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I. Background

A. Legislative History

Specific provisions of the proposed rule are discussed in detail in Section II below.

Section 1832(a)(2)(F)(i) of the Social Security Act (the Act) provides that benefits under the Medicare Supplementary Medical Insurance program (Part B) include payment for facility services furnished in connection with surgical procedures we specify and which are performed in an ambulatory surgical center (ASC). We are to review and update the list of ASC procedures biennially. To participate in the Medicare program as an ASC, a facility must meet the standards specified under section 1832(a)(2)(F)(i) of the Act and 42 CFR 416.25, which sets forth general conditions and requirements for ASCs.

Generally, there are two primary elements in the total cost of performing a surgical procedure—the cost of the physician's professional services for performing the procedure and the cost of services furnished by the facility where the procedure is performed (for example, surgical supplies and equipment and nursing services). Section 1833(i)(2)(A) of the Act addresses what the ASC facility fee is intended to represent and how the amount of the Medicare payment for ASC facility services is to be determined. It requires us to review and update ASC payment amounts annually.

The ASC payment rate is to be a standard overhead amount established on the basis of our estimate of a fair fee that takes into account the costs incurred by ASCs generally in providing facility services in connection with performing a specific procedure. The Report of the Conference Committee accompanying section 934 of the Omnibus Budget Reconciliation Act of 1980 (Pub. L. 96-499), which enacted the ASC benefit in December 1980, states that this overhead factor is expected to be calculated on a prospective basis using sample survey and similar techniques to establish reasonable estimated overhead allowances, which take account of volume (within reasonable limits), for each of the listed procedures. (See H.R. Rep. No. 1479, at 134 (1980).) To estimate the amount of those reasonable allowances, we are required by section 1833(i)(2)(A)(i) of the Act to survey the actual audited costs incurred by a representative sample of facilities in connection with a representative sample of procedures. Because payment for ASC facility services is subject to the usual Medicare Part B deductible and coinsurance requirements, Medicare pays participating ASCs 80 percent of the prospectively-determined rate, adjusted for regional wage variations. Section 1833(i)(2)(A)(ii) of the Act requires that the ASC payment rates result in substantially lower Medicare ( printed page 15269) expenditures than would have been paid if the same procedure had been performed on an inpatient basis in a hospital. Section 1833(i)(2)(A)(iii) of the Act requires that payment for insertion of an intraocular lens (IOL) include an allowance for the IOL that is reasonable and related to the cost of acquiring the class of lens involved.

Section 13531 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) (Pub. L. 103-66), prohibited us from providing for any inflation update in the payment amounts for ASCs determined under section 1833(i)(2)(A) of the Act for fiscal years (FYs) 1994 and 1995. Section 13533 of OBRA 1993 established $150 as the amount of payment allowed for an IOL inserted during or subsequent to cataract surgery in an ASC on or after January 1, 1994, and before January 1, 1999. Section 141(a)(1) of the Social Security Act Amendments of 1994 (SSAA 1994) (Public Law 103-432) amended section 1833(i)(2)(A)(i) of the Act to require that a quinquennial survey of ASCs be taken beginning not later than January 1, 1995.

Section 141(a)(2) of SSAA 1994 added section 1833(i)(2)(C) to the Act to provide that, beginning with FY 1996, there be an adjustment for inflation during fiscal years when we do not update ASC rates based on actual audited costs determined by surveying a representative sample of facilities. Section 1833(i)(2)(C) of the Act provides that ASC payment rates are to be increased by the percentage increase in the consumer price index for urban consumers (CPI-U), that we estimate for the 12-month period ending with the midpoint of the year involved, beginning with FY 1996. Section 141(a)(3) of SSAA 1994 amended section 1833(i)(1) of the Act to require us to consult with appropriate medical organizations in specifying the procedures that constitute the ASC list.

Section 141(b) of SSAA 1994 requires us to establish a process for reviewing the appropriateness of the payment amount provided under section 1833(i)(2)(A)(iii) of the Act for IOLs with respect to a class of new-technology IOLs. That process was the subject of a separate notice of proposed rulemaking entitled Adjustment in Payment Amounts for New Technology Intraocular Lenses published in the Federal Register on September 9, 1997 (62 FR 46698).

Section 4555 of BBA 1997 amended section 1833(i)(2)(C) of the Act to limit the annual adjustment of ASC payment rates provided for in that paragraph to the CPI-U increase reduced by 2.0 percentage points (but not below zero) for fiscal years 1998 through 2002.

B. Extensions of Comment Periods for Proposed Rule

On June 12, 1998, we published in the Federal Register a proposed rule that would revise the ratesetting methodology and payment rates and update the list of surgical procedures payable by Medicare for ASCs. The closing date of the comment period for the June 12, 1998 proposed rule was extended several times. The first extension notice was published in the Federal Register August 14, 1998 (63 FR 43655). The reason for the extension was that, due to the complexity and scope of the proposed rule, numerous members of the industry and professional associations requested more time to analyze the potential consequences of the rule. The closing date was extended to September 10, 1998.

