 2011. We modeled the impact of this APC policy assuming
that CMHCs will continue to provide the same number of days of PHP
care, with each day having either 3 services or 4 or more services, as
seen in the CY 2014 claims data used for this final rule with comment
period. We excluded days with 1 or 2 services because our policy only
pays a per diem rate for partial hospitalization when 3 or more
qualifying services are provided to the beneficiary. We estimate that
CMHCs will experience an overall 23.1 percent increase in payments from
CY 2015 (shown in Column 5). We note that this includes the trimming
methodology described in section VIII.B. of this final rule with
comment period.
Column 3 shows that the estimated impact of adopting the FY 2016
wage index values will result in a small decrease of 0.6 percent to
CMHCs. Column 4 shows that combining this OPD fee schedule increase
factor, adjustment to the conversion to address the inflation in OPPS
payment rates resulting from excess packaged payment under the OPPS for
laboratory tests, along with changes in APC policy for CY 2016 and the
FY 2016 wage index updates, will result in an estimated increase of
23.4 percent. Column 5 shows that adding the changes in outlier and
pass-though payments will result in a total 23.1 percent increase in
payment for CMHCs. This reflects all changes to CMHCs for CY 2016.
(4) Estimated Effect of OPPS Changes on Beneficiaries
For services for which the beneficiary pays a copayment of 20
percent of the payment rate, the beneficiary share of payment will
increase for services for which the OPPS payments will rise and will
decrease for services for which the OPPS payments will fall. For
further discussion on the calculation of the national unadjusted
copayments and minimum unadjusted copayments, we refer readers to
section II.I. of this final rule with comment period. In all cases,
section 1833(t)(8)(C)(i) of the Act limits beneficiary liability for
copayment for a procedure performed in a year to the hospital inpatient
deductible for the applicable year.
We estimate that the aggregate beneficiary coinsurance percentage
will

[[Page 70590]]

be 19.3 percent for all services paid under the OPPS in CY 2016. The
estimated aggregate beneficiary coinsurance reflects general system
adjustments, including the recalibration of the APC relative payment
weights, APC reorganization, change in the portion of OPPS payments
dedicated to pass-through payments, and the CY 2016 comprehensive APC
payment policy discussed in section II.A.2.e. of this final rule with
comment period.
(5) Estimated Effects of OPPS Changes on Other Providers
The relative payment weights and payment amounts established under
the OPPS affect the payments made to ASCs as discussed in section XII.
of this final rule with comment period. No types of providers or
suppliers other than hospitals, CMHCs, and ASCs will be affected by the
changes in this final rule with comment period.
(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid
Programs
The effect on the Medicare program is expected to be a decrease of
$133 million in program payments for OPPS services furnished in CY
2016. The effect on the Medicaid program is expected to be limited to
copayments that Medicaid may make on behalf of Medicaid recipients who
are also Medicare beneficiaries. We refer readers to our discussion of
the impact on beneficiaries in section XXI.A. of this final rule with
comment period.
(7) Alternative OPPS Policies Considered
Alternatives to the OPPS changes we are finalizing and the reasons
for our selected alternatives are discussed throughout this final rule
with comment period. In this section, we discuss some of the
significant issues and the alternatives considered.
Alternatives Considered for the Methodology for Assigning Skin
Substitutes to High or Low Cost Groups
We refer readers to section V.B.2.c. of this final rule with
comment period for a discussion of our proposal to determine the high/
low cost status for each skin substitute product based on either a
product's mean unit cost (MUC) exceeding the MUC threshold or the
product's per day cost (PDC) exceeding the PDC threshold. As discussed
in that section, we also considered, but did not propose, to determine
high/low cost status for each skin substitute using just MUC or just
PDC instead of both.
Alternatives Considered for Application of the Device Offset
for Discontinued Procedures for Device Intensive Procedures
We refer readers to section IV.B.4. of this final rule with comment
period for a discussion of our proposal to deduct the device offset
amount for procedures in device-intensive APCs that are discontinued.
As discussed in that section, we considered finalizing the policy as
proposed, but instead are finalizing to only apply the policy to device
intensive procedures with modifier 73 (Discontinued procedure prior to
anesthesia administration).
b. Estimated Effects of CY 2016 ASC Payment System Policies
Most ASC payment rates are calculated by multiplying the ASC
conversion factor by the ASC relative payment weight. As discussed
fully in section XII. of this final rule with comment period, we are
setting the CY 2016 ASC relative payment weights by scaling the CY 2016
OPPS relative payment weights by the ASC scaler of 0.9332. The
estimated effects of the updated relative payment weights on payment
rates are varied and are reflected in the estimated payments displayed
in Tables 71 and 72 below.
Beginning in CY 2011, section 3401 of the Affordable Care Act
requires that the annual update to the ASC payment system (which
currently is the CPI-U) after application of any quality reporting
reduction be reduced by a productivity adjustment. The Affordable Care
Act defines the productivity adjustment to be equal to the 10-year
moving average of changes in annual economy-wide private nonfarm
business multifactor productivity (MFP) (as projected by the Secretary
for the 10-year period ending with the applicable fiscal year, year,
cost reporting period, or other annual period). For ASCs that fail to
meet their quality reporting requirements, the CY 2016 payment
determinations will be based on the application of a 2.0 percentage
points reduction to the annual update factor, which currently is the
CPI-U. We calculated the CY 2016 ASC conversion factor by adjusting the
CY 2015 ASC conversion factor by 0.9997 to account for changes in the
pre-floor and pre-reclassified hospital wage indexes between CY 2015
and CY 2016 and by applying the CY 2016 MFP-adjusted CPI-U update
factor of 0.3 percent (projected CPI-U update of 0.8 percent minus a
projected productivity adjustment of 0.5 percentage point). The CY 2016
ASC conversion factor is $44.177.
(1) Limitations of Our Analysis
Presented here are the projected effects of the changes for CY 2016
on Medicare payment to ASCs. A key limitation of our analysis is our
inability to predict changes in ASC service-mix between CY 2014 and CY
2016 with precision. We believe that the net effect on Medicare
expenditures resulting from the CY 2016 changes will be small in the
aggregate for all ASCs. However, surgical specialty groups may be
affected differently as ASCs continue to provide services to
beneficiaries under the ASC payment system. We are unable to accurately
project such changes at a disaggregated level. Clearly, individual ASCs
will experience changes in payment that differ from the aggregated
estimated impacts presented below.
(2) Estimated Effects of ASC Payment System Policies on ASCs
Some ASCs are multispecialty facilities that perform a wide range
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 of the update to
the CY 2016 payments on an individual ASC will 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 CY 2016 updates to the ASC payment system on Medicare
payments to ASCs, assuming the same mix of services as reflected in our
CY 2014 claims data. Table 71 depicts the estimated aggregate percent
change in payment by surgical specialty or ancillary items and services
group by comparing estimated CY 2015 payments to estimated CY 2016
payments, and Table 72 shows a comparison of estimated CY 2015 payments
to estimated CY 2016 payments for procedures that we estimate will
receive the most Medicare payment in CY 2015.
Table 71 shows the estimated effects on aggregate Medicare payments
under the ASC payment system by surgical specialty or ancillary items
and services group. We have aggregated the surgical HCPCS codes by
specialty group, grouped all HCPCS codes for covered ancillary items
and services into a single group, and then estimated the effect on
aggregated payment for surgical

[[Page 70591]]

specialty and ancillary items and services groups. The groups are
sorted for display in descending order by estimated Medicare program
payment to ASCs. The following is an explanation of the information
presented in Table 71.
Column 1--Surgical Specialty or Ancillary Items and
Services Group indicates the surgical specialty into which ASC
procedures are grouped and the ancillary items and services group which
includes all HCPCS codes for covered ancillary items and services. To
group surgical procedures by surgical specialty, we used the CPT code
range definitions and Level II HCPCS codes and Category III CPT codes
as appropriate, to account for all surgical procedures to which the
Medicare program payments are attributed.
Column 2--Estimated CY 2015 ASC Payments were calculated
using CY 2014 ASC utilization (the most recent full year of ASC
utilization) and CY 2015 ASC payment rates. The surgical specialty and
ancillary items and services groups are displayed in descending order
based on estimated CY 2015 ASC payments.
Column 3--Estimated CY 2016 Percent Change is the
aggregate percentage increase or decrease in Medicare program payment
to ASCs for each surgical specialty or ancillary items and services
group that are attributable to updates to ASC payment rates for CY 2016
compared to CY 2015.
As seen in Table 71, for the six specialty groups that account for
the most ASC utilization and spending, we estimate that the update to
ASC rates for CY 2016 will result in a 1-percent increase in aggregate
payment amounts for eye and ocular adnexa procedures, a 2-percent
increase in aggregate payment amounts for digestive system procedures,
a 1-percent decrease in aggregate payment amounts for nervous system
procedures, a 4-percent decrease in aggregate payment amounts for
musculoskeletal system procedures, a 1-percent increase in aggregate
payment amounts for genitourinary system procedures, and a 2-percent
increase in aggregate payment amounts for integumentary system
procedures.
Also displayed in Table 71 is a separate estimate of Medicare ASC
payments for the group of separately payable covered ancillary items
and services. The payment estimates for the covered surgical procedures
include the costs of packaged ancillary items and services. We estimate
that aggregate payments for these items and services will remain at $21
million for CY 2016.

Table 71--Estimated Impact of the CY 2016 Update to the ASC Payment
System on Aggregate CY 2016 Medicare Program Payments by Surgical
Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
Estimated CY
2015 ASC Estimated CY
Surgical specialty group payments (in 2016 percent
millions) change
(1) (2) (3)
------------------------------------------------------------------------
Total................................... $3,893 0
Eye and ocular adnexa................... 1,534 1
Digestive system........................ 807 2
Nervous system.......................... 617 -1
Musculoskeletal system.................. 485 -4
Genitourinary system.................... 176 1
Integumentary system.................... 135 2
Respiratory system...................... 55 3
Cardiovascular system................... 42 0
Ancillary items and services............ 21 2
Auditory system......................... 14 5
Hematologic & lymphatic systems......... 6 -5
------------------------------------------------------------------------

Table 72 below shows the estimated impact of the updates to the
revised ASC payment system on aggregate ASC payments for selected
surgical procedures during CY 2016. The table displays 30 of the
procedures receiving the greatest estimated CY 2015 aggregate Medicare
payments to ASCs. The HCPCS codes are sorted in descending order by
estimated CY 2015 program payment.
Column 1--CPT/HCPCS code.
Column 2--Short Descriptor of the HCPCS code.
Column 3--Estimated CY 2015 ASC Payments were calculated
using CY 2014 ASC utilization (the most recent full year of ASC
utilization) and the CY 2015 ASC payment rates. The estimated CY 2015
payments are expressed in millions of dollars.
Column 4--Estimated CY 2016 Percent Change reflects the
percent differences between the estimated ASC payment for CY 2015 and
the estimated payment for CY 2016 based on the update.

