[Federal Register Volume 77, Number 221 (Thursday, November 15, 2012)]
[Rules and Regulations]
[Pages 68209-68565]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26902]



[[Page 68209]]

Vol. 77

Thursday,

No. 221

November 15, 2012

Part II





 Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 416, 419, 476, et al.





 Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Electronic Reporting Pilot; Inpatient 
Rehabilitation Facilities Quality Reporting Program; Revision to 
Quality Improvement Organization Regulations; Final Rule

Federal Register / Vol. 77 , No. 221 / Thursday, November 15, 2012 / 
Rules and Regulations

[[Page 68210]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 416, 419, 476, 478, 480, and 495

[CMS-1589-FC]
RIN 0938-AR10


Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Electronic Reporting Pilot; Inpatient 
Rehabilitation Facilities Quality Reporting Program; Revision to 
Quality Improvement Organization Regulations

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

ACTION: Final rule with comment period.

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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 2013 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, the ASC 
Quality Reporting (ASCQR) Program, and the Inpatient Rehabilitation 
Facility (IRF) Quality Reporting Program. We are continuing the 
electronic reporting pilot for the Electronic Health Record (EHR) 
Incentive Program, and revising the various regulations governing 
Quality Improvement Organizations (QIOs), including the secure 
transmittal of electronic medical information, beneficiary complaint 
resolution and notification processes, and technical changes. The 
technical changes to the QIO regulations reflect CMS' commitment to the 
general principles of the President's Executive Order on Regulatory 
Reform, Executive Order 13563 (January 18, 2011).

DATES: Effective Date: This final rule with comment period is effective 
on January 1, 2013.
    Comment Period: To be assured consideration, comments on the 
payment classifications assigned to HCPCS codes identified in Addenda 
B, AA, and BB of this final rule with comment period 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 
31, 2012.
    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, 2013, at the following address: ASC/NTOL, 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-1589-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-1589-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-1589-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: 
    Marjorie Baldo, (401) 786-4617, for issues related to new CPT and 
Level II HCPCS codes, exceptions to the 2 times rule, and new 
technology APCs.
    Anita Bhatia, (410) 786-7236, Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program--Program Administration and Reconsideration 
Issues.
    Douglas Brown, (410) 786-0028, for issues related to Electronic 
Health Record (EHR) Incentive Program Electronic Reporting Pilot.
    Carrie Bullock, (401) 786-0378, for issues related to blood 
products.
    Erick Chuang, (410) 786-1816, for issues related to OPPS APC 
weights, mean calculation, copayments, wage index, outlier payments, 
and rural hospital payments.
    Caroline Gallaher, (410) 786-8705, for issues related to Inpatient 
Rehabilitation Facility (IRF) Quality Reporting Program.
    Shaheen Halim (410) 786-0641, Hospital Outpatient Quality Reporting 
Program (OQR)--Measures Issues and Publication of Hospital OQR Program 
Data, and Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program--Measures Issues and Publication of ASCQR Program Data.
    Twi Jackson, (410) 786-1159, for issues related to device-dependent 
APCs, no cost/full credit and partial credit devices, hospital 
outpatient visits, extended assessment and management composite APCs, 
and inpatient-only procedures.
    Thomas Kessler, (401) 786-1991, for issues related to QIO 
regulations.

[[Page 68211]]

    Marina Kushnirova, (410) 786-2682, for issues related to OPPS 
status indicators and comment indicators.
    Barry Levi, (410) 786-4529, for issues related to OPPS pass-through 
devices, brachytherapy sources, intraoperative radiation therapy 
(IORT), brachytherapy composite APC, multiple imaging composite APCs, 
cardiac resynchronization therapy composite APC, and cardiac 
electrophysiologic evaluation and ablation composite APC.
    Jana Lindquist, (410) 786-4533, for issues related to partial 
hospitalization and community mental health center (CMHC) issues.
    Ann Marshall, (410) 786-3059, for issues related to hospital 
outpatient supervision, outpatient status, proton beam therapy, and the 
Hospital Outpatient Payment (HOP) Panel.
    John McInnes, (410) 786-0378, for issues related to new technology 
intraocular lenses (NTIOLs) and packaged items/services.
    James Poyer, (410) 786-2261, Hospital Outpatient Quality 
Reporting--Program Administration, Validation, and Reconsideration 
Issues.
    Char Thompson, (410) 786-2300, for issues related to OPPS drugs, 
radiopharmaceuticals, biologicals, blood clotting factors, cost-to-
charge ratios (CCRs), and ambulatory surgical center (ASC) payments.
    Marjorie Baldo, (410) 786-4617, for all other issues related to 
hospital outpatient and ambulatory surgical center payments not 
previously identified.

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.gpo.gov/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 will be published and 
available only on the CMS Web site. The Addenda relating to the OPPS 
are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-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. Readers who 
experience any problems accessing any of the Addenda that are posted on 
the CMS Web site identified above should contact Charles Braver at 
(410) 786-0378.

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

AHA American Hospital Association
AMA American Medical Association
APC Ambulatory Payment Classification
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAP Competitive Acquisition Program
CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter associated urinary tract infection
CBSA Core-Based Statistical Area
CCI Correct Coding Initiative
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CEO Chief executive officer
CERT Comprehensive Error Rate Testing
CFR Code of Federal Regulations
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP [Medicare] Condition of participation
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CQM Clinical quality measure
CR Change request
CSAC Consensus Standards Approval Committee
CY Calendar year
DFO Designated Federal Official
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-Related Group
DSH Disproportionate share hospital
EACH Essential access community hospital
eCQM Electronically specified clinical quality measure
ECT Electroconvulsive therapy
ED Emergency department
E/M Evaluation and management
EHR Electronic health record
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Public Law 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HEU Highly enriched uranium
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HITECH Health Information Technology for Economic and Clinical 
Health [Act] (found in the American Recovery and Reinvestment Act of 
2009, Public Law 111-5)
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD Implantable cardioverter defibrillator
ICU Intensive care unit
IHS Indian Health Service
IMRT Intensity Modulated Radiation Therapy
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IOM Institute of Medicine
IORT Intraoperative radiation treatment
IPF Inpatient Psychiatric Facility
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment 
Instrument