On September 8, 1998, a proposed rule outlining the provisions of a Medicare prospective payment system (PPS) for hospital outpatient services was published in the Federal Register (63 FR 47551). On October 1, 1998 a second extension notice extending the comment period for the June 12, 1998 proposed rule was published in the Federal Register (63 FR 52663) with a new closing date of November 9, 1998. This second extension notice was issued because members of trade and professional associations urged us to postpone implementing the changes contained in the June 12, 1998 ASC proposed rule from October 1, 1998 to January 1, 1999 to coincide with implementation of the OPPS. They based their argument for delaying implementation of the ASC changes both on the need for more time for cross-analysis of the ASC proposed rule with the hospital outpatient prospective payment system (OPPS) proposed rule and the overlap and interrelationship between the two payment systems. This second extension notice also explained that there would be no inflationary update of the ASC rates on October 1, 1998 because reducing the fiscal year CPI-U factor of 2.1 percent by 2.0 percent would result in a change of less than $1 for each payment group.

A third notice, which extended the comment period to January 8, 1999, was published in the Federal Register on November 15, 1998. This extension was necessary because the OPPS proposed rule comment period was being extended and Medicare payments to ASCs were closely linked to the way Medicare proposed to pay hospitals under the OPPS. A fourth extension notice was published in the Federal Register on January 12, 1999 (64 FR 1785). The reason given was the same as the prior extension notice, that is, because the comment period for the OPPS rule was being extended for further examination and because the two proposed payment systems were closely related. The new closing date of March 9, 1999 would run concurrently with the OPPS extension. On March 2, 1999, a fifth extension notice with the same rationale as the fourth notice was published in the Federal Register (64 FR 12278) and extended the comment period for an additional 60 days.

The sixth and final extension was published in the Federal Register July 6, 1999 (64 FR 36321). On June 30, 1999 we published a correction notice (64 FR 35258) in the Federal Register that corrected a number of technical and typographical errors contained in the September 8, 1998 OPPS proposed rule. To provide commenters adequate time to analyze the potential impact of the corrections to the OPPS proposed rule on ASC payments and because of the link between Medicare ASC payments and hospital outpatient payments, we found it appropriate to extend the comment period for the ASC proposed rule to July 30, 1999.

II. Provisions of the Proposed Regulations

In the June 12, 1998, proposed rule, we proposed the following:

• Clarification of the definition of ASC.
• Revision of the basic requirements in § 416.3 and § 416.4.
• Additions to and deletions from the ASC list.
• Revision of the criteria for determining surgical procedures payable in an ASC in § 416.65 and elimination of numeric thresholds.
• Establishment of an ASC Advisory Group.
• Replacement of eight ASC payment groups with ambulatory payment classification (APC) groups that are clinically homogeneous and consist of procedures with similar resource inputs, modeled on the APC groups proposed for the OPPS.
• Redefinition of the ASC ratesetting methodology.
• Rebased payment rates to reflect a survey of ASC costs that was conducted in 1994.

A combination of circumstances has resulted in our delaying publication of a final rule to implement the changes proposed in the June 12, 1998 ASC proposed rule. First, as discussed above, we extended the public comment period to July 30, 1999 in response to requests from the industry to allow adequate opportunity for comparison of the ( printed page 15270) proposed ASC rates and ratesetting methodology with the proposed OPPS that was published in the Federal Register on September 8, 1998, followed by publication of an OPPS correction notice on June 30, 1999. Notwithstanding the close of the comment period on July 30, 1999, the changes required to implement a new payment system for ASC facility services could not be implemented because our contractors had to prepare Medicare claims processing systems to be Year 2000 (“Y2K”) compliant.

On November 29, 1999, the Balanced Budget Refinement Act of 1999 (BBRA)(Pub. L. 106-113) was enacted. Section 226 of BBRA required that full implementation of the proposed ASC rates be delayed over a 3 year period. Specifically, the BBRA stated that if a prospective payment system for ASCs, that is, one involving the June 1998 proposed rates, was implemented prior to incorporating data from a 1999 or subsequent Medicare cost survey, in the first year of implementation no more than 1/3 of the new ASC payment would consist of this new rate and the remainder would consist of the current payment rate. In the following year, no more than 2/3 of the new rate would consist of the June 1998 proposed rate and the remainder would consist of the current rate.

Significant changes in the OPPS were also required as a result of the enactment of the BBRA. Substantial pressures to implement the OPPS combined with the new OPPS requirements resulting from enactment of the BBRA compelled us to focus all available resources on the OPPS, which was implemented on August 1, 2000.