Table 72--Estimated Impact of the CY 2016 Update to the ASC Payment System on Aggregate Payments for Selected
Procedures
----------------------------------------------------------------------------------------------------------------
Estimated CY
2015 ASC Estimated CY
CPT/HCPCS code Short descriptor payment (in 2016 percent
millions) change
(1) (2).................................... .............. (4)
----------------------------------------------------------------------------------------------------------------
66984.................................. Cataract surg w/iol 1 stage............ $1,092 2
43239.................................. Egd biopsy single/multiple............. 177 2
45380.................................. Colonoscopy and biopsy................. 181 -3
45385.................................. Colonoscopy w/lesion removal........... 117 -3

[[Page 70592]]

66982.................................. Cataract surgery complex............... 95 2
64483.................................. Inj foramen epidural l/s............... 94 -11
62311.................................. Inject spine lumbar/sacral............. 75 -11
45378.................................. Diagnostic colonoscopy................. 69 -4
66821.................................. After cataract laser surgery........... 65 1
64493.................................. Inj paravert f jnt l/s 1 lev........... 53 25
G0105.................................. Colorectal scrn; hi risk ind........... 46 17
64635.................................. Destroy lumb/sac facet jnt............. 50 -3
63650.................................. Implant neuroelectrodes................ 52 4
G0121.................................. Colon ca scrn not hi rsk ind........... 43 17
64590.................................. Insrt/redo pn/gastr stimul............. 44 -7
15823.................................. Revision of upper eyelid............... 33 2
63685.................................. Insrt/redo spine n generator........... 54 2
29827.................................. Arthroscop rotator cuff repr........... 50 5
64721.................................. Carpal tunnel surgery.................. 30 3
29881.................................. Knee arthroscopy/surgery............... 28 14
29824.................................. Shoulder arthroscopy/surgery........... 21 -44
29880.................................. Knee arthroscopy/surgery............... 24 14
43235.................................. Egd diagnostic brush wash.............. 24 2
62310.................................. Inject spine cerv/thoracic............. 23 -11
29823.................................. Shoulder arthroscopy/surgery........... 13 -44
52000.................................. Cystoscopy............................. 22 -3
G0260.................................. Inj for sacroiliac jt anesth........... 22 -11
45384.................................. Colonoscopy w/lesion removal........... 20 -3
67042.................................. Vit for macular hole................... 22 5
26055.................................. Incise finger tendon sheath............ 21 21
----------------------------------------------------------------------------------------------------------------

(3) Estimated Effects of ASC Payment System Policies on Beneficiaries
We estimate that the CY 2016 update to the ASC payment system will
be generally positive for beneficiaries with respect to the new
procedures that we are adding to the ASC list of covered surgical
procedures and for those that we are designating as office-based for CY
2016. First, other than certain preventive services where coinsurance
and the Part B deductible is waived to comply with section 1833(a)(1)
and (b) of the Act, the ASC coinsurance rate for all procedures is 20
percent. This contrasts with procedures performed in HOPDs under the
OPPS, where the beneficiary is responsible for copayments that range
from 20 percent to 40 percent of the procedure payment (other than for
certain preventive services). Second, in almost all cases, the ASC
payment rates under the ASC payment system are lower than payment rates
for the same procedures under the OPPS. Therefore, the beneficiary
coinsurance amount under the ASC payment system will almost always be
less than the OPPS copayment amount for the same services. (The only
exceptions would be if the ASC coinsurance amount exceeds the inpatient
deductible. The statute requires that copayment amounts under the OPPS
not exceed the inpatient deductible.) 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 under the MPFS
compared to the ASC. However, for those additional procedures that we
are designating as office-based in CY 2016, the beneficiary coinsurance
amount under the ASC payment system generally will be no greater than
the beneficiary coinsurance under the MPFS because the coinsurance
under both payment systems generally is 20 percent (except for certain
preventive services where the coinsurance is waived under both payment
systems).
(4) Alternative ASC Payment Policies Considered
Alternatives Considered for Application of the Device
Offset for Discontinued Procedures for Device Intensive Procedures
We refer readers to section XII.C.1.d. of this final rule with
comment period for a discussion of our proposal to deduct the device
offset amount for device intensive procedures that are discontinued
before applying any standard downward payment adjustment. We proposed
that this would apply to device-intensive procedures in the ASC payment
system beginning in CY 2016 with modifier ``52'' (reduced services) and
modifier ``73'' (discontinued outpatient procedure prior to anesthesia
administration). As discussed in that section, we considered finalizing
the policy as proposed, but, based on stakeholder comments, are
finalizing the policy to only apply to device-intensive procedures with
modifier ``73.''
c. Accounting Statements and Tables
As required by OMB Circular A-4 (available on the Office of
Management and Budget Web site at: https://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf, we have
prepared two accounting statements to illustrate the impacts of this
final rule with comment period. The first accounting statement, Table
73 below, illustrates the classification of expenditures for the CY
2016 estimated hospital OPPS incurred benefit impacts associated with
the CY 2016 OPD fee schedule increase, based on the Midsession Review
of the President's FY 2016 Budget, and the adjustment to the conversion
factor to address the

[[Page 70593]]

inflation in OPPS payment rates resulting from excess packaged payment
under the OPPS for laboratory tests. The second accounting statement,
Table 74 below, illustrates the classification of expenditures
associated with the 0.3 percent CY 2016 update to the ASC payment
system, based on the provisions of this final rule with comment period
and the baseline spending estimates for ASCs in the Midsession Review
of the President's FY 2016 Budget. Lastly, the tables classify most
estimated impacts as transfers.

Table 73--Accounting Statement: CY 2016 Estimated Hospital OPPS
Transfers From CY 2015 to CY 2016 Associated With the CY 2016 Hospital
Outpatient OPD Fee Schedule Increase and the Adjustment To Address
Excess Packaged Payment for Laboratory Tests
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... -$133 million
From Whom to Whom...................... Federal Government to
outpatient hospitals and other
providers who receive payment
under the hospital OPPS.
--------------------------------
Total.............................. -$133 million.
------------------------------------------------------------------------

Table 74--Accounting Statement: Classification of Estimated Transfers
From CY 2015 to CY 2016 as a Result of the CY 2016 Update to the ASC
Payment System
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... $10 million.
From Whom to Whom...................... Federal Government to Medicare
Providers and Suppliers.
------------------------------------------------------------------------
Total.............................. $10 million.
------------------------------------------------------------------------

d. Effects of Requirements for the Hospital OQR Program
We refer readers to CY 2015 OPPS/ASC final rule with comment period
(79 FR 67018) for the estimated effects of previously finalized OPPS
changes on hospitals for the CY 2017 payment determination. In section
XIII. of this final rule with comment period, we are finalizing the
adoption of changes to policies affecting the Hospital OQR Program. Of
the 3,292 hospitals that met eligibility requirements for the CY 2015
payment determination, we determined that 113 hospitals did not meet
the requirements to receive the full OPD fee schedule increase factor
(79 FR 67018). Most of these hospitals (71 of the 113) chose not to
participate in the Hospital OQR Program for the CY 2015 payment
determination. We estimate that approximately 115 hospitals will not
receive the full OPD fee schedule increase factor for the CY 2018
payment determination and subsequent years.
In section XIII. of this final rule with comment period, we are
finalizing the adoption of our proposals to make several changes to the
Hospital OQR Program for the CY 2017 payment determination and
subsequent years and the CY 2018 payment determination and subsequent
years. For the CY 2017 payment determination and subsequent years, we
are finalizing our proposals to: (1) Remove OP-15: Use of Brain
Computed Tomography (CT) in the Emergency Department for Atraumatic
Headache measure, effective January 1, 2016 (no data for this measure
will be used for any payment determination); (2) change the deadline
for withdrawing from the program to August 31 and revise 42 CFR
419.46(b) to reflect this change; (3) shift the quarters on which we
base payment determinations; (4) change the data submission timeframe
for measures submitted via the CMS Web-based tool (QualityNet Web site)
to January 1 through May 15; (5) fix a typographical error to correct
the name of our extension and exception policy to extension and
exemption policy; (6) change the deadline for submitting a
reconsideration request to the first business day on or after March 17
of the affected payment year and make a conforming change to 42 CFR
419.46(f)(1) to reflect this change; and (7) amend 42 CFR 419.46(f)(1)
and 42 CFR 419.46(e)(2) to replace the term ``fiscal year'' with the
term ``calendar year.'' While there is burden associated with filing a
reconsideration request, section 3518(c)(1)(B) of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3518(c)(1)(B)) excludes collection
activities during the conduct of administrative actions such as
reconsiderations. We do not believe that any of the other changes we
are finalizing will increase burden, as further discussed below.
In addition, we are finalizing the adoption of our proposals to
make conforming changes to our validation scoring process to reflect
changes in the APU determination timeframes. For the CY 2017 payment
determination, we are finalizing our proposal that validation be based
on three quarters of data (validation quarter 2, validation quarter 3,
and validation quarter 4 of 2015), as opposed to four quarters as
previously required. For the CY 2017 transition year, we estimate that
the burden associated with validation reporting will be reduced by 25
percent because hospitals will submit validation data for three
quarters instead of four quarters. For prior payment determinations, we
sampled 500 hospitals for validation and estimated that it would take
each hospital 12 hours to comply with the data submission requirements
for four quarters. We estimate that data submission for three quarters
will reduce the number of hours required by 25 percent (from 12 hours
to 9 hours per hospital). Consistent with prior years (79 FR 67013), we
estimate that a hospital pays an individual approximately $30 per hour
to abstract and submit these data. Therefore, we estimate a total
burden of approximately 4,500 hours (500 hospitals x 9 hours/hospital)
and a total financial impact of $135,000 ($30/hour x 4,500 hours) for
the CY 2017 payment determination. This is a reduction of 1,500 hours
and $45,000 across all hospitals from last year's estimate attributable
to changes in our validation scoring process.
For the CY 2018 payment determination and subsequent years, we are
finalizing two changes to the program. First, we are finalizing the
adoption of one new measure: OP-33: External Beam Radiotherapy (EBRT)
for

[[Page 70594]]

Bone Metastases (NQF #1822). As we further explain in section
XIII.D.4.b. of this final rule with comment period, we are finalizing
only one mode of data submission for this measure: data for OP-33 may
only be submitted at an aggregate-level via a CMS Web based tool
(QualityNet Web site). As discussed in section XIX.B.1.b. of this final
rule with comment period, we believe that this measure will result in a
total increase in burden across all participating hospitals of 8,312.7
hours or $249,381 per year. Second, for the CY 2018 payment
determination and subsequent years, we are finalizing that validation
again be based on four quarters of data. However, those quarters are
validation quarter 1, validation quarter 2, validation quarter 3, and
validation quarter 4. For payment determinations prior to CY 2017, we
sampled 500 hospitals for validation and estimated that it would take
each hospital 12 hours to comply with the data submission requirements
for four quarters. Therefore, we estimate a total burden of
approximately 6,000 hours (500 hospitals x 12 hours/hospital) and a
total financial impact of $180,000 ($30/hour x 6,000 hours) in burden
associated with validation for the CY 2018 payment determination and
subsequent years. This increase in burden associated with the
validation process is 1,500 hours and $45,000 across all hospitals from
the CY 2017 estimate because we will be sampling four quarters, as we
had in prior years, instead of three quarters.
For the CY 2019 payment determination and subsequent years, we are
not making any changes to the program. We are not finalizing the
proposed adoption of OP-34: Emergency Department Transfer Communication
(EDTC) (NQF #0291). Thus, because we have not adopted any new measures
or policy changes for the CY 2019 payment determination and subsequent
years, we expect the burden to be unchanged for the CY 2019 payment
determination as compared to the CY 2018 payment determination and
subsequent years as discussed above.
We refer readers to the information collection requirements in
section XIX.B.1. of this final rule with comment period for a detailed
discussion of the financial and hourly burden of the additional
requirements for submitting data to the Hospital OQR Program.
e. Effects of Requirements for the ASCQR Program
As discussed in section XIV. of this final rule with comment
period, we are finalizing our proposals to adopt policies affecting the
ASCQR Program. For the CY 2015 payment determination, of the 5,260 ASCs
that met eligibility requirements for the ASCQR Program, 116 ASCs did
not meet the requirements to receive the full annual payment update.
We are not adding any quality measures to the ASCQR measure set for
the CY 2018 payment determination. We do not believe that the other
measures we previously adopted will cause any additional ASCs to fail
to meet the ASCQR Program requirements. (We refer readers to the CY
2015 OPPS/ASC final rule with comment period (79 FR 66978 through
66979) for a list of these measures.) In addition, we do not believe
that any of the other proposals we are finalizing in this final rule
with comment period will increase the number of ASCs that do not
receive a full annual payment update for the CY 2018 payment
determination. We expect a reduction in the number of ASCs that do not
receive a full annual payment update for the CY 2018 payment
determination due to our finalizing our proposal that IHS hospital
outpatient departments billing as ASCs will no longer be considered
ASCs for the purposes of the ASCQR Program. Thus, because CY 2016 and
CY 2017 payment determination information is not yet available, using
the CY 2015 payment determination numbers as a baseline, we estimate
that approximately 115 ASCs will not receive the full annual payment
update in CY 2018 due to failure to meet the ASCQR Program
requirements.
Based on the previously finalized policies for the ASCQR program
and the proposals we are finalizing in this final rule with comment
period, we estimate a total burden of approximately 4.34 hours per ASC
for facilities not submitting data for ASC-11 ([1,757 hours for ASC-6
and ASC-7 + 18,005 hours for ASC-8 + 3,067 hours for ASC-9 and ASC-10]/
5,260 ASCs = 4.34 hours per ASC for all required measures) and
approximately 4.92 hours for facilities voluntarily reporting data for
ASC-11 \65\ (4.34 hours for reporting all required measures + [613
hours for ASC-11/1,052 ASCs] = 4.92 hours), or approximately 23,442
hours (1,757 hours for ASC-6 and ASC-7 + 18,005 hours for ASC-8 + 3,067
hours for ASC-9 and ASC-10 + 613 hours for ASC-11 = 23,442 hours)
across all ASCs associated with participating in the ASCQR Program for
the CY 2018 payment determination. We further estimate a resulting
total financial burden of $130 per ASC for facilities not submitting
data for ASC-11 ([$52,710 for ASC-6 and ASC-7 + $540,150 for ASC-8 +
$92,010 for ASC-9 and ASC-10]/5,260 ASCs = $130 per ASC for all
required measures) and approximately $148 per ASC for facilities
voluntarily reporting data under ASC-11 ($130 for all required measures
+ [$18,390/1,052 ASCs] = $148), or $703,260 ($52,710 for ASC-6 and ASC-
7 + $540,150 for ASC-8 + $92,010 for ASC-9 and ASC-10 + $18,390 for
ASC-11 = $703,260) across all ASCs.
---------------------------------------------------------------------------