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IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
LDR Low dose rate
LOS Length of Stay
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law. 111-
309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MPFS Medicare Physician Fee Schedule
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NQF National Quality Forum
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PCR Payment-to-cost ratio
PE Practice expense
PEPPER Program for Evaluating Payment Patterns Electronic Report
PHP Partial hospitalization program
PHS Public Health Service [Act], Public Law 96-88
PPI Producer Price Index
PPS Prospective payment system
PQRS Physician Quality Reporting System
PT Physical therapy
QDC Quality data code
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RFA Regulatory Flexibility Act
RTI Research Triangle Institute, International
RVU Relative value unit
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SI Status indicator
SIR Standardized infection ratio
SLP Speech-language pathology
SNF Skilled Nursing Facility
SRS Stereotactic Radiosurgery
TEP Technical Expert Panel
TMS Transcranial Magnetic Stimulation Therapy
TOPs Transitional Outpatient Payments
UR Utilization review
USPSTF United States Preventive Services Task Force
UTI Urinary tract infection
VBP Value-based purchasing
WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background
    A. Executive Summary of This Final Rule With Comment Period
    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), Formerly Named the Advisory Panel on Ambulatory 
Payment Classification Groups (APC Panel)
    1. Authority of the Panel
    2. Establishment of the Panel
    3. Panel Meetings and Organizational Structure
    F. Public Comments Received in Response to the CY 2013 OPPS/ASC 
Proposed Rule
    G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule 
With Comment Period
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
    (2) Creation of ``Pseudo'' Single Procedure Claims
    c. Completion of Claim Records and Geometric Mean Cost 
Calculations
    (1) General Process
    (2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    d. Calculation of Single Procedure APC Criteria-Based Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Brachytherapy Sources
    e. Calculation of Composite APC Criteria-Based Costs
    (1) Extended Assessment and Management Composite APCs (APCs 8002 
and 8003)
    (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (3) Cardiac Electrophysiologic Evaluation and Ablation Composite 
APC (APC 8000)
    (4) Mental Health Services Composite APC (APC 0034)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    (6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
    f. Geometric Mean-Based Relative Payment Weights
    3. Changes to Packaged Services
    a. Background
    b. Clarification of Regulations at 42 CFR 419.2(b)
    c. Packaging Recommendations of the HOP Panel (``The Panel'') at 
its February 2012 Meeting
    d. Packaging Recommendations of the HOP Panel (``The Panel'') at 
its August 2012 Meeting
    e. Other Packaging Proposals and Policies for CY 2013
    f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals
    (1) Existing Packaging Policies
    (2) Clarification of Packaging Policy for Anesthesia Drugs
    g. Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' 
Drugs and Devices)
    h. Summary of Proposals
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. OPPS Payments to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes
    2. 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 2013
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Final Outlier Calculation
    4. Outlier Reconciliation
    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 2012 Level II HCPCS and CPT Codes 
Effective April 1, 2012 and July 1, 2012 for Which We Solicited 
Public Comments in the CY 2013 OPPS/ASC Proposed Rule
    2. Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be 
Effective January 1, 2013 for Which We Are Soliciting Public 
Comments in this CY 2013 OPPS/ASC Final Rule with Comment Period
    B. OPPS Changes--Variations within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background

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    2. Movement of Procedures From New Technology APCs to Clinical 
APCs
    3. Payment Adjustment Policy for Radioisotopes Derived From Non-
Highly Enriched Uranium (HEU) Sources
    a. Background
    b. Payment Policy
    D. OPPS APC-Specific Policies
    1. Cardiovascular and Vascular Services
    a. Cardiac Telemetry (APC 0213)
    b. Mechanical Thrombectomy (APC 0653)
    c. Non-Congenital Cardiac Catheterization (APC 0080)
    d. Endovascular Revascularization of the Lower Extremity (APCs 
0083, 0229, and 0319)
    e. External Electrocardiographic Monitoring (APC 0097)
    f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697)
    2. Gastrointestinal Services
    a. Laparoscopic Adjustable Gastric Band (APC 0132)
    b. Transoral Incisionless Fundoplication (APC 0422)
    c. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    3. Integumentary System Services
    a. Extracorporeal Shock Wave Wound Treatment (APC 0340)
    b. Application of Skin Substitute (APCs 0133 and 0134)
    c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)
    4. Nervous System Services
    a. Scrambler Therapy (APC 0275)
    b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)
    c. Paravertebral Neurolytic Agent (APC 0207)
    d. Programmable Implantable Pump (APC 0691)
    e. Revision/Removal of Neurostimulator Electrodes (APC 0687)
    5. Ocular Services: Placement of Amniotic Membrane (APC 0233)
    6. Radiology Oncology
    a. Proton Beam Therapy (APCs 0664 and 0667)
    b. Device Construction for Intensity Modulated Radiation Therapy 
(IMRT) (APC 0305)
    c. Other Radiation Oncology Services (APCs 0310 and 0412)
    d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0065, 0066, 0067 and 0127)
    e. Intraoperative Radiation Therapy (IORT) (APC 0412)
    (1) Background
    (2) CY 2013 Proposals and Final Policies for CPT Codes 77424, 
77425, and 77469
    7. Imaging
    a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397)
    b. Level II Nervous System Imaging (APC 0402)
    c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)
    8. Respiratory Services
    a. Bronchoscopy (APC 0415)
    b. Upper Airway Endoscopy (APC 0075)
    9. Other Services
    a. Payment for Molecular Pathology Services
    b. Bone Marrow (APC 0112)
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 2013 Policy
    2. Provisions for Reducing Transitional Pass-Through Payments to 
Offset Costs Packaged into APC Groups
    a. Background
    b. CY 2013 Policy
    3. Clarification of Existing Device Category Criterion
    a. Background
    b. Clarification of CY 2013 Policy
    B. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. APCs and Devices Subject to the Adjustment Policy
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 
2012
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2013
    4. Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals and Contrast Agents to Offset 
Costs Packaged Into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    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, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. 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 2013 Payment Policy
    4. Payment Policy for Therapeutic Radiopharmaceuticals
    5. Payment for Blood Clotting Factors
    6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital 
Claims Data
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. Background
    B. Policies for Hospital Outpatient Visits
    C. Transitional Care Management
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2013
    C. Coding Changes
    D. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Would Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
X. Policies for the Supervision of Outpatient Services in Hospitals 
and CAHs
    A. Conditions of Payment for Physical Therapy, Speech-Language 
Pathology, and Occupational Therapy Services in Hospitals and CAHs
    B. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
XI. Outpatient Status: Solicitation of Public Comments in the CY 
2013 OPPS/ASC Proposed Rule
    A. Background
    B. Summary of Public Comments Received
    1. Part A to Part B Rebilling
    2. Clarifying Current Admission Instructions or Establishing 
Specified Clinical Criteria
    3. Hospital Utilization Review
    4. Prior Authorization
    5. Time-Based Criteria for Inpatient Admission
    6. Payment Alignment
    7. Public Comments on Other Topics
    a. Rules for the External Review of Inpatient Claims
    b. Improving Beneficiary Protections
    c. Revising the Qualifying Criteria for Skilled Nursing Facility 
(SNF) Coverage
    C. Summary
XII. CY 2013 OPPS Payment Status and Comment Indicators
    A. CY 2013 OPPS Payment Status Indicator Definitions
    B. CY 2013 Comment Indicator Definitions
XIII. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. GAO Recommendations
    C. OIG Recommendations
XIV. 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 Codes
    1. Process for Recognizing New Category I and Category III CPT 
Codes and Level II HCPCS Codes
    2. Treatment of New Level II HCPCS Codes and Category III CPT 
Codes Implemented in April and July 2012 for Which We