On December 21, 2000, the Medicare, Medicaid and SCHIP Benefit Improvement and Protection Act of 2000 (BIPA)(Pub. L. 106-554) was enacted. Section 424 of BIPA prohibited implementation of a revised prospective payment system for ASC facility services before January 1, 2002, extended the phase-in of the APC system for ASCs to four years and required that by January 1, 2003, ASC rates be rebased using data from a 1999 or later Medicare survey.

The changes mandated by the BBRA and the BIPA, combined with the diversion of resources necessitated by Y2K compliance activities and implementation and start-up issues related to the OPPS have resulted in the delay in issuing a final ASC rule to implement the changes in the June 12, 1998 proposed rule. As stated above, Section 424 of BIPA requires that payment rates effective January 1, 2003 be based on a survey of ASCs conducted after 1999. We have developed an ASC survey instrument, but our experience in collecting ASC cost data in 1994 suggests that completion of the survey instrument, followed by an audit of the data reported by ASCs and the subsequent compilation of cost data upon which to base ASC payment rates, takes at least 2 years. Therefore, rather than delaying further the biennial update of the ASC list mandated by the statute, in this final rule with comment period we are making final only the additions to and deletions from the ASC list that we proposed in the June 12, 1998 proposed rule. We are not implementing at this time any of the other changes proposed in the June 1998 proposed rule. That is, we are not making final the regulatory changes in part 416 that we proposed or the proposed ratesetting methodology based on APC groups and survey data of ASC costs collected in 1994. We recognize that we are not in compliance with the requirements enacted by section 424 of BIPA, that we rebase rates by January 1, 2003 using data from a survey of ASC costs taken in 1999 or later. While we are committed to rebasing and restructuring the ASC payment rates, we are also committed to ensuring that the method we use to rebase ASC payment rates does not inadvertently result in rates that amplify payment differentials across ambulatory sites of service. We are studying approaches to ratesetting, some of which may require legislative change that will provide adequate payments to ASCs for surgical services and that are in line with what Medicare pays under the OPPS and the physician fee schedule for the same service.

In section III of this preamble, we respond to comments that we received timely on our proposed additions to and deletions from the ASC list. In addition, we are proposing to add to the list a limited number of new CPT codes that were added to CPT in 1999, 2000, 2001, 2002, and 2003 and that are similar to procedures on the updated ASC list. These new CPT codes are designated by an “A*” in column 2 of the Addendum. We solicit comments on the addition of these new CPT codes and the payment rates proposed for these new codes.

In the June 1998 proposed rule, we listed codes with corresponding new payment rates based on the 1994 survey of ASC costs. Because we do not have current survey data upon which to base new payment rates, we have assigned the codes being added to the ASC list in this final rule to one of the nine existing payment groups under which payments for ASC facility services are currently made. With the guidance of our medical advisors, we matched additions to the ASC list with codes for procedures already on the ASC list that they most closely resemble in terms of clinical work and resource inputs such as equipment, supplies, and time required in the operating suite. We assigned the additions to the list to the same payment group to which the matching codes are currently assigned. For example, our medical advisors determined that CPT code 24341, Repair tendon or muscle, upper arm or elbow, each tendon or muscle, primary or secondary (excludes rotator cuff), is in the same family of codes as CPT code 24340, Tenodesis of biceps tendon at elbow (separate procedure) and CPT code 24342, Reinsertion of ruptured biceps or triceps tendon, distal, with or without tendon graft. CPT codes 24340 and 24342 are both currently assigned to payment group 3. Because the resource inputs such as supplies, equipment, and time in the operating suite for CPT code 24341 are similar to the resources required to perform CPT codes 24340 and 24342, we assigned CPT code 24341 to group 3 to maintain consistency in payment for this family of closely related codes.

In the case of some codes, such as CPT 47511, Introduction of percutaneous transhepatic stent for biliary drainage, we identified procedures on the current list that they most closely resemble clinically and in terms of resource inputs, but we assigned the code to a higher payment group to take into account expensive equipment or supplies that are required to perform the procedure. Therefore, while CPT code 47511 is similar to CPT code 47510, which is currently on the ASC list and assigned to payment group 2, we assigned CPT code 47511 to payment group 9 to take into account the added cost of expensive supplies required for this procedure.

There are some procedures that we proposed to add to the ASC list in the June 1998 proposed rule that we are not adding to the list at this time. We are not adding to the ASC list procedures that are inconsistent with our current criteria in § 416.65 for determining surgical procedures payable in an ASC. Also, we are not adding to the list procedures that would otherwise have met the criteria for inclusion on the ASC list, except that they would be significantly overpaid in the lowest ASC payment group, which could create an incentive to shift these procedures to an ASC setting. The payment rates proposed for many of these procedures in the June 12, 1998 proposed rule were significantly less than the lowest current ASC payment group because we were proposing a different ratesetting method ( printed page 15271) using APC groups. We are also eliminating proposed additions to the ASC list that were deleted from CPT after 1998, and there are some codes that we proposed to add but are not adding on the basis of comments. The codes that we are not adding to the ASC list for these reasons are listed in the following table. We recognize that most of the additions and deletions to the ASC list that are being implemented through this final rule were proposed nearly 5 years ago. Our medical advisors have reviewed all of the changes reflected in this final rule and we believe that, taking patient safety into account , the final updated list reasonably reflects contemporary surgery performed in an ASC in the year 2003.