\65\ As noted in the CY 2015 OPPS/ASC final rule with comment
period, we anticipate that approximately 20 percent of ASCs, or
1,052 facilities, would elect to report ASC-11 on a voluntary basis
(79 FR 67016).
---------------------------------------------------------------------------

We refer readers to the information collection requirements in
section XIX.B.2. of this final rule with comment period for a detailed
discussion of the financial and hourly burden of the ASCQR Program's
current and newly finalized requirements.
We invited public comment on the burden associated with these
proposals. We did not receive any public comments on these proposals.
f. Impact of the Policy Change for Medical Review of Inpatient Hospital
Admissions Under Medicare Part A
As discussed in section XV. of this final rule with comment period,
we are finalizing a policy change for medical review of inpatient
hospital admissions under Medicare Part A. In this section, we discuss
the estimate by our actuaries of the overall impact of the policy
change described in section XV. of this final rule with comment period.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649 through
27650), we discussed our actuaries' estimate that our current 2-
midnight policy would increase IPPS expenditures by approximately $220
million in FY 2014. These additional expenditures were expected to
result from a net increase in hospital inpatient encounters due to some
outpatient encounters spanning more than 2 midnights moving to the IPPS
from the OPPS, and some inpatient encounters of less than 2 midnights
moving from the IPPS to the OPPS. We also proposed to use our
exceptions and adjustments authority under section 1886(d)(5)(I)(i) of
the Act to offset this estimated $220 million in additional
expenditures with a -0.2 percent adjustment to the IPPS rates. As
discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50952 through
50954), after considering the public comments we received, our
actuaries continued to estimate that there would be approximately $220
million in additional expenditures resulting from the 2-midnight rule
and we adopted the -0.2 percent adjustment beginning in FY 2014.

[[Page 70595]]

In the CY 2016 OPPS/ASC proposed rule (80 FR 39369 through 39370),
we discussed our actuaries' estimate that overall IPPS expenditures
would not be significantly different under our proposed policy change
for the medical review of inpatient hospital admissions under Medicare
Part A. For example, our actuaries did not assume any significant
additional shifts between the inpatient setting and the outpatient
setting as a result of the proposed policy change relative to the
shifts that had been modeled for the original -0.2 percent estimate nor
did they assume any change in the assumption regarding the 30-percent
outpatient/inpatient payment differential.
Although we received many public comments questioning the validity
of the original -0.2 percent estimate and some commenters asserted that
we should remove the -0.2 percent adjustment in light of the proposed
policy change, none of these public comments specifically addressed the
issue of whether or not the proposed policy change that we are adopting
for the medical review of inpatient hospital admissions under Medicare
Part A described in section XV. of this final rule with comment period
would have a differential impact on expenditures compared to the
original policy.
As a result, after consideration of the public comments we
received, our actuaries do not assume any significant additional shifts
between the inpatient setting and the outpatient setting as a result of
the policy change we are adopting for the medical review of inpatient
hospital admissions under Medicare Part A described in section XV. of
this final rule with comment period. In addition, after reviewing the
public comments we received, our actuaries determined that there is no
change in the assumption regarding the 30-percent outpatient/inpatient
payment differential at the current time. Therefore, our actuaries
continue to estimate that overall IPPS expenditures would not be
significantly different under the policy change we are adopting, and we
are not changing the -0.2 percent adjustment at this time.
Regarding the public comments we received questioning the validity
of the original -0.2 percent estimate, we note that this issue has been
the subject of continuing litigation in Shands v. Burwell, No. 14-263
(D.D.C.) and consolidated cases. Since the CY 2016 OPPS/ASC proposed
rule was published, the court in Shands has remanded the issue of the
validity of the original -0.2 percent estimate to the Agency for
further proceedings. Those proceedings will include publication of a
notice with comment period, consideration of public comments, and
publication of a final notice. As a result, we will soon be addressing
the same issues regarding the validity of the original -0.2 percent
adjustment in the Shands remand proceedings that we discussed in the
proposed rule and on which we invited public comments. We do not
believe it is efficient to separately respond to two sets of public
comments on essentially the same issue--once now and then once again as
part of the Shands remand proceedings. Therefore, we will respond to
all public comments regarding the validity of the original -0.2 percent
adjustment that we received in response to the proposed rule as part of
the Shands remand proceedings. Commenters are invited to submit public
comments as part of the Shands remand proceedings if they wish, whether
or not they submitted public comments in response to the CY 2016 OPPS/
ASC proposed rule. Commenters do not need to resubmit public comments
regarding the validity of the original -0.2 percent adjustment in the
Shands remand proceedings that they submitted in response to the
proposed rule. Again, we will respond to all such public comments, in
addition to public comments submitted in the Shands remand proceedings,
as part of those proceedings.
As we indicated in the CY 2016 OPPS/ASC proposed rule, our
actuaries will continue to review the claims experience under the 2-
midnight rule, and we will take those reviews into account during
future rulemaking, including potential future rulemaking on the issue
of whether or not the proposed policy change that we are adopting for
the medical review of inpatient hospital admissions under Medicare Part
A described in section XV. of this final rule with comment period would
have a differential impact on expenditures compared to the original
policy.
g. Impact of Transition for Former MDHs Under the IPPS
In section XVI. of this final rule with comment period, we are
finalizing, with modification, our proposed policy relating to a
transition period under the IPPS for hospitals that lost their MDH
status because they are no longer in a rural area as a result of the
implementation of the new OMB labor market area delineations. A
hospital is eligible for designation as an MDH only if it is either
physically located in a rural area or has been reclassified to a rural
area under 42 CFR 412.103. In the CY 2016 OPPS/ASC proposed rule (80 FR
39354), we proposed to provide a transition period only for hospitals
that lost their MDH status because they are no longer in a rural area
due to the implementation of the new OMB labor market area delineations
and are now located in an all-urban State. After consideration of the
public comments we received, in this final rule with comment period, we
are finalizing a policy that, effective January 1, 2016, payments to
hospitals that (1) lost their MDH status because they are no longer in
a rural area due to the implementation of the new OMB delineations in
FY 2015 and (2) have not reclassified from urban to rural under the
regulations at Sec. 412.103 before January 1, 2016, will transition
from payments based, in part, on the hospital-specific rate to payments
based entirely on the Federal rate. For discharges occurring on or
after January 1, 2016, and before October 1, 2016, these former MDHs
will receive the Federal rate plus two-thirds of 75 percent of the
amount by which the Federal rate payment is exceeded by the hospital's
hospital-specific rate payment. For FY 2017, that is, for discharges
occurring on or after October 1, 2016, and before October 1, 2017,
these former MDHs will receive the Federal rate plus one-third of 75
percent of the amount by which the Federal rate payment is exceeded by
the hospital's hospital-specific rate payment. For FY 2018, that is,
for discharges occurring on or after October 1, 2017, these former MDHs
will be paid based solely on the Federal rate.
We are aware of eight providers that were classified as MDHs prior
to the implementation of the new OMB delineations on October 1, 2014,
that did not reclassify as rural under the regulations at Sec.
412.103. In order to estimate the cost associated with the transition
period for these eight providers, we used 12 months of FY 2014 MedPAR
claims data and the FY 2016 payment rates. We estimated two sets of
payments for affected hospitals, one calculated with MDH status in
which payment is calculated based on the Federal rate plus 75 percent
of the amount by which the Federal rate payment is exceeded by the
hospital-specific payment (referred to as the hospital-specific payment
add-on) and the other without MDH status where payment is based solely
on the Federal rate. We then took the difference between these two
payments to arrive at the FY 2016 hospital-specific payment add-on,
that is, 75 percent of the amount by which the Federal rate payment is
exceeded by the hospital-specific rate payment. For the first year of
the

[[Page 70596]]

transition, we multiplied the hospital-specific payment add-on amount
by three-quarters because the payment transition is only effective for
three-quarters of FY 2016. We then multiplied that product by two-
thirds to calculate the MDH transition payment for discharges on or
after January 1, 2016, and before October 1, 2016. For the second year
of the transition, we multiplied the hospital-specific payment add-on
amount by one-third to calculate the MDH transition payment for
discharges on or after October 1, 2016, and before October 1, 2017. We
then added the transition payments from the first and second year to
arrive at the total estimate of the costs associated with the
transition period for affected former MDHs. We estimate the costs to
the Government associated with the transition period for these
hospitals to be approximately $9 million.

B. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, we estimate that
most hospitals, ASCs and CMHCs are small entities as that term is used
in the RFA. For purposes of the RFA, most hospitals are considered
small businesses according to the Small Business Administration's size
standards with total revenues of $38.5 million or less in any single
year or by the hospital's not-for-profit status. Most ASCs and most
CMHCs are considered small businesses with total revenues of $15
million or less in any single year. For details, see the Small Business
Administration's ``Table of Small Business Size Standards'' at http://www.sba.gov/content/table-small-business-size-standards.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has 100 or fewer beds. We estimate that this final
rule with comment period may have a significant impact on approximately
649 small rural hospitals. Therefore, we have prepared a regulatory
impact analysis that includes the effects of the rule on small rural
hospitals. The full impact analysis is reflected in Table 70 under
section XXI.A. of this final rule with comment period.
The analysis above, together with the remainder of this preamble,
provides a regulatory flexibility analysis and a regulatory impact
analysis.

C. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $144 million. This final rule with
comment period does not mandate any requirements for State, local, or
tribal governments, or for the private sector.

D. Conclusion

The changes we are making in this final rule with comment period
will affect all classes of hospitals paid under the OPPS and will
affect both CMHCs and ASCs. We estimate that most classes of hospitals
paid under the OPPS will experience a modest increase or a minimal
decrease in payment for services furnished under the OPPS in CY 2015.
Table 70 demonstrates the estimated distributional impact of the OPPS
budget neutrality requirements that would result in a 0.4 percent
decrease in payments for all services paid under the OPPS in CY 2016,
after considering all of the changes to APC reconfiguration and
recalibration, as well as the OPD fee schedule increase factor,
adjustment to the conversion factor to address the inflation in OPPS
payment rates resulting from excess packaged payment under the OPPS for
laboratory tests, wage index changes, including the frontier State wage
index adjustment, estimated payment for outliers, and changes to the
pass-through payment estimate. However, some classes of providers that
are paid under the OPPS would experience more significant gains or
losses in OPPS payments in CY 2016.
The updates to the ASC payment system for CY 2016 will affect each
of the approximately 5,300 ASCs currently approved for participation in
the Medicare program. The effect on an individual ASC will depend on
its mix of patients, the proportion of the ASC's patients who are
Medicare beneficiaries, the degree to which the payments for the
procedures offered by the ASC are changed under the ASC payment system,
and the extent to which the ASC provides a different set of procedures
in the coming year. Table 71 demonstrates the estimated distributional
impact among ASC surgical specialties of the MFP-adjusted CPI-U update
factor of 0.3 percent for CY 2016.