[[Page 68214]]

Solicited Public Comments in the CY 2013 OPPS/ASC Proposed Rule
    3. Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Are Soliciting Public Comments 
in This CY 2013 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. Additions to the List of ASC Covered Surgical Procedures
    b. Covered Surgical Procedures Designated as Office-Based
    (1) Background
    (2) Changes for CY 2013 to Covered Surgical Procedures 
Designated as Office-Based
    c. ASC Covered Surgical Procedures Designated as Device-
Intensive
    (1) Background
    (2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2013
    d. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    e. ASC Treatment of Surgical Procedures Removed From the OPPS 
Inpatient List for CY 2013
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
2013
    c. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    d. Payment for the Cardiac Resynchronization Therapy Composite
    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 2013
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Cycle and Evaluation Criteria
    2. NTIOL Application Process for Payment Adjustment
    3. Requests to Establish New NTIOL Classes for CY 2013 and 
Deadline for Public Comments
    4. Payment Adjustment
    5. Revisions to the Major NTIOL Criteria Described in 42 CFR 
416.195
    6. Request for Public Comment on the ``Other Comparable Clinical 
Advantages'' Improved Outcome
    7. Announcement of CY 2013 Deadline for Submitting Requests for 
CMS Review of Appropriateness of ASC Payment for Insertion of an 
NTIOL Following Cataract Surgery
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. ASC Policy and Payment Recommendations
    H. 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 2013 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of CY 2013 ASC Payment Rates
XV. Hospital Outpatient Quality Reporting Program Updates
    A. Background
    1. Overview
    2. Statutory History of the Hospital Outpatient Quality 
Reporting (Hospital OQR) Program
    3. Measure Updates and Data Publication
    a. Process for Updating Quality Measures
    b. Publication of Hospital OQR Program Data
    B. Process for Retention of Hospital OQR Program Measures 
Adopted in Previous Payment Determinations
    C. Removal or Suspension of Quality Measures From the Hospital 
OQR Program Measure Set
    1. Considerations in Removing Quality Measures From the Hospital 
OQR Program
    2. Removal of One Chart-Abstracted Measure for the CY 2013 and 
Subsequent Years Payment Determinations
    3. Suspension of One Chart-Abstracted Measure for the CY 2014 
and Subsequent Years Payment Determinations
    4. Deferred Data Collection of OP-24: Cardiac Rehabilitation 
Measure: Patient Referral From an Outpatient Setting for the CY 2014 
Payment Determination
    D. Quality Measures for CY 2015 Payment Determination
    E. Possible Quality Measures Under Consideration for Future 
Inclusion in the Hospital OQR Program
    F. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2013 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2013
    G. Requirements for Reporting of Hospital OQR Data for the CY 
2014 Payment Determination and Subsequent Years
    1. Administrative Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    2. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program for the CY 2014 Payment Determination and Subsequent 
Years
    a. Background
    b. General Requirements
    c. Chart-Abstracted Measure Requirements for CY 2014 and 
Subsequent Payment Determination Years
    d. Claims-Based Measure Data Requirements for the CY 2014 and CY 
2015 Payment Determinations
    e. Structural Measure Data Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    f. Data Submission Requirements for OP-22: ED-Patient Left 
Without Being Seen for the CY 2015 Payment Determination
    g. Population and Sampling Data Requirements for the CY 2014 
Payment Determination and Subsequent Years
    3. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2014 
Payment Determination and Subsequent Years
    a. Random Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2014 Payment Determination and 
Subsequent Years
    b. Targeting and Targeting Criteria for Data Validation 
Selection for CY 2014 Payment Determination and for Subsequent Years
    c. Methodology for Encounter Selection for the CY 2014 Payment 
Determination and Subsequent Years
    d. Validation Score Calculation for the CY 2014 Payment 
Determination and Subsequent Years
    H. Hospital OQR Reconsideration and Appeals Procedures for the 
CY 2014 Payment Determination and Subsequent Years
    I. Extraordinary Circumstances Extension or Waiver for the CY 
2013 Payment Determination and Subsequent Years
    J. Electronic Health Records (EHRs)
    K. 2013 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Eligible Hospitals and CAHs
XVI. Requirements for the Ambulatory Surgical Centers Quality 
Reporting (ASCQR) Program
    A. Background
    1. Overview
    2. Statutory History of the ASC Quality Reporting (ASCQR) 
Program
    3. History of the ASCQR Program
    B. ASCQR Program Quality Measures
    1. Considerations in the Selection of ASCQR Program Quality 
Measures
    2. ASCQR Program Quality Measures
    3. ASC Measure Topics for Future Consideration
    4. Clarification Regarding the Process for Updating ASCQR 
Program Quality Measures
    C. Requirements for Reporting of ASC Quality Data
    1. Form, Manner, and Timing for Claims-Based Measures for the CY 
2014 Payment Determination and Subsequent Payment Determination 
Years
    a. Background
    b. Form, Manner, and Timing for Claims-Based Measures for the CY 
2015 Payment Determination and Subsequent Payment Determination 
Years
    2. Data Completeness and Minimum Threshold for Claims-Based 
Measures Using QDCs
    a. Background
    b. Data Completeness Requirements for the CY 2015 Payment 
Determination and Subsequent Payment Determination Years
    3. Other Comments on the ASCQR Program
    D. Payment Reduction for ASCs That Fail To Meet the ASCQR 
Program Requirements
    1. Statutory Background
    2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet 
the ASCQR Program Requirements for the CY 2014 Payment Determination 
and Subsequent Payment Determination Years