We are not adding to the ASC list CPT code 50590 Extracorporeal Shock Wave Lithotripsy (ESWL), for which we had proposed a payment of $2107 in the June 1998 proposed rule. In American Lithotripsy Society v. Sullivan, 785, F. Supp. 1035 (D.D.C. 1992), the District Court ordered that we “publish the data and other information we are relying on in setting a (lithotripsy) rate and allow time for comment before issuing a final notice * * *”. The data and other information that we would rely on in setting a payment rate for ESWL are part of the ratesetting methodology that we proposed in the June 1998 proposed rule. Because we are not making that ratesetting methodology final at this time, we might not be in compliance with the District Court order if we were to add CPT code 50590 to the ASC list in this final rule under the current payment rate structure. In addition, comments submitted by the American Lithotripsy Society opposed the $2,107 payment rate that we proposed in the June 1998 proposed rule. Therefore, we are not including CPT code 50590 among the additions to the ASC list that are implemented by this final rule.

III. Analysis of and Responses to Public Comments

In response to the publication of the June 12, 1998 proposed rule, we received approximately 13,000 comments, many of which were duplicate comments that were resubmitted each time we extended the comment period. We received comments from individual ASCs, physicians, health care workers, professional and trade associations, and medical societies and organizations. The majority of the comments addressed our proposal to adopt ambulatory payment classification (APC) groups as the basis for setting ASC payment rates. In addition, we received numerous comments regarding our proposal to package payment for corneal tissue into the payment rate for corneal transplant surgery. We also received numerous comments regarding proposed reductions in payment for gastroenterological procedures. Those comments will be addressed in a subsequent rule when we implement changes in the ASC ratesetting methodology. In this final rule with comment, we only respond to comments that address additions to and deletions from the list of approved procedures.

Overall, the commenters who addressed our proposed additions to and deletions from the ASC list favored the proposed additions. Most commenters supported expansion of the ASC list to the maximum possible extent to permit Medicare payment to ASCs for procedures that are performed on an outpatient basis in hospitals. We respond below to commenters who recommended the addition or deletion of specific CPT codes. In reviewing the comments regarding our proposed additions to and deletions from the ASC list, we consulted our medical advisors, and we took into account Congressional intent when the ASC benefit was enacted as well as the current standards for the ASC list that are codified in § 416.65.

As we explain above, we do not include in the list of ASC approved procedures, procedures currently performed on an ambulatory basis in a physician's office that do not generally require the more elaborate facilities of an ASC. Also, the ASC list does not include procedures that are appropriately performed in an inpatient hospital setting but would not be safely performed in an ASC, consistent with the criteria in § 416.65(b)(3).

We also recognized that there are some procedures that might be appropriately performed in ASC for the younger patient who is generally healthy. But for the larger number of beneficiaries whose health is more likely to be compromised by age or disability, an ASC may be a questionable setting for those same procedures. Therefore, we are adding to the ASC list only those procedures that can be safely performed in an ASC on the general Medicare population in at least a significant number of cases.

We believe that the ASC list resulting from the additions and deletions that we are implementing in this final rule with comment is an improvement over the existing list. We have updated the ASC list by adding a significant number of the procedures that we proposed to add in the June 1998 proposed rule as well as new CPT codes established since 1998 that are consistent with our criteria for the ASC list. The resulting updated list allows ASCs to furnish to Medicare beneficiaries surgical services that reflect the practice of contemporary surgery without compromising patient safety. We will continue to update the list through notice and comment within the biennial timeframe established under the statute. As part of the next biennial update, we will also consider proposing revised criteria to apply in determining which procedures are appropriate for the ASC list.

Comment: A number of commenters favored elimination of the ASC list. The commenters stated that the decision regarding where to perform a procedure should rest with the physician and the patient, not with CMS.

Response: Section 1833(i)(1) of the Act requires us to determine which surgical procedures are safely and appropriately performed in an ASC. Therefore, we cannot adopt this recommendation.

Comment: A national medical association commented that we should not add certain codes that we proposed to add because these procedures are hospital procedures and are not appropriate for same day surgery in an ASC. These procedures are CPT codes 57284 (paravaginal defect repair), 57288 (stress incontinence), 57555 (cervical stump excision), 58345 (fallopian tube catheter), and 57460 (colposcopy).