XXII. Federalism Analysis

Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. We have examined the OPPS and ASC provisions included in
this final rule with comment period in accordance with Executive Order
13132, Federalism, and have determined that they will not have a
substantial direct effect on State, local or tribal governments,
preempt State law, or otherwise have a Federalism implication. As
reflected in Table 70 of this final rule with comment period, we
estimate that OPPS payments to governmental hospitals (including State
and local governmental hospitals) would decrease payment by 0.3 percent
under this final rule with comment period. While we do not know the
number of ASCs or CMHCs with government ownership, we anticipate that
it is small. The analyses we have provided in this section of this
final rule with comment period, in conjunction with the remainder of
this document, demonstrate that this final rule with comment period is
consistent with the regulatory philosophy and principles identified in
Executive Order 12866, the RFA, and section 1102(b) of the Act.
This final rule with comment period would affect payments to a
substantial number of small rural hospitals and a small number of rural
ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some
effects may be significant.

List of Subjects

42 CFR Part 405

Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping,
Rural areas, X-rays.

42 CFR Part 410

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

42 CFR Part 412

Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.

[[Page 70597]]

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 416

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

42 CFR Part 419

Hospitals, Medicare, Reporting and recordkeeping requirements.

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

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart R--Provider Reimbursement Determinations and Appeals

0
1. The authority citation for Part 405, Subpart R continues to read as
follows:

Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v),
1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C.
405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii,
1395oo, and 1395ww).

0
2. Section 405.1801 is amended by--
0
a. Amending paragraph (a) by revising the definition of ``Contractor
determination''.
0
b. Revising paragraph (b)(1).
The revisions read as follows:

Sec. 405.1801 Introduction.

(a) * * *
Contractor determination means the following:
(1) With respect to a provider of services that has filed a cost
report under Sec. Sec. 413.20 and 413.24 of this chapter, the term
means a final determination of the amount of total reimbursement due
the provider, pursuant to Sec. 405.1803 following the close of the
provider's cost reporting period, for items and services furnished to
beneficiaries for which reimbursement may be made on a reasonable cost
basis under Medicare for the period covered by the cost report.
(2) With respect to a hospital that receives payments for inpatient
hospital services under the prospective payment system (part 412 of
this chapter), the term means a final determination of the total amount
of payment due the hospital, pursuant to Sec. 405.1803 following the
close of the hospital's cost reporting period, under that system for
the period covered by the final determination.
(3) For purposes of appeal to the Provider Reimbursement Review
Board, the term is synonymous with the phrases ``intermediary's final
determination,'' ``final determination of the organization serving as
its fiscal intermediary,'' ``Secretary's final determination'' and
``final determination of the Secretary,'' as those phrases are used in
section 1878(a) of the Act, and with the phrases ``final contractor
determination'' and ``final Secretary determination'' as those phrases
are used in this subpart.
(4) For purposes of Sec. 405.376 concerning claims collection
activities, the term does not include an action by CMS with respect to
a compromise of a Medicare overpayment claim, or termination or
suspension of collection action on an overpayment claim, against a
provider or physician or other supplier.
* * * * *
(b) * * *
(1) Providers. In order to be paid for covered services furnished
to Medicare beneficiaries, a provider must file a cost report with its
contractor as specified in Sec. 413.24 of this chapter. For purposes
of this subpart, the term ``provider'' includes a hospital (as
described in part 482 of this chapter), hospice program (as described
in Sec. 418.3 of this chapter), critical access hospital (CAH),
comprehensive outpatient rehabilitation facility (CORF), renal dialysis
facility, Federally qualified health center (FQHC), home health agency
(HHA), rural health clinic (RHC), skilled nursing facility (SNF), and
any other entity included under the Act. (FQHCs and RHCs are providers,
for purposes of this subpart, effective with cost reporting periods
beginning on or after October 1, 1991).
* * * * *

0
3. Section 405.1803 is amended by revising the paragraph (a)
introductory text to read as follows:

Sec. 405.1803 Contractor determination and notice of amount of
program reimbursement.

(a) General requirement. Upon receipt of a provider's cost report,
or amended cost report where permitted or required, the contractor must
within a reasonable period of time (as specified in Sec.
405.1835(c)(1)), furnish the provider and other parties as appropriate
(see Sec. 405.1805) a written notice reflecting the contractor's final
determination of the total amount of reimbursement due the provider.
The contractor must include the following information in the notice, as
appropriate:
* * * * *

0
4. Section 405.1811 is amended by revising paragraphs (a), (b)(1),
(b)(2) introductory text, (b)(2)(iii), (b)(3), (e)(1), and (e)(2), to
read as follows:

Sec. 405.1811 Right to contractor hearing; contents of, and adding
issues to, hearing request.

(a) Right to hearing on final contractor determination. A provider
(but no other individual, entity, or party) has a right to a contractor
hearing, as a single provider appeal, with respect to a final
contractor or Secretary determination for the provider's cost reporting
period, if--
(1) The provider is dissatisfied with the contractor's final
determination of the total amount of reimbursement due the provider, as
set forth in the contractor's written notice pursuant to Sec.
405.1803. Exception: If a final contractor determination is reopened
under Sec. 405.1885, any review by the contractor hearing officer must
be limited solely to those matters that are specifically revised in the
contractor's revised final determination (Sec. Sec. 405.1887(d),
405.1889(b), and the ``Exception'' in Sec. 405.1832(c)(2)(i)).
(2) The amount in controversy (as determined in accordance with
Sec. 405.1839) must be at least $1,000 but less than $10,000.
(3) Unless the provider qualifies for a good cause extension under
Sec. 405.1813, the date of receipt by the contractor of the provider's
hearing request must be no later than 180 days after the date of
receipt by the provider of the final contractor or Secretary
determination.
(b) * * *
(1) A demonstration that the provider satisfies the requirements
for a contractor hearing as specified in paragraph (a) of this section,
including a specific identification of the final contractor or
Secretary determination under appeal.
(2) For each specific item under appeal, a separate explanation of
why, and a description of how, the provider is dissatisfied with the
specific aspects of the final contractor or Secretary determination
under appeal, including an account of all of the following:
* * * * *
(iii) If the provider self-disallows a specific item (as specified
in Sec. 413.24(j) of this chapter), an explanation of the nature and
amount of each self-disallowed item, the reimbursement sought for the
item, and why the provider self-disallowed the item instead of claiming
reimbursement for the item.
(3) A copy of the final contractor or Secretary determination under
appeal and any other documentary evidence the provider considers
necessary to satisfy the hearing request requirements

[[Page 70598]]

of paragraphs (b)(1) and (b)(2) of this section.
* * * * *
(e) * * *
(1) The request to add issues complies with the requirements of
paragraphs (a) and (b), or paragraphs (c) and (d), of this section as
to each new specific item at issue.
(2) The specific items raised in the initial hearing request and
the specific items identified in subsequent requests to add issues,
when combined, satisfy the amount in controversy requirements of
paragraph (a)(2) or paragraph (c)(3) of this section.
* * * * *

Sec. 405.1813 [Amended]

0
5. In Sec. 405.1813, paragraphs (a) and (b) are amended by removing
the cross-reference ``Sec. 405.1811(a)(3) of this subpart'' and adding
in its place the cross-reference ``Sec. 405.1811(a)(3) or Sec.
405.1811(c)(2)''.

Sec. 405.1814 [Amended]

0
6. Section 405.1814 is amended by removing paragraph (b)(3).
0
7. A new Sec. 405.1832 is added to read as follows:

Sec. 405.1832 Contractor hearing officer review of compliance with
the substantive reimbursement requirement of an appropriate cost report
claim.

(a) General. In order to receive or potentially qualify for
reimbursement for a specific item, the provider must include in its
cost report an appropriate claim for the specific item (as prescribed
in Sec. 413.24(j) of this chapter). If the provider files an appeal to
the contractor seeking reimbursement for a specific item and any party
to such appeal questions whether the provider's cost report included an
appropriate claim for the specific item, the contractor hearing
officer(s) must address such questions in accordance with the
procedures set forth in this section.
(b) Summary of procedures--(1) Preliminary steps. The contractor
hearing officer(s) must give each party to the appeal an adequate
opportunity to submit factual evidence and legal argument regarding the
question of whether the provider's cost report included an appropriate
claim for the specific item under appeal. Upon receipt of timely
submitted factual evidence and legal argument (if any), the contractor
hearing officer(s) must review such evidence and argument, and prepare
written specific findings of fact and conclusions of law on the
question of whether the provider's cost report complied with, for the
specific item under appeal, the cost report claim requirements
prescribed in Sec. 413.24(j) of this chapter. In reaching such
specific factual findings and legal conclusions, the contractor hearing
officer(s) must follow the procedures set forth in Sec. 413.24(j)(3)
of this chapter for determining whether the provider's cost report
included an appropriate claim for the specific item under appeal. The
contractor hearing officer(s) must promptly give a copy of such written
specific factual findings and legal conclusions to each party to the
appeal, and such factual findings and legal conclusions must be
included in the record of administrative proceedings for the appeal (as
prescribed in Sec. 405.1827).
(2) Limits on contractor hearing officer(s) actions. The contractor
hearing officer(s)'s specific findings of fact and conclusions of law
(in accordance with paragraph (b)(1) of this section) must not be
invoked or relied on by the contractor hearing officer(s) as a basis to
deny, or decline to exercise, jurisdiction over a specific item or take
any other of the actions specified in paragraph (c) of this section.
Upon giving the parties to the appeal the contractor hearing
officer(s)'s written specific factual findings and legal conclusions
(pursuant to paragraph (b)(1) of this section) on the question of
whether the provider's cost report included an appropriate cost report
claim for the specific item under appeal, the contractor hearing
officer(s) must proceed to issue one of the two types of overall
decisions specified in paragraphs (d) and (e) of this section with
respect to the specific item. If the contractor hearing officer(s)
issues an overall contractor hearing decision (as specified in
paragraph (d) of this section) regarding the specific item under
appeal, the contractor hearing officer(s)'s written specific factual
findings and legal conclusions (in accordance with paragraph (b)(1) of
this section) must be included in such overall contractor hearing
decision regarding the specific item, along with the other matters that
are required by the regulations for an overall contractor hearing
decision. However, if the contractor hearing officer(s) issues an
overall jurisdictional dismissal decision (as specified in paragraph
(e) of this section) regarding the specific item under appeal, the
contractor hearing officer(s)'s written specific factual findings and
legal conclusions (in accordance with paragraph (b)(1) of this section)
must not be included in the overall jurisdictional dismissal decision
regarding the specific item. The contractor hearing officer(s) may
permit reimbursement for the specific item under appeal, as part of an
overall contractor hearing decision, but such reimbursement may be
permitted only to the extent authorized by paragraph (f) of this
section.
(c) Prohibition of certain types of decisions, orders, and other
actions. (1) If the contractor hearing officer(s) determines, in its
findings of fact and conclusions of law (as prescribed by paragraph
(b)(1) of this section), that the provider's cost report did not
include an appropriate claim for the specific item under appeal, the
contractor hearing officer(s) may not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the contractor hearing officer(s)'s factual
findings and legal conclusions (reached under paragraph (b)(1) of this
section);
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the contractor hearing
officer(s)'s factual findings and legal conclusions (reached under
paragraph (b)(1) of this section); or
(iii) Impose any sanction or take any other action against the
interests of any party to the appeal except as provided in paragraph
(f) of this section, based on (in whole or in part) the contractor
hearing officer(s)'s factual findings and legal conclusions (in
accordance with paragraph (b)(1) of this section).
(2) Regardless of whether the contractor hearing officer(s)
determines, in its findings of fact and conclusions of law (as
prescribed by paragraph (b)(1) of this section), that the provider's
cost report did or did not include an appropriate claim for the
specific item under appeal, the contractor hearing officer(s) may not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the absence, in the final contractor or Secretary
determination under appeal, of an adjustment, revision, correction, or
other change to the specific item under appeal, or the lack of a
particular determination by the contractor or the Secretary regarding
the specific item. Exception: If the provider's appeal of the specific
item is based on a reopening of such item (pursuant to Sec. 405.1885)
where the specific item is not revised, adjusted, corrected, or
otherwise changed in a revised final contractor or Secretary
determination, the contractor must deny jurisdiction over the specific
item under appeal (as prescribed in Sec. Sec. 405.1887(d) and
405.1889(b));
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the