[[Page 68215]]

XVII. Inpatient Rehabilitation Facility (IRF) Quality Reporting 
Program Updates
    A. Overview
    B. Updates to IRF QRP Measures Which Are Made as a Result of 
Review by the National Quality Forum (NQF) Process
    C. Process for Retention of IRF Quality Measures Adopted in 
Previous Fiscal Year Rulemaking Cycles
    D. Measures for the FY 2014 Payment Determination
    1. Clarification Regarding Existing IRF Quality Measures That 
Have Undergone Changes During the NQF Measure Maintenance Processes
    2. Updates to the ``Percent of Residents Who Have Pressure 
Ulcers That Are New or Worsened'' Measure
XVIII. Revisions to the Quality Improvement Organization (QIO) 
Regulations (42 CFR Parts 476, 478, and 480)
    A. Summary of Changes
    B. Quality of Care Reviews
    1. Beneficiary Complaint Reviews
    2. Completion of General Quality of Care Reviews
    C. Use of Confidential Information That Explicitly or Implicitly 
Identifies Patients
    D. Secure Transmissions of Electronic Versions of Medical 
Information
    E. Active Staff Privileges
    F. Technical Corrections
XIX. Files Available to the Public Via the Internet
XX. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. 2013 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs (Sec.  495.8)
    C. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 
2014 and CY 2015 Payment Determinations
    a. Previously Adopted Hospital OQR Program Measures for the CY 
2012, CY 2013, and CY 2014 Payment Determinations
    b. Hospital OQR Program Measures for the CY 2014 Payment 
Determination
    c. Hospital OQR Program Measures for CY 2015
    3. Hospital OQR Program Validation Requirements for CY 2014
    4. Hospital OQR Program Reconsideration and Appeals Procedures
    5. ASCQR Program Requirements
    a. Claims-Based Outcome Measures for the CY 2014 Payment 
Determination
    b. Claims-Based Process, Structural, and Volume Measures for the 
CY 2015 and CY 2016 Payment Determinations
    c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstance and Extension Requests; Reconsideration 
Requests
    6. IRF QRP
    a. Pressure Ulcer Measure
    b. CAUTI Measure
XXI. Waiver of Proposed Rulemaking and Response to Comments
    A. Waiver of Proposed Rulemaking
    B. Response to Comments
XXII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for 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 ASC Payment System Final Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of ASC Payment System Final Policies on 
ASCs
    (3) Estimated Effects of ASC Payment System Final Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Effects of the Revisions to the QIO Regulations
    d. Accounting Statements and Tables
    e. Effects of Requirements for the Hospital OQR Program
    f. Effects of the EHR Electronic Reporting Pilot
    g. Effects of Proposals for the ASCQR Program
    h. Effects of Updates to the IRF QRP
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIII. Federalism Analysis
Regulation Text

I. Summary and Background

A. Executive Summary of This Final Rule With Comment Period

1. Purpose
    In this final rule with comment period, we are updating the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments and Ambulatory 
Surgical Centers (ASCs) beginning January 1, 2013. Section 1833(t) of 
the Social Security Act (the Act) requires us to annually review and 
update the relative payment weights and the conversion factor for 
services payable under the Outpatient Prospective Payment System 
(OPPS). Under 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.
    In addition to establishing payment rates for CY 2013, we are 
updating and implementing new requirements under the Hospital 
Outpatient Quality Reporting (OQR) Program, the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program, and the Inpatient 
Rehabilitation Facility (IRF) Quality Reporting Program. We are 
continuing the electronic reporting pilot for the Electronic Health 
Record (EHR) Incentive Program and making revisions to the regulations 
governing the Quality Improvement Organizations (QIOs), including the 
secure transmittal of electronic medical information, beneficiary 
complaint resolution and notification processes, and technical 
corrections. The technical changes to the QIO regulations that we are 
making to improve the regulations reflect CMS' commitment to the 
principles of the President's Executive Order on Regulatory Reform, 
Executive Order 13563 (January 18, 2011).
2. Summary of the Major Provisions
     OPPS Update: For CY 2013, we are increasing the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.8 percent. This increase is based on the 
final hospital inpatient market basket percentage increase of 2.6 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.7 percentage points, and minus a 0.1 percentage 
point adjustment required by the Affordable Care Act. Under this final 
rule with comment period, we estimate that total payments for CY 2013, 
including beneficiary cost-sharing, to the more than 4,000 facilities 
paid under the OPPS (including general acute care hospitals, children's 
hospitals, cancer hospitals, and community mental health centers 
(CMHCs)), will be approximately $48.1 billion, an increase of 
approximately $4.6 billion compared to CY 2012 payments, or $600 
million 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 reporting 
factor of 0.980 to the OPPS payments and copayments for all applicable 
services.
     Geometric Mean-Based Relative Payment Weights: CMS has 
discretion under the statute to set OPPS payments based upon either the 
estimated mean or median costs of services within an Ambulatory Payment 
Classification (APC) group, the unit of payment. To improve our cost 
estimation process, for

[[Page 68216]]