Response: After a review of our most recent claims data for site of service and an examination of the clinical nature of the surgical procedures in question, we agree with the commenter, and we are not adding these codes to the list.

Comment: The same commenter agreed with our proposal to add CPT codes 57291 (artificial vagina construction) and 57556 (cervical stump excision) to the ASC list and our proposal to delete CPT codes 56405 (vulva drainage) and 57800 (cervix dilation) from the ASC list.

Response: We agree with the commenter. We are adding CPT codes 57291 and 57556 to the ASC list and deleting CPT codes 56405 and 57800.

Comment: A medical specialty society commented that we should delete from the ASC list CPT codes 15842 (microsurgical muscle graft), 26035 (decompression fingers, injection injury), 26037 (decompressive fasciotomy, hand), 27440 (arthroplasty, knee, tibial plateau), 42225 (palatoplasty w. attached pharyngeal flap), 60220 (total thyroid lobectomy), and 60225 (total thyroid lobectomy). The commenter states that these procedures are hospital procedures and not appropriate for an ASC.

Response: We agree with the commenter and we are deleting these 7 procedures from the current list.

Comment: The same commenter disagreed with our proposal to add to the list the following procedures: CPT codes 42842 (extensive throat surgery), 42844 (extensive throat surgery), 57284 ( printed page 15273) (paravaginal defect repair), 60210 (thyroid partial excision), and 60240 (thyroid removal). The commenter stated that these procedures are hospital procedures and not appropriate for same day surgery performance in an ASC. Another medical organization also recommended not adding CPT code 57284 to the list.

Response: Our medical staff have reviewed these codes and agree with the commenters. Therefore, we are not implementing these proposed additions to the list.

Comment: The same medical specialty society further stated that the following codes should be deleted from the ASC list: 15840 (face nerve palsy graft), 15841 (face nerve palsy graft), 15845 (skin and muscle repair, face), 19318 (large breast reduction), and 19340 (immediate breast prosthesis). The commenter stated these procedures are not appropriate for an ASC setting.

Response: Our medical staff have reviewed the clinical nature of these procedures and have determined that they may appropriately be performed in an ASC. Further, our 2001 claims data show that these procedures are being performed in a significant number of cases in an outpatient setting. Therefore, we are retaining these procedures on the ASC list.

Comment: The same commenter states that we should not add proposed CPT code 40700 (repair cleft lip, nasal), because this procedure is not appropriate for an ASC.

Response: Our 2001 claims data indicate that equal numbers of cases were reported as being performed in a hospital inpatient, hospital outpatient, and ASC setting. Our medical advisors reviewed the clinical nature of this procedure and determined that it is appropriately performed in an ASC setting. Therefore, we will add this code to the list.

Comment: Commenters suggested that we add to the ASC list the following CPT codes: 27096 (injection, sacroiliac joint), 62284 (myelography, injection), 62287 (Aspiration/decompression, nucleus pulposus), 62290 (discography injection, lumbar), 62291 (discography injection, cervical), 62292 (chemonucleolysis injection), 62298 (injection, other than anesthetic), 64640 (destruction by neurolytic agent, peripheral nerve), and 64714 (neuroplasty).

Response: Our medical staff reviewed the clinical nature of these codes and agreed that CPT codes 27096, 62292, and 62298 were appropriate additions to the ASC list. Note that in CY 2000, CPT code 62298 was replaced by code 62310, which we added to the ASC list in 2000 by program memorandum. CPT codes 27096 and 62292, while clinically appropriate for the list, would be significantly overpaid in the lowest ASC payment group, so we are not adding them to the ASC list. CPT code 64714 is already on the ASC list. CPT codes 62284, 62290 and 62291 are codes for injections used in connection with diagnostic imaging procedures that are not payable as ASC services. Therefore, we would not pay separately for these procedures in the ASC setting. According to our Medicare billing data, CPT 64640 is performed 68 percent of the time in a physician's office, so this procedure is not being added to the list. CPT 62287, which we proposed for addition to the list, will be added.

Comment: Some commenters believed that it was appropriate to add CPT codes 42415 (parotoid surgery), 31254 (partial ethmoid endoscopy), 31255 (ethmoid endoscopy), 31256 (nasal endoscopy with antrostomy), 31267 (nasal endoscopy with maxillary endoscopy), and 31276 (nasal endoscopy with frontal endoscopy) to the list. The commenters asserted that all of these procedures are suitable and routinely performed in an ASC setting.

Response: After review by clinical staff, we agree with the commenter and we are adding CPT code 42415 to the list. CPT codes 31254, 31255, 31256, 31267 and 31276 are currently on the ASC list and will remain on the list.