[[Page 70599]]

absence, in the final contractor or Secretary determination under
appeal, of an adjustment, revision, correction, or other change to the
specific item under appeal, or the lack of a particular determination
by the contractor or the Secretary regarding the specific item; or
(iii) Impose any sanction or take any other action against the
interests of any party to the appeal except as provided in paragraph
(f) of this section, based on (in whole or in part) the absence, in the
final contractor or Secretary determination under appeal, of an
adjustment, revision, correction, or other change to the specific item
under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item.
(d) Contractor hearing decision must include any factual findings
and legal conclusions under paragraph (b)(1) of this section. If the
contractor hearing officer(s) issues a hearing decision regarding the
specific item under appeal (pursuant to Sec. 405.1831), any specific
findings of fact and conclusions of law by the contractor hearing
officer(s) (reached under paragraph (b)(1) of this section), on the
question of whether the provider's cost report included an appropriate
claim for the specific item, must be included in such hearing decision
along with the other matters prescribed by Sec. 405.1831. The
contractor hearing officer(s)'s factual findings and legal conclusions
(in accordance with paragraph (b)(1) of this section) about whether
there was an appropriate cost report claim for the specific item under
appeal are subject to the provisions of Sec. 405.1833 just as those
provisions apply to the other parts of the contractor hearing decision.
If the contractor hearing officer(s) determines that the provider's
cost report--
(1) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the
contractor hearing decision also must address whether the other
substantive reimbursement requirements for the specific item are also
satisfied; or
(2) Did not include an appropriate claim for the specific item
under appeal, the contractor hearing officer(s) has discretion whether
or not to address in the contractor hearing decision whether the other
substantive reimbursement requirements for the specific item are also
satisfied.
(e) Contractor jurisdictional dismissal decision must not include
factual findings and legal conclusions under paragraph (b)(1) of this
section. If the contractor hearing officer(s) issues a jurisdictional
dismissal decision regarding the specific item under appeal (in
accordance with Sec. 405.1814(c)), the contractor hearing officer(s)'s
specific findings of fact and conclusions of law (in accordance with
paragraph (b)(1) of this section) on the question of whether the
provider's cost report included an appropriate claim for the specific
item must not be included in such jurisdictional dismissal decision.
(f) Effects of the contractor hearing officer(s)'s factual findings
and legal conclusions under paragraph (b)(1) of this section when part
of a final contractor hearing decision. If the contractor hearing
officer(s) determines, as part of a final and binding contractor
hearing decision (pursuant to Sec. 405.1833 and paragraphs (b)(1) and
(d) of this section), that the provider's cost report--
(1) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the specific
item is reimbursable in accordance with Medicare policy, but only if
the contractor hearing officer(s) further determines in such final
contractor hearing decision that all the other substantive
reimbursement requirements for the specific item are also satisfied; or
(2) Did not include an appropriate cost report claim for the
specific item under appeal, the specific item is not reimbursable,
regardless of whether the contractor hearing officer(s) further
determines in such final contractor hearing decision that the other
substantive reimbursement requirements for the specific item are or are
not satisfied.

0
8. Section 405.1834 is amended by adding a new paragraph (b)(2)(iii) to
read as follows:

Sec. 405.1834 CMS reviewing official procedure.

* * * * *
(b) * * *
(2) * * *
(iii) If the CMS reviewing official reviews a contractor hearing
decision regarding a specific item, then the CMS reviewing official's
review of such a contractor hearing decision will include, and any
decision issued by the CMS reviewing official (under paragraph (e) of
this section) will address, the contractor hearing officer(s)'s
specific findings of fact and conclusions of law in such contractor
hearing decision (as specified in Sec. 405.1832(b)(1) and (d)) on the
question of whether the provider's cost report included an appropriate
claim for the specific item under appeal (as specified in Sec.
413.24(j) of this chapter).
* * * * *

0
9. Section 405.1835 is amended by revising paragraphs (a), (b)(1),
(b)(2) introductory text, (b)(2)(iii), (b)(3), (e)(1), and (e)(2), to
read as follows:

Sec. 405.1835 Right to Board hearing; contents of, and adding issues
to, hearing request.

(a) Right to hearing on final contractor determination. A provider
(but no other individual, entity, or party) has a right to a Board
hearing, as a single provider appeal, with respect to a final
contractor or Secretary determination for the provider's cost reporting
period, if--
(1) The provider is dissatisfied with the contractor's final
determination of the total amount of reimbursement due the provider, as
set forth in the contractor's written notice specified under Sec.
405.1803. Exception: If a final contractor determination is reopened
under Sec. 405.1885, any review by the Board must be limited solely to
those matters that are specifically revised in the contractor's revised
final determination (Sec. Sec. 405.1887(d), 405.1889(b), and the
``Exception'' in Sec. 405.1873(c)(2)(i)).
(2) The amount in controversy (as determined in accordance with
Sec. 405.1839) must be $10,000 or more.
(3) Unless the provider qualifies for a good cause extension under
Sec. 405.1836, the date of receipt by the Board of the provider's
hearing request must be no later than 180 days after the date of
receipt by the provider of the final contractor or Secretary
determination.
(b) * * *
(1) A demonstration that the provider satisfies the requirements
for a Board hearing as specified in paragraph (a) of this section,
including a specific identification of the final contractor or
Secretary determination under appeal.
(2) For each specific item under appeal, a separate explanation of
why, and a description of how, the provider is dissatisfied with the
specific aspects of the final contractor or Secretary determination
under appeal, including an account of all of the following:
* * * * *
(iii) If the provider self-disallows a specific item (as specified
in Sec. 413.24(j) of this chapter), an explanation of the nature and
amount of each self-disallowed item, the reimbursement sought for the
item, and why the provider self-disallowed the item instead of claiming
reimbursement for the item.
(3) A copy of the final contractor or Secretary determination under
appeal and any other documentary evidence the provider considers
necessary to satisfy the hearing request requirements

[[Page 70600]]

Sec. 405.1836 [Amended]

0
10. In Sec. 405.1836, paragraph (a) is amended by removing the cross-
reference ``Sec. 405.1835(a)(3) of this subpart'' and adding in its
place the cross-reference ``Sec. 405.1835(a)(3) or Sec.
405.1835(c)(2)''; and paragraph (b) is amended by removing the cross-
reference ``Sec. 405.1835(a)(3)'' and adding in its place the cross-
reference ``Sec. 405.1835(a)(3) or Sec. 405.1835(c)(2)''.

0
11. Section 405.1837 is amended by revising paragraphs (a) introductory
text, (a)(1), (c)(2) introductory text, (c)(2)(iii), (c)(3), and (e)(4)
to read as follows:

Sec. 405.1837 Group appeals.

(a) Right to Board hearing as part of a group appeal: Criteria. A
provider (but no other individual, entity, or party) has a right to a
Board hearing, as part of a group appeal with other providers, with
respect to a final contractor or Secretary determination for the
provider's cost reporting period, only if--
(1) The provider satisfies individually the requirements for a
Board hearing under Sec. 405.1835(a) or Sec. 405.1835(c), except for
the $10,000 amount in controversy requirement in Sec. 405.1835(a)(2)
or Sec. 405.1835(c)(3).
* * * * *
(c) * * *
(2) An explanation (for each specific item at issue) of each
provider's dissatisfaction with the final contractor or Secretary
determination under appeal, including an account of--
* * * * *
(iii) If the provider self-disallows a specific item (as specified
in Sec. 413.24(j) of this chapter), an explanation of the nature and
amount of each self-disallowed item, the reimbursement sought for the
item, and why the provider self-disallowed the item instead of claiming
reimbursement for the item.
(3) A copy of each final contractor or Secretary determination
under appeal, and any other documentary evidence the providers consider
to satisfy the hearing request requirements of paragraphs (c)(1) and
(c)(2) of this section, and a precise description of the one question
of fact or interpretation of law, regulations, or CMS Rulings that is
common to the particular matter at issue in the group appeal.
* * * * *
(e) * * *
(4) A provider may submit a request to the Board to join a group
appeal any time before the Board issues one of the decisions specified
in Sec. 405.1875(a)(2). By submitting a request, the provider agrees
that, if the request is granted, the provider is bound by the Board's
actions and decision in the appeal. If the Board denies a request, the
Board's action is without prejudice to any separate appeal the provider
may bring in accordance with Sec. 405.1811, Sec. 405.1835, or this
section. For purposes of determining timeliness for the filing of any
separate appeal and for the adding of issues to such appeal, the date
of receipt of the provider's request to form or join the group appeal
is considered the date of receipt for purposes of meeting the
applicable 180-day period prescribed in Sec. 405.1835(a)(3) or Sec.
405.1835(c)(2).
* * * * *

Sec. 405.1839 [Amended]

0
12. In Sec. 405.1839, paragraph (a)(1) is amended by removing the
cross-reference ``Sec. 405.1811(a)(2) of this subpart'' and adding in
its place the cross-reference ``Sec. 405.1811(a)(2) or Sec.
405.1811(c)(3)''; and by removing the cross-reference ``Sec.
405.1835(a)(2) of this subpart'' and adding in its place the cross-
reference ``Sec. 405.1835(a)(2) or Sec. 405.1835(c)(3)''.

Sec. 405.1840 [Amended]

0
13. Section 405.1840 is amended by removing paragraph (b)(3).

0
14. A new Sec. 405.1873 is added to read as follows:

Sec. 405.1873 Board review of compliance with the reimbursement
requirement of an appropriate cost report claim.

(a) General. In order to receive or potentially receive
reimbursement for a specific item, the provider must include in its
cost report an appropriate claim for the specific item (as prescribed
in Sec. 413.24(j) of this chapter). If the provider files an appeal to
the Board seeking reimbursement for the specific item and any party to
such appeal questions whether the provider's cost report included an
appropriate claim for the specific item, the Board must address such
question in accordance with the procedures set forth in this section.
(b) Summary of procedures--(1) Preliminary steps. The Board must
give the parties an adequate opportunity to submit factual evidence and
legal argument regarding the question of whether the provider's cost
report included an appropriate claim for the specific item under
appeal. Upon receipt of timely submitted factual evidence or legal
argument (if any), the Board must review such evidence and argument and
prepare written specific findings of fact and conclusions of law on the
question of whether the provider's cost report complied with, for the
specific item under appeal, the cost report claim requirements
prescribed in Sec. 413.24(j) of this chapter. In reaching such
specific factual findings and legal conclusions, the Board must follow
the procedures set forth in Sec. 413.24(j)(3) of this chapter for
determining whether the provider's cost report included an appropriate
claim for the specific item under appeal. The Board must promptly give
a copy of such written specific factual findings and legal conclusions
to each party to the appeal, and such factual findings and legal
conclusions must be included in the record of administrative
proceedings for the appeal (as prescribed in Sec. 405.1865).
(2) Limits on Board actions. The Board's specific findings of fact
and conclusions of law (pursuant to paragraph (b)(1) of this section)
must not be invoked or relied on by the Board as a basis to deny, or
decline to exercise, jurisdiction over a specific item or take any
other of the actions specified in paragraph (c) of this section. Upon
giving the parties to the appeal the Board's written specific factual
findings and legal conclusions (pursuant to paragraph (b)(1) of this
section) on the question of whether the provider's cost report included
an appropriate cost report claim for the specific item under appeal,
the Board must proceed to issue one of the four types of overall
decisions specified in paragraphs (d) and (e) of this section with
respect to the specific item. If the Board issues either of two types
of overall Board decisions (as specified in paragraph (d) of this
section) regarding the specific item under appeal, the Board's written
specific factual findings and legal conclusions (pursuant to paragraph
(b)(1) of this section) must be included in such overall Board decision
regarding the specific item, along with the other matters that are
required by the regulations for the pertinent type of