CY 2013 we are using the geometric mean costs of services within an APC 
to determine the relative payment weights of services, rather than the 
median costs that we have used since the inception of the OPPS. Our 
analysis shows that the change to means will have a limited payment 
impact on most providers, with a small number experiencing payment gain 
or loss based on their service-mix.
     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 2013, we are 
continuing our policy to provide additional payments to cancer 
hospitals so that the hospital's payment-to-cost ratio (PCR) with the 
payment adjustment is equal to the weighted average PCR for the other 
OPPS hospitals using the most recent submitted or settled cost report 
data. Based on those data, a target PCR of 0.91 will be used to 
determine the CY 2013 cancer hospital payment adjustment to be paid at 
cost report settlement. That is, the payment amount associated with the 
cancer hospital payment adjustment will be the additional payment 
needed to result in a PCR equal to 0.91 for each cancer hospital.
     Payment Adjustment Policy for Radio-Isotopes Derived from 
Non-Highly Enriched Uranium Sources: We are exercising our statutory 
authority to make payment adjustments necessary to ensure equitable 
payments in order to provide an adjustment for CY 2013 to cover the 
marginal cost of hospital conversion to the use of non-HEU sources of 
radio-isotopes used in medical imaging. The adjustment will cover the 
marginal cost of radio-isotopes produced from non-HEU sources over the 
costs of radio-isotopes produced by HEU sources.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2013, payment for the acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals that do not have pass-through 
status will be set at the statutory default of average sales price 
(ASP) plus 6 percent.
     Supervision of Hospital Outpatient Therapeutic Services: 
We are clarifying the application of the supervision regulations to 
physical therapy, speech-language pathology, and occupational therapy 
services that are furnished in OPPS hospitals and critical access 
hospitals (CAHs). In addition, in this final rule we note that we will 
extend the enforcement instruction one final year through CY 2013. This 
additional year, which we expect will be the final year of the 
extension, will provide additional opportunities for stakeholders to 
bring their issues to the Hospital Outpatient Payment Panel.
     Outpatient Status: We are concerned about recent increases 
in the length of time that Medicare beneficiaries spend as outpatients 
receiving observation services. In addition, hospitals continue to 
express concern about Medicare Part A to Part B rebilling policies when 
a hospital inpatient claim is denied because the inpatient admission 
was not medically necessary. In the CY 2013 OPPS/ASC proposed rule (77 
FR 45155 through 45157), we provided an update on the Part A to Part B 
Rebilling Demonstration that is in effect for CY 2012 through CY 2014, 
which was designed to assist us in evaluating these issues. We also 
solicited public comments on potential clarifications or changes to our 
policies regarding patient status that may be appropriate, which we 
discuss in this final rule with comment period.
     Ambulatory Surgical Center Payment Update: For CY 2013, we 
are increasing payment rates under the ASC payment system by 0.6 
percent. This increase is based on a projected CPI-U update of 1.4 
percent minus a multifactor productivity adjustment required by the 
Affordable Care Act that is projected to be 0.8 percent. 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 2013 will be approximately $4.074 billion, an 
increase of approximately $310 million compared to estimated CY 2012 
payments.
     New Technology Intraocular Lenses: We are revising the 
regulations governing payments for new technology intraocular lenses 
(NTIOLs) to require that the IOL's labeling, which must be approved by 
the FDA, contain a claim of a specific clinical benefit based on a new 
lens characteristic in comparison to currently available IOLs. We also 
are revising the regulations to require that any specific clinical 
benefit referred to in Sec.  416.195(a)(2) must be supported by 
evidence that demonstrates that the IOL results in a measurable, 
clinically meaningful, improved outcome.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we address the public comments received 
as a result of our solicitation in the proposed rule on our approach 
for future measure selection and development as well as certain 
measures for future potential inclusion in the ASCQR Program measure 
set. We are finalizing our approach to future measure selection and 
development for the ASCQR Program. For the CY 2015 payment 
determination and subsequent years' payment determinations, we are 
adopting requirements for claims-based measures regarding the dates for 
submission and payment of claims and data completeness. We also are 
finalizing our policy regarding how the payment rates will be reduced 
in CY 2014 and in subsequent calendar years for ASCs that fail to meet 
program requirements, and we are clarifying our policy on updating 
measures.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are not establishing any new measures for 
CY 2013. We also are not specifying any new targeting criteria to 
select hospitals for validation of medical records. We are confirming 
the removal or suspension of data collection for specific measures. We 
are specifying that the criteria we will consider when determining 
whether to remove measures for the Hospital Inpatient Quality Reporting 
(IQR) Program will also apply to the Hospital OQR Program. We are 
providing that measures adopted in future rulemaking are automatically 
adopted for all subsequent year payment determinations unless we 
remove, suspend, or replace them. We are making changes to 
administrative forms used in the program. We are extending the deadline 
for submitting a notice of participation form and to enter structural 
measures data.
     Electronic Health Record (EHR) Incentive Program: For the 
EHR Incentive Program, we are extending the 2012 Medicare EHR Incentive 
Program Electronic Reporting Pilot for Eligible Hospitals and CAHs 
through 2013, exactly as finalized for 2012. We recently issued a final 
rule (77 FR 53968) for Stage 2 of the Medicare and Medicaid EHR 
Incentive Programs.
     Inpatient Rehabilitation Facility Quality Reporting 
Program (IRF QRP): We are: (1) Adopting updates on one (out of two) 
previously adopted measure for the IRF QRP that will affect annual 
prospective payment amounts for FY 2014; (2) adopting a nonrisk-
adjusted version of an NQF-endorsed pressure ulcer measure for the IRF 
QRP, and we will not publicly report any pressure ulcer measure data 
until we begin risk adjustment of these data; (3) adopting a

[[Page 68217]]