Comment: We received comments stating that certain laproscopic procedures should be added to the ASC list. They are: CPT codes 56340, 56341 and 56342 (laparoscopic cholecystectomy with and without cholangiography and common duct exploration) and CPT code 56348 (laparoscopic assisted vaginal hysterectomy). Commenters stated these procedures are routinely performed in an outpatient setting and would be appropriate for an ASC.

Response: Our medical staff determined that these procedures may be appropriately performed in an ASC for many non-Medicare beneficiaries in the 65-and-under age group. However, these procedures often involve an overnight stay for Medicare beneficiaries and they do not conform to our standard for ASC procedures in § 416.65(b)(ii). Therefore, we are not adding them to the ASC list.

Comment: Some commenters wrote that we should retain the following procedures proposed for deletion: CPT codes 51726 (Complex cystometrogram), 51772 (Urethra pressure profile), 51785 (Anal/urinary pressure study), 50392 (Insert kidney drain), 50393 (Insert ureteral tube), 50395 (Create passage for kidney), 50684 (Injection for ureter x-ray), 50690 (Injection for ureter x-ray), 51600 (Injection for bladder x-ray), 51605 (Preparation for bladder x-ray), and 51610 (Injection for bladder x-ray).

Response: Our medical staff reviewed these codes in light of the commenters' arguments against deleting them, and we agree that CPT codes 51726, 51772, 51785, 50392, 50393, and 50395 should be retained on the ASC list. CPT codes 50684, 50690, 51600, 51605, and 51610 are services that involve injections, which are packaged into imaging procedures that are not payable in an ASC, and we are making final their deletion from the ASC list.

Comment: Some of the same commenters also agreed with our proposal to delete CPT code 51725, Simple Cystometrogram and not add to the list CPT codes 51736 Simple Uroflowmetry and 51741 Complex Uroflowmetry.

Response: In the absence of disagreement from commenters, we are making our proposal regarding these codes final.

Comment: Another commenter recommended that we not remove the following CPT codes from the list: 50970, 50972, 50974, 50976, 50978, and 50980, all of which are ureteral endoscopy codes.

Response: We reviewed these procedures and we agree with the commenter that they are appropriate to the ASC setting and consistent with our criteria for the ASC list. Therefore, we are not removing these codes from the list.

Comment: A few commenters wanted us not to delete CPT codes 51005 (Aspiration of bladder) and 51010 (Aspiration of bladder). These commenters also wanted us to add the following codes to the ASC list: 54450 (Foreskin manipulation), 51000 (Aspiration bladder), 53600 (Dilate urethral stricture), 53601 (Dilate urethral stricture), 53621 (Dilate urethral stricture), 53660 (Dilation female urethra), 53661 (Subsequent dilation female urethra), 53675 (Catheterization, complicated), and 54200 (Injection procedure, Peyronie).

Response: We reviewed our utilization data and agree with the commenters that CPT code 51010 should remain on the ASC list. With the exception of CPT code 53675, all of the other procedures recommended by the commenters are performed more than 50 percent of the time in physicians' offices, some as frequently as 99 percent of the reported cases. Therefore, we are not adding these procedures to the list consistent with our current regulation at § 416.65(a)(2), which requires that the ( printed page 15274) ASC list not include procedures that are commonly performed or that may be safely performed in physicians' offices. CPT code 53675, Complex catheterization, would be significantly overpaid in the lowest ASC payment group. Therefore, we are not adding this procedure to the list.

Comment: A few commenters opposed our proposal to remove the following codes from the ASC list: CPT codes 50520 (Closure of nephrocutaneous fistula), 50570 (Renal endoscopy), 50572 (Renal endoscopy), 50574 (Renal endoscopy), 50576 (Renal endoscopy), 50578 (Renal endoscopy), and 50580 (Renal endoscopy).

Response: These codes describe procedures that are not consistent with our criteria in section § 416.65(b)(3) and therefore are not appropriate to be performed in an ASC. Therefore, we are making our proposal final and we are deleting these codes from the list.

Comment: In our proposed rule we proposed to delete the following nerve injection CPT codes: 64410, 64415, 64417, 64420, 64421, 64430, 64442, 64443, 64510, 64520, 64530, 64600, 64605, 64610, 64620, 64622, 64623, 64630, and 64680. These proposed deletions prompted numerous comments from ASCs specializing in pain management and from interventional pain physicians. Commenters argued that concerns about patient safety supported retaining these nerve block injection codes on the ASC list. They stated that the minimally acceptable requirements for safe completion of these procedures include continuous monitoring of heart function, lung function and breathing. The placement of injections in the spinal area requires the highest infection control standards. In addition, fluoroscopic guidance is necessary to assure precise needle placement. Injections can provoke severe hypertension, chest pain, cardiac arrythmias, myocardial infarction, severe pain and vasovagal reactions. Risks include seizures, respiratory and cardiac arrest, hypotension, respiratory depression, pneumothorax, total spinal anesthesia, infection, local anesthetic toxicity, paralysis and death. Commenters argued that because of the risks associated with these procedures, they require the health and safety protections assured by the conditions for coverage of ASC services found in part 416 of the regulations.