[[Page 70601]]

overall Board decision. However, if the Board issues either of two
other types of overall Board decisions (as specified in paragraph (e)
of this section) regarding the specific item under appeal, the Board's
written specific factual findings and legal conclusions (pursuant to
paragraph (b)(1) of this section) must not be included in the overall
Board decision regarding the specific item. The Board may permit
reimbursement for the specific item under appeal, as part of one of the
two types of overall Board decisions that are specified in paragraph
(d) of this section, but such reimbursement may be permitted only to
the extent authorized by paragraph (f) of this section.
(c) Prohibition of certain types of decisions, orders, and other
actions. (1) If the Board determines, in its findings of fact and
conclusions of law (as prescribed by paragraph (b)(1) of this section),
that the provider's cost report did not include an appropriate claim
for the specific item under appeal, the Board may not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the Board's factual findings and legal
conclusions (reached under paragraph (b)(1) of this section);
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the Board's factual findings and
legal conclusions (reached under paragraph (b)(1) of this section); or
(iii) Take any of the actions set forth in Sec. 405.1868(b), (c),
or (d), impose any sanction, or take any other action against the
interests of any party to the appeal, except as provided in paragraph
(f) of this section, based on (in whole or in part) the Board's factual
findings and legal conclusions (reached under paragraph (b)(1) of this
section).
(2) Regardless of whether the Board determines, in its findings of
fact and conclusions of law (as prescribed by paragraph (b)(1) of this
section), that the provider's cost report did or did not include an
appropriate claim for the specific item under appeal, the Board may
not--
(i) Deny jurisdiction over the specific item under appeal, based on
(in whole or in part) the absence, in the final contractor
determination or Secretary determination under appeal, of an
adjustment, revision, correction, or other change to the specific item
under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item. Exception: If
the provider's appeal of the specific item is based on a reopening of
such item (pursuant to Sec. 405.1885) where the specific item is not
revised, adjusted, corrected, or otherwise changed in a revised final
contractor or Secretary determination, the Board must deny jurisdiction
over the specific item under appeal (as prescribed in Sec. Sec.
405.1887(d) and 405.1889(b));
(ii) Decline to exercise jurisdiction over the specific item under
appeal, based on (in whole or in part) the absence, in the final
contractor determination or Secretary determination under appeal, of an
adjustment, revision, correction, or other change to the specific item
under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item; or
(iii) Take any of the actions set forth in Sec. 405.1868(b), (c),
or (d), impose any sanction, or take any other action against the
interests of any party to the appeal, except as provided in paragraph
(f) of this section, based on (in whole or in part) the absence, in the
final contractor determination or Secretary determination under appeal,
of an adjustment, revision, correction, or other change to the specific
item under appeal, or the lack of a particular determination by the
contractor or the Secretary regarding the specific item.
(d) Two types of Board decisions that must include any factual
findings and legal conclusions under paragraph (b)(1) of this section--
(1) Board hearing decision. If the Board issues a hearing decision
regarding the specific item under appeal (pursuant to Sec. 405.1871),
any specific findings of fact and conclusions of law by the Board (in
accordance with paragraph (b)(1) of this section), on the question of
whether the provider's cost report included an appropriate claim for
the specific item, must be included in such hearing decision along with
the other matters prescribed by Sec. 405.1871(a). The Board's factual
findings and legal conclusions (reached under paragraph (b)(1) of this
section), about whether there was an appropriate cost report claim for
the specific item under appeal, are subject to the provisions of Sec.
405.1871(b) just as those provisions apply to the other parts of the
Board's hearing decision. If the Board determines that the provider's
cost report--
(i) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the Board's
hearing decision must also address whether the other substantive
reimbursement requirements for the specific item are also satisfied; or
(ii) Did not include an appropriate claim for the specific item
under appeal, the Board has discretion whether or not to address in the
Board's hearing decision whether the other substantive reimbursement
requirements for the specific item are also satisfied.
(2) Board expedited judicial review (EJR) decision, where EJR is
granted. If the Board issues an EJR decision where EJR is granted
regarding a legal question that is relevant to the specific item under
appeal (in accordance with Sec. 405.1842(f)(1)), the Board's specific
findings of fact and conclusions of law (reached under paragraph (b)(1)
of this section), on the question of whether the provider's cost report
included an appropriate claim for the specific item, must be included
in such EJR decision along with the other matters prescribed by Sec.
405.1842(f)(1). The Board's factual findings and legal conclusions (in
accordance with paragraph (b)(1) of this section) about whether there
was an appropriate cost report claim for the specific item under appeal
are subject to the provisions of Sec. 405.1842(g)(1), (g)(2), (h)(1),
and (h)(3) in the same manner as those provisions apply to the other
parts of the Board's EJR decision.
(e) Two other types of Board decisions that must not include the
Board's factual findings and legal conclusions under paragraph (b)(1)
of this section--(1) Board jurisdictional dismissal decision. If the
Board issues a jurisdictional dismissal decision regarding the specific
item under appeal (pursuant to Sec. 405.1840(c)), the Board's specific
findings of fact and conclusions of law (in accordance with paragraph
(b)(1) of this section), on the question of whether the provider's cost
report included an appropriate claim for the specific item, must not be
included in such jurisdictional dismissal decision.
(2) Board expedited judicial review (EJR) decision, where EJR is
denied. If the Board issues an EJR decision where EJR is denied
regarding a legal question that is relevant to the specific item under
appeal (in accordance with Sec. 405.1842(f)(2)), the Board's specific
findings of fact and conclusions of law (in accordance with paragraph
(b)(1) of this section), on the question of whether the provider's cost
report included an appropriate claim for the same item, must not be
included in such EJR decision. If the Board conducts further
proceedings and issues another decision (as specified in Sec.
405.1842(h)(2)(i)), the Board's specific findings of fact and
conclusions of law (in accordance with paragraph (b)(1) of this
section)--
(i) Must be included in any further hearing decision or EJR
decision where EJR is granted regarding the specific item under appeal
(as specified in paragraph (d) of this section); but
(ii) Must not be included in any further jurisdictional dismissal
decision or EJR decision where EJR is denied

[[Page 70602]]

regarding the specific item under appeal (as prescribed in paragraph
(e) of this section).
(f) Effects of the Board's factual findings and legal conclusions
under paragraph (b)(1) of this section in two types of final
decisions--(1) When part of a final hearing decision. If the Board
determines, or the Administrator of CMS determines (pursuant to Sec.
405.1875(a)(2)(v)), as applicable, in a final and binding hearing
decision (in accordance with Sec. 405.1871(b) and paragraphs (b)(1)
and (d)(1) of this section), that the provider's cost report--
(i) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the specific
item is reimbursable in accordance with Medicare policy, but only if
the Board further determines in such final hearing decision that all
the other substantive reimbursement requirements for the specific item
are also satisfied; or
(ii) Did not include an appropriate cost report claim for the
specific item under appeal, the specific item is not reimbursable,
regardless of whether the Board further determines in such final
hearing decision that the other substantive reimbursement requirements
for the specific item are or are not satisfied.
(2) When part of a final EJR decision that grants EJR. If the Board
determines or the Administrator of CMS determines (pursuant to Sec.
405.1875(a)(2)(v)), as applicable, in a final and binding EJR decision
that grants EJR regarding a legal question that is relevant to the
specific item under appeal (in accordance with Sec. 405.1842(g)(1) and
paragraphs (b)(1) and (d)(2) of this section), that the provider's cost
report--
(i) Included an appropriate claim for the specific item under
appeal (as prescribed in Sec. 413.24(j) of this chapter), the specific
item is reimbursable in accordance with Medicare policy, but only to
the extent permitted by the final decision of a Federal court pursuant
to the EJR provisions of section 1878(f)(1) of the Act (refer also to
Sec. Sec. 405.1842 and 405.1877); or
(ii) Did not include an appropriate claim for the specific item
under appeal, the specific item is not reimbursable, unless--
(A) The specific factual findings and legal conclusions (in
accordance with paragraph (b)(1) of this section) of the Board or the
Administrator, as applicable, on the question of whether the provider's
cost report included an appropriate claim for the specific item under
appeal, are reversed or modified by the final decision of a Federal
court (in accordance with section 1878(f)(1) of the Act and Sec.
405.1877); and
(B) Only to the extent otherwise permitted by the final decision of
a Federal court pursuant to the EJR provisions of section 1878(f)(1) of
the Act (refer also to Sec. Sec. 405.1842 and 405.1877) and by
Medicare policy.

0
15. Section 405.1875 is amended by revising the last sentence of
paragraph (a) introductory text and adding a new paragraph (a)(2)(v) to
read as follows:

Sec. 405.1875 Administrator review.

(a) * * * The Board is required to send to the Office of the
Attorney Advisor a copy of each decision specified in paragraphs
(a)(2)(i), (ii), and (iii) of this section upon issuance of the
decision.
* * * * *
(2) * * *
(v) If the Administrator reviews a Board hearing decision regarding
a specific item, or for a Board EJR decision the question of whether
there is Board jurisdiction over a specific item, the Administrator's
review of such a hearing decision or EJR decision, as applicable, will
include, and any decision issued by the Administrator (under paragraph
(e) of this section) will address, the Board's specific findings of
fact and conclusions of law in such hearing decision or EJR decision
(as prescribed in Sec. 405.1873(b)(1) and (d)) on the question of
whether the provider's cost report included an appropriate claim for
the specific item under appeal (as prescribed in Sec. 413.24(j) of
this chapter).
* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
16. The authority citation for Part 410 continues to read as follows:

Authority: Secs. 1102, 1834, 1871, and 1893 of the Social
Security Act (42 U.S.C. 1302, 1395m, 1395hh, and 1395ddd).

0
17. Section 410.29 is amended by revising paragraph (a) to read as
follows:

Sec. 410.29 Limitations on drugs and biologicals.

* * * * *
(a) Except as provided in Sec. 410.28(a) for outpatient diagnostic
services and Sec. 410.63(b) for blood clotting factors, and except for
EPO, any drug or biological which is usually self-administered by the
patient.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

0
18. The authority citation for Part 412 continues to read as follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat.
1501A-332), sec. 1206 of Pub. L. 113-67, and sec 112 of Pub. L. 113-
93.

0
19. Section 412.3 is amended by revising paragraph (d) to read as
follows:

Sec. 412.3 Admissions.

* * * * *
(d)(1) Except as specified in paragraphs (d)(2) and (3) of this
section, an inpatient admission is generally appropriate for payment
under Medicare Part A when the admitting physician expects the patient
to require hospital care that crosses two midnights.
(i) The expectation of the physician should be based on such
complex medical factors as patient history and comorbidities, the
severity of signs and symptoms, current medical needs, and the risk of
an adverse event. The factors that lead to a particular clinical
expectation must be documented in the medical record in order to be
granted consideration.
(ii) If an unforeseen circumstance, such as a beneficiary's death
or transfer, results in a shorter beneficiary stay than the physician's
expectation of at least 2 midnights, the patient may be considered to
be appropriately treated on an inpatient basis, and payment for an
inpatient hospital stay may be made under Medicare Part A.
(2) An inpatient admission for a surgical procedure specified by
Medicare as inpatient only under Sec. 419.22(n) of this chapter is
generally appropriate for payment under Medicare Part A, regardless of
the expected duration of care.
(3) Where the admitting physician expects a patient to require
hospital care for only a limited period of time that does not cross 2
midnights, an inpatient admission may be appropriate for payment under
Medicare Part A based on the clinical judgment of the admitting
physician and medical record support for that determination. The
physician's decision should be based on such complex medical factors as
patient history and comorbidities, the severity of signs and symptoms,
current medical needs, and the risk of an adverse event. In these
cases, the factors that lead to the decision to admit the patient as an
inpatient must be supported by the

[[Page 70603]]

medical record in order to be granted consideration.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
20. The authority citation for Part 413 continues to read as follows:

Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i),
and (n), 1861(v), 1871, 1881, 1883 and 1886 of the Social Security
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of
Pub. L. 106-113 (113 Stat. 1501A-332), sec. 3201 of Pub. L. 112-96
(126 Stat. 156), sec. 632 of Pub. L. 112-240 (126 Stat. 2354), and
sec. 217 of Pub. L. 113-93.

0
21. Section 413.24 is amended by adding and reserving paragraph (i),
and adding a new paragraph (j), to read as follows:

Sec. 413.24 Adequate cost data and cost finding.