policy that will provide that any measure that has been adopted for use 
in the IRF QRP will remain in effect until the measure is actively 
removed, suspended, or replaced; and (4) adopting policies regarding 
when notice-and-comment rulemaking will be used to update existing IRF 
QRP measures.
     Revisions to the Quality Improvement Organization (QIO) 
Regulations: We are revising the QIO program regulations to: (1) Give 
QIOs the authority to send and receive secure transmissions of 
electronic versions of medical information; (2) provide more detailed 
and improved procedures for QIOs when completing Medicare beneficiary 
complaint reviews and general quality of care reviews, including 
procedures related to a new alternative dispute resolution process 
called ``immediate advocacy''; (3) increase the information 
beneficiaries receive in response to QIO review activities; (4) convey 
to Medicare beneficiaries the right to authorize the release of 
confidential information by QIOs; and (5) make other technical changes 
that are designed to improve the regulations. The technical changes to 
the QIO regulations that we are making to improve the regulations 
reflect CMS' commitment to the principles of the President's Executive 
Order on Regulatory Reform, Executive Order 13563 (January 18, 2011).
3. Summary of Costs and Benefits
    In sections XXII. and XXIII. 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 include the following:
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
    Table 57 in section XXII. of this final rule with comment period 
displays the distributional impact all the OPPS changes on various 
groups of hospitals and CMHCs for CY 2013 compared to all estimated 
OPPS payments in CY 2012. We estimate that the policies in this final 
rule will result in a 1.9 percent overall increase in OPPS payments to 
providers. We estimate that the increase in OPPS expenditures, 
including beneficiary cost-sharing, will be approximately $600 million, 
not taking into account potential changes in enrollment, utilization, 
and case-mix. Taking into account estimated spending changes that are 
attributable to these factors, we estimate an increase of approximately 
$4.571 billion in OPPS expenditures, including beneficiary cost-
sharing, for CY 2013 compared to CY 2012 OPPS expenditures. We estimate 
that total OPPS payments, including beneficiary cost-sharing, will be 
$48.1 billion for CY 2013.
    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 
for CY 2011 and basing payment fully on the type of provider furnishing 
the service, we estimate a 4.4 percent decrease in CY 2013 payments to 
CMHCs relative to their CY 2012 payments.
(2) Impacts of Basing APC Relative Payment Weights on Geometric Mean 
Costs
    We estimate that our final policy to base the APC relative payment 
weights on the geometric mean costs rather than the median costs of 
services within an APC will not significantly impact most providers. 
Payments to very low volume urban hospitals and to hospitals for which 
disproportionate share hospital (DSH) data are not available will 
increase by an estimated 2.5 and 4.3 percent, respectively. The 
hospitals for which DSH data are not available are largely non-IPPS 
psychiatric hospitals. In contrast, payments to CMHCs will decrease by 
an estimated 3.9 percent due to basing the relative payment weights on 
the geometric mean costs of services rather than the median costs of 
services.
(3) Impacts of the Updated Wage Indices
    We estimate no significant impacts related to updating the wage 
indices and applying the frontier State wage index. Adjustments to the 
wage indices other than the frontier State wage adjustment will not 
significantly affect most hospitals. The updated wage indices will most 
affect urban hospitals in the Pacific and East South Central regions 
and rural hospitals in the Mountain and Pacific regions.
(4) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2013 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.
(5) Impacts of the OPD Fee Schedule Increase Factor
    We estimate that, for most hospitals, the application of the OPD 
fee schedule increase factor of 1.8 percent to the conversion factor 
for CY 2013 will mitigate the small negative impacts of the budget 
neutrality adjustments. Certain low volume hospitals and hospitals for 
which DSH data are not available will experience larger increases 
ranging from 4.5 percent to 8.2 percent. As a result of the OPD fee 
schedule increase factor and other budget neutrality adjustments, we 
estimate that rural and urban hospitals will experience similar 
increases of approximately 1.8 percent for urban hospitals and 2.1 
percent for rural hospitals. Classifying hospitals by teaching status 
or type of ownership suggests that these hospitals will receive similar 
increases.
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 2013 payment 
rates compared to estimated CY 2012 payment rates ranges between -3 
percent for respiratory system procedures, integumentary system 
procedures, and cardiovascular system procedures and 3 percent for 
nervous system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our CY 2013 policies to significantly affect the 
number of hospitals that do not receive a full annual payment update.
d. Impacts of the EHR Incentive Program Proposal
    There are no changes from the 2012 OPPS/ASC final rule to the costs 
or impact for the 2013 Medicare EHR Incentive Program Electronic 
Reporting Pilot for Hospitals and CAHs.
e. Impacts of the ASCQR Program
    We do not expect our CY 2013 final policies to significantly affect 
the number of ASCs that do not receive a full annual payment update 
beginning in CY 2014.

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

[[Page 68218]]

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; and 
most recently the Middle Class Tax Relief and Job Creation Act of 2012 
(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012.
    Under the OPPS, we pay for hospital outpatient 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 designated by the Secretary 
that are furnished to inpatients who are entitled to Part A and have 
exhausted their Part A benefits, or who are not so entitled.
    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 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 exercised the 
authority granted under the statute to also exclude from the OPPS those 
services that are paid under fee schedules or other payment systems. 
Such excluded services include, for example, the professional services 
of physicians and nonphysician practitioners paid under the MPFS; 
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 composite rate; 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 and entities that are excluded from payment under the OPPS. 
These excluded entities include: Maryland hospitals, but only for 
services that are paid under a cost containment waiver in accordance 
with section 1814(b)(3) of the Act; CAHs; hospitals located outside of 
the 50 States, the District of Columbia, and Puerto Rico; and Indian 
Health Service (IHS) hospitals.

D. Prior Rulemaking

    On April 7, 2000, we published in the Federal Register a final rule 
with comment period (65 FR 18434) to implement a prospective payment 
system for hospital outpatient services. The hospital OPPS was first 
implemented for services furnished on or after August 1, 2000. Section 
1833(t)(9) of the Act requires the Secretary to review certain 
components of the OPPS, not less often than annually, and to revise the 
groups, relative payment weights, and other adjustments that take into 
account changes in medical practices, changes in

[[Page 68219]]

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), Formerly Named the Advisory Panel on Ambulatory Payment 
Classification Groups (APC Panel)

1. Authority of the Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
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, at that time named the APC Panel. This 
expert panel, which may be composed of up to 19 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). Since its initial chartering, 
the Secretary has renewed the Panel's charter five times: On November 
1, 2002; on November 1, 2004; on November 21, 2006; on November 2, 2008 
and November 12, 2010. 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 current 
charter was amended on November 15, 2011 and the Panel was renamed to 
reflect expanding the Panel's authority to include supervision of 
hospital outpatient therapeutic services and therefore to add CAHs to 
its membership.
    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/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. Panel Meetings and Organizational Structure
    The Panel has held multiple meetings, with the last meeting taking 
place on August 27-28, 2012. 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 
(previously known as the Packaging Subcommittee).
    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 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 SIs 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 
placement of HCPCS codes regarding services for which separate payment 
is made.
    Each of these subcommittees was established by a majority vote from 
the full Panel during a scheduled Panel meeting, and the Panel 
recommended that the subcommittees continue at the August 2012 Panel 
meeting. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
February 2012 and August 2012 Panel meetings are included in the 
sections of this final rule 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://fido.gov/facadatabase/public.asp.

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

    We received approximately 668 timely pieces of correspondence on 
the CY 2013 PPS/ASC proposed rule that appeared in the Federal Register 
on July 30, 2012 (77 FR 45061). We note that we received some public 
comments that were outside the scope of the proposed rule and that are 
not addressed in this 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 subject-matter headings.