A few commenters supported deletion of the nerve injection codes from the ASC list. These commenters stated that they are able to perform these nerve injections in their offices. However, these commenters also stated that they operate in environments with resuscitation facilities and radiological guidance, more typically found in an ASC or a hospital outpatient setting than in a physician's office.

Response: The preponderance of comments opposing deletion of these codes from the ASC list stressed that assuring patient safety requires monitoring and special equipment not customarily found in the physician office setting. Even the minority supporting deletion noted the need for special safety measures in their comments. In light of these comments, we have retained these procedures on the ASC list (with the exception of CPT codes 64442 and 64443, which have been deleted by CPT) because as required by the conditions for coverage in §§ 416.41 and 416.44, ASCs are specifically equipped to provide the level of patient care and monitoring needed to ensure patient health and safety when these procedures are performed. In addition, ASCs are required to have in place appropriate procedures to address emergencies should they occur.

IV. Provisions of the Final Regulations

This final rule with comment period makes additions to and deletions from the current list of Medicare approved ASC procedures. In addition, this final rule with comment period responds to comments received from the June 12, 1998 proposed rule (63 FR 32290) that addressed proposed additions to and deletions from the list of ASC approved procedures. This final rule with comment period implements requirements of section 1833(i)(1) and (2) of the Act.

The addendum that follows this preamble contains the complete list of surgical procedures that are approved for an ASC facility fee payment effective for services furnished on or after July 1, 2003. The addendum also designates those CPT codes that are additions to or deletions from the current ASC list. The CPT code for each procedure is listed in column 1. In column 2, the letter “A” indicates a code that is being added to the ASC in this final rule. The letter “A*” (with an asterisk) indicates a code added to CPT since 1998 that we are adding to the list but that we did not propose to add in the June 1998 proposed rule. CPT codes designated with “A*” are those for which we are soliciting comments. The letter “D” in column 2 indicates a code that is being deleted from the ASC list. Column 3 provides the short descriptor for the CPT code in column 1. Column 4 indicates the current payment group to which an approved code is assigned. Column 5 indicates the FY 2003 payment amount for the assigned payment group. We solicit comments on additions to the ASC list designated with “A*” in column 2 and the payment group to which these additions are assigned. The codes designated by “A*” in column 2 are new CPT codes that were added to CPT in 1999, 2000, 2001, 2002, and 2003 that are similar to procedures on the updated ASC list.

V. Collection of Information Requirements

This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 35).

VI. Waiver of Proposed Rulemaking

We ordinarily publish a proposed notice in the Federal Register and invite public comment when we add to the ASC list HCPCS codes that describe new surgical procedures. The proposed notice includes a reference to the legal authority under which the additions to the list are proposed and a description of the subjects and issues involved. We solicit comment both on the appropriateness of performing the new procedures in an ASC and the payment rate that we propose as the ASC facility fee for the new procedures. This process can be waived, however, if the agency finds good cause that a notice-and-comment procedure is impracticable, unnecessary, or contrary to the public interest and incorporates a statement of the finding and its reasons in the rule that is issued.

For reasons that we explain elsewhere in this preamble, we have not previously issued a rule to make final the additions and deletions proposed in the June 12, 1998 proposed rule. For the same reasons, we have not issued proposed notices regarding the addition to the ASC list of new CPT codes that were created during the years since publication of the June 12 proposed rule. This final rule with comment adopts some provisions set forth in the June 12, 1998 proposed rule (63 FR 32290). In this final rule with comment, we are also making certain additions to the ASC list that were not proposed in the June 12 rule and that are subject to comment. Specifically, we are adding new CPT codes for surgical procedures that were added to CPT in 1999, 2000, 2001, 2002, and 2003, and we are assigning those codes to an existing ASC payment group. ( printed page 15275)

We are making the addition of these new CPT codes to the ASC list effective for services furnished on or after July 1, 2003 because we believe that were we not to add them in this final rule, we would limit beneficiary access to surgical procedures that can be appropriately performed in the ASC setting. If these codes are not payable under the ASC benefit, beneficiaries are limited to receiving the services that they describe in a hospital setting. Also, ASCs cannot receive a facility fee for these services under the Medicare ASC benefit if we do not add them to the list. Therefore, delay in adding these new surgical procedures to the ASC list is contrary to the public interest.

Also, it is impracticable not to add the applicable new CPT codes created from 1999 through 2003 until after we have received public comments, analyzed those comments, and issued a final rule. To do so could mean that the new CPT codes would not be made final under the ASC benefit until 2004, at the earliest.