* * * * *
(i) [Reserved]
(j) Substantive reimbursement requirement of an appropriate cost
report claim--(1) General requirement. In order for a provider to
receive or potentially qualify for reimbursement for a specific item
for its cost reporting period, the provider's cost report, whether
determined on an as submitted, as amended, or as adjusted basis (as
prescribed in paragraph (j)(3) of this section), must include an
appropriate claim for the specific item, by either--
(i) Claiming full reimbursement in the provider's cost report for
the specific item in accordance with Medicare policy, if the provider
seeks payment for the item that it believes comports with program
policy; or
(ii) Self-disallowing the specific item in the provider's cost
report, if the provider seeks payment that it believes may not be
allowable or may not comport with Medicare policy (for example, if the
provider believes the contractor lacks the authority or discretion to
award the reimbursement the provider seeks for the item), by following
the procedures (set forth in paragraph (j)(2) of this section) for
properly self-disallowing the specific item in the provider's cost
report as a protested amount.
(2) Self-disallowance procedures. In order to properly self-
disallow a specific item, the provider must--
(i) Include an estimated reimbursement amount for each specific
self-disallowed item in the protested amount line (or lines) of the
provider's cost report; and
(ii) Attach a separate work sheet to the provider's cost report for
each specific self-disallowed item, explaining why the provider self-
disallowed each specific item (instead of claiming full reimbursement
in its cost report for the specific item) and describing how the
provider calculated the estimated reimbursement amount for each
specific self-disallowed item.
(3) Procedures for determining whether there is an appropriate cost
report claim. Whether the provider's cost report for its cost reporting
period includes an appropriate claim for a specific item (as prescribed
in paragraph (j)(1) of this section) must be determined by reference to
the cost report that the provider submits originally to, and was
accepted by, the contractor for such period, provided that none of the
following exceptions applies:
(i) If the provider submits an amended cost report for its cost
reporting period and such amended cost report is accepted by the
contractor, then whether there is an appropriate cost report claim for
the specific item must be determined by reference to such amended cost
report, provided that neither of the exceptions set forth in paragraphs
(j)(3)(ii) and (iii) of this section applies;
(ii) If the contractor adjusts the provider's cost report, as
submitted originally by the provider and accepted by the contractor or
as amended by the provider and accepted by the contractor, whichever is
applicable, with respect to the specific item, then whether there is an
appropriate cost report claim for the specific item must be determined
by reference to the provider's cost report, as such cost report claim
is adjusted for the specific item in the final contractor determination
(as defined in Sec. 405.1801(a) of this chapter) for the provider's
cost reporting period, provided that the exception set forth in
paragraph (j)(3)(iii) of this section does not apply;
(iii) If the contractor reopens either the final contractor
determination for the provider's cost reporting period (pursuant to
Sec. 405.1885 of this chapter) or a revised final contractor
determination for such period (issued pursuant to Sec. 405.1889 of
this chapter) and the contractor adjusts the provider's cost report
with respect to the specific item, then whether there is an appropriate
cost report claim for the specific item must be determined by reference
to the provider's cost report, as such cost report claim is adjusted
for the specific item in the most recent revised final contractor
determination for such period.
(4) Reimbursement effects of contractor's determination of whether
there is an appropriate cost report claim. If the contractor determines
that the provider's cost report included an appropriate claim for a
specific item (as specified in paragraphs (j)(1), (2), and (3) of this
section) and that all the other substantive reimbursement requirements
for the specific item are also satisfied, the final contractor
determination (as defined in Sec. 405.1801(a) of this chapter) must
include reimbursement for the specific item to the extent permitted by
Medicare policy. If the contractor determines that the provider made an
appropriate cost report claim for a specific item but the contractor
disagrees with material aspects of the provider's claim for the
specific item, the contractor must make appropriate adjustments to the
provider's cost report and include reimbursement for the specific item
in the final contractor determination in accordance with such cost
report adjustments and to the extent permitted by program policy. If
the contractor determines that the provider did not make an appropriate
cost report claim for a specific item, the final contractor
determination must not include any reimbursement for the specific item,
regardless of whether the other substantive reimbursement requirements
for the specific item are or are not satisfied.
(5) Administrative review of whether there is an appropriate cost
report claim. If the provider files an administrative appeal (pursuant
to Part 405, Subpart R of this chapter) seeking reimbursement for a
specific item and any party to such appeal questions whether the
provider's cost report included an appropriate claim for the specific
item under appeal (as specified in paragraphs (j)(1), (2), (3), and (4)
of this section), the reviewing entity (as defined in Sec. 405.1801(a)
of this chapter) must follow the procedures prescribed in Sec.
405.1873 of this chapter (if the appeal was filed originally with the
Board), or the procedures set forth in Sec. 405.1832 of this chapter
(if the appeal was filed initially with the contractor), for review of
whether the substantive reimbursement requirement of an appropriate
cost report claim for the specific item under appeal is satisfied. The
reviewing entity must follow the procedures set forth in paragraph
(j)(3) of this section in determining whether the provider's cost
report included an appropriate claim for the specific item under
appeal. The reviewing entity may permit reimbursement for the specific

[[Page 70604]]

item under appeal solely to the extent authorized by Sec. 405.1873(f)
of this chapter (if the appeal was filed originally with the Board) or
by Sec. 405.1832(f) of this chapter (if the appeal was filed initially
with the contractor).

PART 416--AMBULATORY SURGICAL SERVICES

0
22. 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).

0
23. Section 416.164 is amended by revising paragraph (b)(3) to read as
follows:

Sec. 416.164 Scope of ASC services.

* * * * *
(b) * * *
(3) Certain items and services that CMS designates as contractor-
priced, including, but not limited to, the acquisition or procurement
of corneal tissue for corneal transplant procedures;
* * * * *

0
24. Section 416.172 is amended by revising paragraph (f) to read as
follows:

Sec. 416.172 Adjustments to national payment rates.

* * * * *
(f) Interrupted procedures. (1) Subject to the provisions of
paragraph (f)(2) of this section, when a covered surgical procedure or
covered ancillary service is terminated prior to completion due to
extenuating circumstances or circumstances that threaten the well-being
of the patient, the Medicare program payment amount and the beneficiary
coinsurance amount are based on one of the following:
(i) The full program and beneficiary coinsurance amounts if the
procedure for which anesthesia is planned is discontinued after the
induction of anesthesia or after the procedure is started;
(ii) One-half of the full program and beneficiary coinsurance
amounts if the procedure for which anesthesia is planned is
discontinued after the patient is prepared for surgery and taken to the
room where the procedure is to be performed but before the anesthesia
is induced; or
(iii) One-half of the full program and beneficiary coinsurance
amounts if a covered surgical procedure or covered ancillary service
for which anesthesia is not planned is discontinued after the patient
is prepared and taken to the room where the service is to be provided.
(2) Beginning CY 2016, if the covered surgical procedure is a
device-intensive procedure, the full device portion of the ASC device-
intensive procedure is removed prior to determining the Medicare
program payment amount and the beneficiary coinsurance amount
identified in paragraph (f)(1)(ii) of this section.
* * * * *

0
25. Section 416.195 is amended by revising paragraph (a)(1) to read as
follows:

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

(a) * * *
(1) The IOL is considered new. CMS will evaluate an application for
a new technology IOL only if the IOL type has received initial FDA
premarket approval within the 3 years prior to the new technology IOL
application submission date.
* * * * *

0
26. Subpart H is added to read as follows:
Subpart H--Requirements Under the Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
Sec.
416.300 Basis and scope of subpart.
416.305 Participation and withdrawal requirements under the ASCQR
Program.
416.310 Data collection and submission requirements under the ASCQR
Program.
416.315 Public reporting of data under the ASCQR Program.
416.320 Retention and removal of quality measures under the ASCQR
Program.
416.325 Measure maintenance under the ASCQR Program.
416.330 Reconsiderations under the ASCQR Program.

Subpart H--Requirements Under the Ambulatory Surgical Center
Quality Reporting (ASCQR) Program

Sec. 416.300 Basis and scope of subpart.

(a) Statutory basis. Section 1833(i)(2)(D)(iv) and (i)(7) of the
Act authorizes the Secretary to implement a revised ASC payment system
in a manner so as to provide for a 2.0 percentage point reduction in
any annual update for an ASC's failure to report on quality measures in
accordance with the Secretary's requirements.
(b) Scope. This subpart contains specific requirements and
standards for the ASCQR Program.

Sec. 416.305 Participation and withdrawal requirements under the
ASCQR Program.

(a) Participation in the ASCQR Program. Except as provided in
paragraph (c) of this section, an ambulatory surgical center (ASC) is
considered as participating in the ASCQR Program once the ASC submits
any quality measure data to the ASCQR Program and has been designated
as open in the Certification and Survey Provider Enhanced Reporting
system for at least four months prior to the beginning of data
collection for a payment determination.
(b) Withdrawal from the ASCQR Program. (1) An ASC may withdraw from
the ASCQR Program by submitting to CMS a withdrawal of participation
form that can be found in the secure portion of the QualityNet Web
site.
(2) An ASC may withdraw from the ASCQR Program any time up to and
including August 31 of the year preceding a payment determination.
(3) Except as provided in paragraph (c) of this section, an ASC
will incur a 2.0 percentage point reduction in its ASC annual payment
update for that payment determination year and any subsequent payment
determinations in which it is withdrawn.
(4) An ASC will be considered as rejoining the ASCQR Program if it
begins to submit any quality measure data again to the ASCQR Program.
(c) Minimum case volume for program participation. ASCs with fewer
than 240 Medicare claims (Medicare primary and secondary payer) per
year during an annual reporting period for a payment determination year
are not required to participate in the ASCQR Program for the subsequent
annual reporting period for that subsequent payment determination year.
(d) Indian Health Service hospital outpatient department
participation. Beginning with the CY 2017 payment determination, Indian
Health Service hospital outpatient departments that bill Medicare under
the Ambulatory Surgical Center payment system are not considered ASCs
for the purposes of the ASCQR Program. These facilities are not
required to meet ASCQR Program requirements and will not receive
payment reductions under the ASCQR Program.

Sec. 416.310 Data collection and submission requirements under the
ASCQR Program.

(a) Requirements for claims-based measures using quality data codes
(QDCs). (1) ASCs must submit complete data on individual claims-based
quality measures through a claims-based reporting mechanism by
submitting the appropriate QDCs on the ASC's Medicare claims.
(2) The data collection period for claims-based quality measures
reported using QDCs is the calendar year 2 years prior to the payment
determination year. Only claims for services furnished in each calendar
year paid by the Medicare Administrative Contractor

[[Page 70605]]

(MAC) by April 30 of the following year of the ending data collection
time period will be included in the data used for the payment
determination year.
(3) For ASCQR Program purposes, data completeness for claims-based
measures using QDCs is determined by comparing the number of Medicare
claims (where Medicare is the primary or secondary payer) meeting
measure specifications that contain the appropriate QDCs with the
number of Medicare claims that meet measure specifications, but do not
have the appropriate QDCs on the submitted Medicare claim. The minimum
threshold for successful reporting is that at least 50 percent of
Medicare claims meeting measure specifications contain the appropriate
QDCs. ASCs that meet this minimum threshold are regarded as having
provided complete data for the claims-based measures using QDCs for the
ASCQR Program.
(b) Requirements for claims-based measures not using QDCs. The data
collection period for claims-based quality measures not using QDCs is
paid Medicare fee-for-service claims from the calendar year 2 years
prior to the payment determination year. Only claims for services
furnished in each calendar year paid by the MAC by April 30 of the
following year of the ending data collection time period will be
included in the data used for the payment determination.
(c) Requirements for data submitted via an online data submission
tool--(1) Requirements for data submitted via a CMS online data
submission tool--(i) QualityNet account for Web-based measures. ASCs
must maintain a QualityNet account in order to submit quality measure
data to the QualityNet Web site for all Web-based measures submitted
via a CMS online data submission tool. A QualityNet security
administrator is necessary to set-up such an account for the purpose of
submitting this information.
(ii) Data collection requirements. The data collection time period
for quality measures for which data are submitted via a CMS online data
submission tool is for services furnished during the calendar year 2
years prior to the payment determination year. Data collected must be
submitted during the time period of January 1 to August 15 in the year
prior to the payment determination year.
(2) Requirements for data submitted via a non-CMS online data
submission tool. The data collection time period for ASC-8: Influenza
Vaccination Coverage Among Healthcare Personnel is from October 1 of
the year 2 years prior to the payment determination year to March 31
during the year prior to the payment determination year. Data collected
must be submitted by May 15 in the year prior to the payment
determination year.
(d) Extension or exemption. CMS may grant an extension or exemption
for the submission of information in the event of extraordinary
circumstances beyond the control of an ASC, or a systematic problem
with one of CMS' data collection systems directly or indirectly affects
data submission. CMS may grant an extension or exemption as follows:
(1) Upon request of the ASC. Specific requirements for submission
of a request for an extension or exemption are available on the
QualityNet Web site; or
(2) At the discretion of CMS. CMS may grant extensions or
exemptions to ASCs that have not requested them when CMS determines
that an extraordinary circumstance has occurred.