G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 61 timely pieces of correspondence on the 
CY 2012 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 30, 2011 (76 FR 74122), some of which 
contained comments on the interim APC assignments and/or status 
indicators of HCPCS codes identified with comment indicator ``NI'' in 
Addendum B to that final rule. Summaries of these public comments on 
topics that were open to comment and our responses to them are set 
forth in various sections of this final rule with comment period under 
the appropriate subject-matter headings.

[[Page 68220]]

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 2013 OPPS/ASC proposed rule (77 FR 45071), for the CY 
2013 OPPS, we proposed to recalibrate the APC relative payment weights 
for services furnished on or after January 1, 2013, and before January 
1, 2014 (CY 2013), using the same basic methodology that we described 
in the CY 2012 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 2013, 
we used approximately 141 million final action claims (claims for which 
all disputes and adjustments have been resolved and payment has been 
made) for hospital outpatient department services furnished on or after 
January 1, 2011, and before January 1, 2012. For this final rule with 
comment period, for the purpose of recalibrating the final APC relative 
payment weights for CY 2013, we used approximately 153 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, 2011, and before January 1, 2012. For exact counts of 
claims used, we refer readers to the claims accounting narrative under 
supporting documentation for the 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 153 million final action claims for services 
provided in hospital outpatient settings used to calculate the final CY 
2013 OPPS payment rates for this final rule with comment period, 
approximately 121 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 121 million claims, approximately 5 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 116 million claims, we created approximately 120 million 
single records, of which approximately 81 million were ``pseudo'' 
single or ``single session'' claims (created from approximately 39 
million multiple procedure claims using the process we discuss later in 
this section). Approximately 1 million claims were trimmed out on cost 
or units in excess of 3 standard deviations from the 
geometric mean, yielding approximately 120 million single bills 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. Ultimately, we were able to use for CY 2013 
ratesetting some portion of approximately 95 percent of the CY 2011 
claims containing services payable under the OPPS.
    The final APC relative weights and payments for CY 2013 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 
2011 that were processed through June 30, 2012. While we have 
historically based the payments on median hospital costs for services 
in the APC groups, we proposed in the CY 2013 OPPS/ASC proposed rule 
(77 FR 45071) to establish the cost-based relative payment weights of 
the CY 2013 OPPS using geometric mean costs, as discussed in section 
II.A.2.f. of this final rule with comment period. Therefore, on the CMS 
Web site, along with Addenda A and B, we provided a file that presented 
payment information for the proposed CY 2013 OPPS payments based on 
geometric mean costs compared to those based on median 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 2013 payment rates.
b. Use of Single and Multiple Procedure Claims
    For CY 2013, 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 continue to use date of service stratification and a list 
of codes to be bypassed to convert multiple procedure claims to 
``pseudo'' single procedure claims. Through bypassing specified codes 
that we believe do not have significant packaged costs, we are able to 
use more data from multiple procedure claims. In many cases, this 
enables us to create multiple ``pseudo'' single procedure claims from 
claims that were submitted as multiple procedure claims spanning 
multiple dates of service, or claims that contained numerous separately 
paid procedures reported on the same date on one claim. We refer to 
these newly created single procedure claims as ``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 2012 OPPS/ASC final rule with comment period (76 FR 74132 
through 74134). In addition, for CY 2008 (72 FR 66614 through 66664), 
we increased packaging and created the first composite APCs, and 
continued

[[Page 68221]]

those policies through CY 2012. 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 2012. We did not receive any public comments on 
this policy, and therefore, we are finalizing our proposal to continue 
this policy for CY 2013. We refer readers to section II.A.2.e. of this 
final rule with comment period for a discussion of the use of claims in 
modeling the costs for composite APCs.
    We proposed to continue to apply these processes to enable us to 
use as much claims data as possible for ratesetting for the CY 2013 
OPPS. This methodology enabled us to create, for this final rule with 
comment period, approximately 81 million ``pseudo'' single procedure 
claims, including multiple imaging composite ``single session'' bills 
(we refer readers to section II.A.2.e.(5) of this final rule with 
comment period for further discussion), to add to the approximately 39 
million ``natural'' single procedure claims. For this final rule with 
comment period, ``pseudo'' single procedure and ``single session'' 
procedure bills represented approximately 67 percent of all single 
procedure bills used for ratesetting purposes.
    For CY 2013, we proposed to bypass 480 HCPCS codes that were 
identified in Addendum N to the CY 2013 OPPS/ASC proposed rule (which 
was 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 bills that 
contained packaging for each HCPCS code and the amount of packaging on 
each ``natural'' single bill for each code. Each year, we generally 
retain the codes on the previous year's bypass list and use the updated 
year's data (for CY 2013, data available for the February 27, 2012 
meeting of the Advisory Panel on Hospital Outpatient Payment (the 
Panel) from CY 2011 claims processed through September 30, 2011, and CY 
2010 claims data processed through June 30, 2011, used to model the 
payment rates for CY 2012) to determine whether it would be appropriate 
to add additional codes to the previous year's bypass list. For CY 
2013, we proposed to continue to bypass all of the HCPCS codes on the 
CY 2012 OPPS bypass list, with the exception of HCPCS codes that we 
proposed to delete for CY 2013, which are listed in Table 1 of the 
proposed rule. 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. In 
addition, we proposed to add to the bypass list for CY 2013 HCPCS codes 
not on the CY 2012 bypass list that, using either the CY 2012 final 
rule data (CY 2010 claims) or the February 27, 2012 Panel data (first 9 
months of CY 2011 claims), met the empirical criteria for the bypass 
list that are summarized below. Finally, to remain consistent with the 
CY 2013 final policy to develop OPPS relative payment weights based on 
geometric mean costs, we proposed that the median cost of packaging 
criterion instead be based on the geometric mean cost of packaging. The 
entire list proposed for CY 2013 (including the codes that remain on 
the bypass list from prior years) was open to public comment in the CY 
2013 OPPS/ASC 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. As we proposed, the criteria for the bypass list are:
     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, in the CY 2013 OPPS/ASC proposed rule (77 FR 45072), 
we proposed to establish the CY 2013 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. The development of the CY 2013 OPPS relative payment weights 
based on geometric mean costs is discussed in greater detail in section 
II.A.2.f. of this final rule with comment period.
    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 2012 OPPS/ASC 
final rule with comment period (76 FR 74133), we proposed for CY 2013 
to continue to update the packaged cost threshold by the market basket 
increase. By applying the final CY 2012 market basket increase of 1.9 
percent to the prior non-rounded dollar threshold of $52.76 (76 FR 
74133), we determined that the threshold remains for CY 2013 at $55 
($53.76 rounded to $55, the nearest $5 increment). Therefore, we 
proposed to set the geometric mean packaged cost threshold on the CY 
2011 claims at $55 for a code to be considered for addition to the CY 
2013 OPPS bypass list.
     The code is not a code for an unlisted service. Unlisted 
codes do not describe a specific service, and thus 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 CMS medical advisors