For these reasons, we find good cause to waive the notice of proposed rulemaking and to issue this final rule with comment. We are providing a 60-day public comment period regarding the addition of the new CPT codes, designated by an “A*” in the addendum and the payment group to which these codes are assigned. We will respond to timely comments in the next final notice or final rule that we issue regarding the ASC benefit.

VII. Regulatory Impact Statement

A. Overall Impact

We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), Section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). Our Office of the Actuary has prepared a fiscal impact estimate. As shown in the table below, for fiscal years 2003 through 2007, the cost to the Medicare program is estimated to be $5 million per year. Therefore, this is not considered a major rule.

The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $6 to $29 million in any 1 year. According to the small business associations, approximately 73 percent of all ASCs are considered small entities by having revenues of $11.5 million or less. Individuals and States are not included in the definition of a small entity.

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 fewer than 100 beds. This rule does not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule that may result in expenditure in any 1 year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. This rule will not have an effect on the governments mentioned and the private sector costs will be less than the $110 threshold.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. This rule will not have a substantial effect on State or local governments.

B. Anticipated Effects

The entities affected by this final rule with comment period are Medicare certified ASCs and beneficiaries. No other providers are affected. This rule will not affect state or local governments or the private sector other than ASCs. There are more than 3,000 ASCs currently certified by Medicare, nearly three-quarters of which fit the definition of a “small entity.”

The result of this rule is to increase the number of ASC procedures approved for Medicare payment by approximately 300, thereby making more surgical services payable by Medicare in an ASC available to beneficiaries. ASCs will benefit from our expanding the list of Medicare approved ASC procedures because the number of services for which Medicare will pay a facility fee will increase as a result. Currently, if ASCs perform these procedures, Medicare does not allow payment of a facility fee. Our adding these codes to the ASC list also enables ASCs to serve a greater number of beneficiaries by being able to offer access to an increased number of surgical services. The number of claims for ASC services would increase. No specific provisions of this final rule have yet been implemented. If this final rule is not issued, beneficiaries would be denied access to approximately 300 surgical procedures in the ASC setting and this would limit beneficiary choice.

Some individuals have advocated the elimination of the ASC list on the basis that the decision regarding where to perform a procedure rests ultimately with the physician. These same individuals support payment of an ASC facility fee for any surgical procedure covered by Medicare in a clinic or hospital outpatient setting. The requirements for an ASC list are imposed by the statute, so we cannot adopt this recommendation.

ASCs that specialize in dermatology, gastroenterology, and orthopedics may object to our not adding certain procedures that we proposed in our June 1998 proposed rule. In particular, we are not adding procedures performed more than 50 percent of the time in a physician's office, procedures that are not appropriately or safely performed in an ambulatory setting, or procedures that would otherwise have met the criteria for inclusion on the ASC list except that they would be significantly overpaid in the lowest ASC payment group. We have determined that the adverse economic impact on the Medicare program that could result from a shift of such services to an ASC setting outweighs the potential negative reaction of these medical specialties.

ASCs that furnish extracorporeal shockwave lithotripsy (ESWL) services may also object to our not adding this procedure to the ASC list. However, as ( printed page 15276) we explained above, because we are not updating the ASC payment rates and ratesetting methodology in this final rule, we would not be in compliance with the District Court order issued in American Lithotripsy Society v. Sullivan, 785, F. Supp. 1035 (D.D.C. 1992) if we were to add ESWL to the ASC list without further data and information. Overall, we believe the increased beneficiary access to surgical services and the expansion of the ASC list that will result from this final rule outweighs potential objections to our not including certain additions that were proposed in 1998 to the ASC list.

For the above reasons, we are not preparing analyses for either the RFA or section 1102(b) of the Act because we have determined, and we certify, that this rule would not have a significant economic impact on a substantial number of small entities or a significant impact on the operations of a substantial number of small rural hospitals.

C. Alternatives Considered

As stated above, we are issuing this final rule with comment to implement additions to and deletions from the ASC list proposed in the June 1998 proposed rule. However, we are not implementing the ratesetting method, rebased payment rates, and changes in the regulations that were also proposed in the June 1998 proposed rule. We considered not updating the ASC list until we completed a survey of ASC costs to use in rebasing the ASC payment rates. However, we decided against this approach because it could have resulted in delaying the update of the list for several years while we conducted the survey and audited and compiled the data upon which to rebase the rates.

We considered basing payment rates for procedures being added to the ASC list in this final rule on the ASC payment group that most closely approximated the payment amount for the same procedures under the hospital outpatient prospective payment system (OPPS). However, the statute requires that payment rates be tied to ASC, not hospital outpatient costs, so we decided, as explained previously in this preamble, to match the additions to the list to procedures already on the list that are similar in terms of clinical work and resource inputs and to assign the new code to the same payment group as the current code. This approach better maintains internal consistency in ASC payment rates among codes on the list that are similar.

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.