Sec. 416.315 Public reporting of data under the ASCQR Program.

Data that an ASC submitted for the ASCQR Program will be made
publicly available on a CMS Web site after providing the ASC an
opportunity to review the data to be made public. CMS will publicly
display ASC data by the National Provider Identifier (NPI) when data
are submitted by the NPI. CMS will publicly display ASC data by the CMS
Certification Number (CCN) when data are submitted by the CCNs.

Sec. 416.320 Retention and removal of quality measures under the
ASCQR Program.

(a) General rule for the retention of quality measures. Quality
measures adopted for an ASCQR Program measure set for a previous
payment determination year are retained in the ASCQR Program for
measure sets for subsequent payment determination years, except when
they are removed, suspended, or replaced as set forth in paragraphs (b)
and (c) of this section.
(b) Immediate measure removal. In cases where CMS believes that the
continued use of a measure as specified raises patient safety concerns,
CMS will immediately remove a quality measure from the ASCQR Program
and will promptly notify ASCs and the public of the removal of the
measure and the reasons for its removal through the ASCQR Program
ListServ and the ASCQR Program QualityNet Web site. CMS will confirm
the removal of the measure for patient safety concerns in the next
ASCQR Program rulemaking.
(c) Measure removal, suspension, or replacement through the
rulemaking process. Unless a measure raises specific safety concerns as
set forth in paragraph (b) of this section, CMS will use the regular
rulemaking process to remove, suspend, or replace quality measures in
the ASCQR Program to allow for public comment.
(1) Criteria for removal of quality measures. (i) CMS will use the
following criteria to determine whether to remove a measure from the
ASCQR Program:
(A) Measure performance among ASCs is so high and unvarying that
meaningful distinctions and improvements in performance can no longer
be made (topped-out measures);
(B) Availability of alternative measures with a stronger
relationship to patient outcomes;
(C) A measure does not align with current clinical guidelines or
practice;
(D) The availability of a more broadly applicable (across settings,
populations, or conditions) measure for the topic;
(E) The availability of a measure that is more proximal in time to
desired patient outcomes for the particular topic;
(F) The availability of a measure that is more strongly associated
with desired patient outcomes for the particular topic; and
(G) Collection or public reporting of a measure leads to negative
unintended consequences other than patient harm.
(ii) The benefits of removing a measure from the ASCQR Program will
be assessed on a case-by-case basis. A measure will not be removed
solely on the basis of meeting any specific criterion.
(2) Criteria to determine topped-out measures. For the purposes of
the ASCQR Program, a measure is considered to be topped-out under
paragraph (c)(1)(i)(A) of this section when it meets both of the
following criteria:
(i) Statistically indistinguishable performance at the 75th and
90th percentiles (defined as when the difference between the 75th and
90th percentiles for an ASC's measure is within two times the standard
error of the full data set); and
(ii) A truncated coefficient of variation less than or equal to
0.10.

Sec. 416.325 Measure maintenance under the ASCQR Program.

(a) Measure maintenance under the ASCQR Program. CMS follows
different procedures to update the measure specifications under the
ASCQR Program based on whether the change is substantive or
nonsubstantive. CMS will determine what constitutes a substantive
versus a nonsubstantive change to a measure's specifications on a case-
by-case basis.

[[Page 70606]]

(b) Substantive changes. CMS will continue to use rulemaking to
adopt substantive updates to measures in the ASCQR Program.
(c) Nonsubstantive changes. If CMS determines that a change to a
measure previously adopted in the ASCQR Program is nonsubstantive, CMS
will use a subregulatory process to revise the ASCQR Program
Specifications Manual so that it clearly identifies the changes to that
measure and provide links to where additional information on the
changes can be found. When a measure undergoes subregulatory
maintenance, CMS will provide notification of the measure specification
update on the QualityNet Web site and in the ASCQR Program
Specifications Manual, and will provide sufficient lead time for ASCs
to implement the revisions where changes to the data collection systems
would be necessary.

Sec. 416.330 Reconsiderations under the ASCQR Program.

(a) Reconsiderations of ASCQR Program decisions. An ASC may request
reconsideration of a decision by CMS that it has not met the
requirements of the ASCQR Program for a particular payment
determination year. An ASC must submit a reconsideration request to CMS
by no later than the first business day on or after March 17 of the
affected payment year.
(b) Requirements for reconsideration requests. A reconsideration
request must contain the following information:
(1) The ASC CCN and related NPI(s);
(2) The name of the ASC;
(3) The CMS-identified reason for not meeting the requirements of
the ASCQR Program for the affected payment determination year as
provided in any CMS notification to the ASC;
(4) The ASC's basis for requesting reconsideration. The ASC must
identify its specific reason(s) for believing it met the ASCQR Program
requirements for the affected payment determination year and should not
be subject to the reduced ASC annual payment update;
(5) The ASC-designated personnel contact information, including
name, email address, telephone number, and mailing address (must
include physical mailing address, not just a post office box); and
(6) A copy of all materials that the ASC submitted to comply with
the requirements of the affected ASCQR Program payment determination
year. With regard to information on claims, ASCs are not required to
submit copies of all submitted claims, but instead may focus on the
specific claims at issue. For these claims, ASCs should submit relevant
information, which could include copies of the actual claims at issue.
(c) Reconsideration process. Upon receipt of a request for
reconsideration, CMS will do the following:
(1) Provide an email acknowledgement, using the contact information
provided in the reconsideration request, notifying the ASC that the
request has been received; and
(2) Provide a formal response to the ASC contact using the
information provided in the reconsideration request notifying the ASC
of the outcome of the reconsideration process.
(d) Final ASCQR Program payment determination. For an ASC that
submits a timely reconsideration request, the reconsideration
determination is the final ASCQR Program payment determination. For an
ASC that does not submit a timely reconsideration request, the CMS
determination is the final payment determination. There is no appeal of
any final ASCQR Program payment determination.

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

0
27. 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, 1395l(t), and 1395hh).

0
28. Section 419.2 is amended by revising paragraph (c)(8) to read as
follows:

Sec. 419.2 Basis of payment.

* * * * *
(c) * * *
(8) Corneal tissue acquisition or procurement costs for corneal
transplant procedures.

0
29. Section 419.32 is amended by adding new paragraph (b)(1)(iv)(B)(7)
to read as follows:

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

* * * * *
(b) * * *
(1) * * *
(iv) * * *
(B) * * *
(7) For calendar year 2016, a multifactor productivity adjustment
(as determined by CMS), and 0.2 percentage point.
* * * * *

0
30. Section 419.44 is amended by revising paragraph (b) to read as
follows:

Sec. 419.44 Payment reductions for procedures.

* * * * *
(b) Interrupted procedures. (1) Subject to the provisions of
paragraph (b)(2) of this section, when a procedure is terminated prior
to completion due to extenuating circumstances or circumstances that
threaten the well-being of the patient, the Medicare program payment
amount and the beneficiary copayment amount are based on--
(i) The full program and beneficiary copayment amounts if the
procedure for which anesthesia is planned is discontinued after the
induction of anesthesia or after the procedure is started;
(ii) One-half the full program and the beneficiary copayment
amounts if the procedure for which anesthesia is planned is
discontinued after the patient is prepared and taken to the room where
the procedure is to be performed but before anesthesia is induced; or
(iii) One-half of the full program and beneficiary copayment
amounts if a procedure for which anesthesia is not planned is
discontinued after the patient is prepared and taken to the room where
the procedure is to be performed.
(2) Beginning CY 2016, if a procedure involves an implantable
device assigned to a device-intensive APC, the full device portion of
the device-intensive APC procedure payment is removed prior to
determining the program and beneficiary copayment amounts identified in
paragraph (b)(1)(ii) of this section.

0
31. Section 419.46 is amended by revising paragraphs (b), (d), (e), and
(f)(1) to read as follows:

Sec. 419.46 Participation, data submission, and validation
requirements under the Hospital Outpatient Quality Reporting (OQR)
Program.

* * * * *
(b) Withdrawal from the Hospital OQR Program. A participating
hospital may withdraw from the Hospital OQR Program by submitting to
CMS a withdrawal form that can be found in the secure portion of the
QualityNet Web site. The hospital may withdraw any time up to and
including August 31 of the year prior to the affected annual payment
updates. A withdrawn hospital will not be able to later sign up to
participate in that payment update, is subject to a reduced annual
payment update as specified under Sec. 419.43(h), and is required to
submit a new participation form in order to participate in any future
year of the Hospital OQR Program.
* * * * *

[[Page 70607]]

(d) Exemption. CMS may grant an extension or exemption of one or
more data submission deadlines and requirements in the event of
extraordinary circumstances beyond the control of the hospital, such as
when an act of nature affects an entire region or locale or a systemic
problem with one of CMS' data collection systems directly or indirectly
affects data submission. CMS may grant an extension or exemption as
follows:
(1) Upon request by the hospital. Specific requirements for
submission of a request for an extension or exemption are available on
the QualityNet Web site.
(2) At the discretion of CMS. CMS may grant extensions or
exemptions to hospitals that have not requested them when CMS
determines that an extraordinary circumstance has occurred.
(e) Validation of Hospital OQR Program data. CMS may validate one
or more measures selected under section 1833(t)(17)(C) of the Act by
reviewing documentation of patient encounters submitted by selected
participating hospitals.
(1) Upon written request by CMS or its contractor, a hospital must
submit to CMS supporting medical record documentation that the hospital
used for purposes of data submission under the program. The specific
sample that a hospital must submit will be identified in the written
request. A hospital must submit the supporting medical record
documentation to CMS or its contractor within 45 days of the date
identified on the written request, in the form and manner specified in
the written request.
(2) A hospital meets the validation requirement with respect to a
calendar year if it achieves at least a 75-percent reliability score,
as determined by CMS.
(f) * * *
(1) A hospital may request reconsideration of a decision by CMS
that the hospital has not met the requirements of the Hospital OQR
Program for a particular calendar year. Except as provided in paragraph
(d) of this section, a hospital must submit a reconsideration request
to CMS via the QualityNet Web site, no later than the first business
day on or after March 17 of the affected payment year as determined
using the date the request was mailed or submitted to CMS.
* * * * *

0
32. Section 419.66 is amended by revising paragraph (b)(1) to read as
follows:

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

* * * * *
(b) * * *
(1) If required by the FDA, the device must have received FDA
premarket approval or clearance (except for a device that has received
an FDA investigational device exemption (IDE) and has been classified
as a Category B device by the FDA in accordance with Sec. Sec. 405.203
through 405.207 and 405.211 through 405.215 of this chapter), or meet
another appropriate FDA exemption for premarket approval or clearance.
Under this provision, the pass-through payment application for a
medical device must be submitted within 3 years from the date of the
initial FDA approval or clearance, if required, unless there is a
documented, verifiable delay in U.S. market availability after FDA
approval or clearance is granted, in which case CMS will consider the
pass-through payment application if it is submitted within 3 years from
the date of market availability.
* * * * *

Dated: October 23, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare and Medicaid Services.
Dated: October 26, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-27943 Filed 10-30-15; 4:15 pm]
BILLING CODE 4120-01-P

80_FR_70517

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Final rule with comment period; final rule.
Dates		Effective Date: This final rule with comment period and final rule are effective on January 1, 2016.
Contact		Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact Carol Schwartz at (410) 786-0576.
FR Citation		80 FR 70298
RIN Number		0938-AS42 and 0938-AS11
CFR Citation		42 CFR 405 42 CFR 410 42 CFR 412 42 CFR 413 42 CFR 416 42 CFR 419
CFR Associated		Administrative Practice and Procedure; Health Facilities; Health Professions; Kidney Diseases; Medicare; Reporting and Recordkeeping; Rural Areas; X-Rays; Laboratories; Puerto Rico; Reporting and Recordkeeping Requirements and Hospitals

DEPARTMENT OF HEALTH AND HUMAN SERVICESCenters for Medicare & Medicaid Services

Federal Register Volume 80, Issue 219 (November 13, 2015)

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services