[[Page 68222]]

believe have minimal associated packaging based on their clinical 
assessment of the complete CY 2013 OPPS proposal. Some of these codes 
were identified by CMS medical advisors and some were identified in 
prior years by commenters with specialized knowledge of the 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) and the 
CPT codes for additional hours of drug administration to the bypass 
list (73 FR 68513 and 71 FR 68117 through 68118).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, 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'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of 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'' bills that could 
be used for calculating composite APC costs. ``Overlap bypass codes'' 
that are members of the multiple imaging composite APCs are identified 
by asterisks (*) in Addendum N to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    Addendum N to this final rule with comment period includes the list 
of bypass codes for CY 2013. The list of bypass codes contains codes 
that were reported on claims for services in CY 2011 and, therefore, 
includes codes that were in effect in 2011 and used for billing but 
were deleted for CY 2012. We retained these deleted bypass codes on the 
CY 2013 bypass list because these codes existed in CY 2011 and were 
covered OPD services in that period, and CY 2011 claims data are used 
to calculate CY 2013 payment rates. Keeping these deleted bypass codes 
on the bypass list potentially allows us to create more ``pseudo'' 
single procedure claims for ratesetting purposes. ``Overlap bypass 
codes'' that were members of the proposed multiple imaging composite 
APCs are identified by asterisks (*) in the third column of Addendum N 
to this final rule with comment period. HCPCS codes that we are adding 
for CY 2013 are identified by asterisks (*) in the fourth column of 
Addendum N. Table 1 of the proposed rule contained the list of codes 
that we proposed to remove from the CY 2013 bypass list for CY 2013 (77 
FR 45073).
    Comment: One commenter supported the proposal to include CPT codes 
76881 (Ultrasound, extremity, nonvascular, real-time with image 
documentation; complete) and 76882 (Ultrasound, extremity, nonvascular, 
real-time with image documentation; limited, anatomic specific) on the 
CY 2013 OPPS bypass list.
    Response: We appreciate the commenter's support.
    Comment: Several commenters expressed appreciation for our efforts 
to include multiple procedure claims in the ratesetting process through 
processes such as the bypass list and date of service stratification, 
which are used to create ``pseudo'' single claims. However, the 
commenters remained concerned about the limited number of claims used 
to model brachytherapy APCs 0312 (Radioelement Applications), 0651 
(Complex Interstitial Radiation Source Application), and 8001 (LDR 
Prostate Brachytherapy Composite) and encouraged CMS to continue 
exploring potential methodologies through which more claims data could 
be used in OPPS ratesetting.
    Response: We appreciate the commenters' support of our efforts to 
include more appropriate claims data for ratesetting purposes. As 
discussed above, one of the challenges in modeling the APC costs on 
which the OPPS/ASC relative payment weights are based is appropriately 
allocating the packaged cost associated with a service, when multiple 
separately payable procedures appear on the claim. However, recognizing 
the challenges associated with obtaining additional information, we 
will continue to explore potential methodologies through which we would 
be able to derive accurate cost data from the multiple major procedure 
claims made available to us.
    After consideration of the public comments we received, we are 
adopting as final the proposed ``pseudo'' single claims process and the 
final CY 2013 bypass list of 480 HCPCS codes, as displayed in Addendum 
N of this final rule with comment period (available via the Internet on 
the CMS Web site). Table 1 below contains the list of codes that we are 
removing from the CY 2013 bypass list because these codes were either 
deleted from the HCPCS before CY 2011 (and therefore were not covered 
OPD services in CY 2011) or were not separately payable codes under the 
CY 2013 OPPS because these codes are not used for ratesetting (and 
therefore would not need to be bypassed). None of these deleted codes 
are ``overlap bypass'' codes.

[[Page 68223]]

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c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45073), for CY 2013, 
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 2013 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 2011 claims data from the most recent 
available hospital cost reports, in most cases, cost reports beginning 
in CY 2010. For the CY 2013 OPPS proposed rates, we used the set of 
claims processed during CY 2011. 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 2011 
(the year of the claims data we used to calculate the proposed CY 2013 
OPPS payment rates) and found that the National Uniform Billing 
Committee (NUBC) did not add any new revenue codes to the NUBC 2011 
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). One longstanding exception to this general 
methodology for calculation of CCRs used for converting charges to 
costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule 
with comment period, is the calculation of blood costs, as discussed in 
section II.A.2.d.(2) of this final rule with comment period and which 
has been our standard policy since the CY 2005 OPPS.
    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 2011 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, in most cases, cost reports with cost reporting periods 
beginning in CY 2010. 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 2013 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 2013.
    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 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

[[Page 68224]]

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,'' 
public comments, and our responses, 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. As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 
45074), in order to develop a robust analysis regarding the use of cost 
data from the ``Implantable Devices Charged to Patients'' cost center, 
we believe that it is necessary to have a critical mass of cost reports 
filed with data in this cost center. In preparation for the CY 2013 
proposed rule, we assessed the availability of data in the 
``Implantable Devices Charged to Patients'' cost center using cost 
reports in the December 31, 2011 quarter ending update of HCRIS, which 
was the latest upload of the cost report data that we could use for the 
CY 2013 proposed rule. We determined that 2,063 hospitals, out of 
approximately 3,800 hospitals, utilized the ``Implantable Devices 
Charged to Patients'' cost center. Because we believe that this is a 
sufficient amount of data from which to generate a meaningful analysis, 
we proposed to use data from the ``Implantable Devices Charged to 
Patients'' cost center to create a distinct CCR for use in calculating 
the OPPS relative payment weights for CY 2013.
    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 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 
are effective for cost report periods beginning on or after May 1, 
2010, on the revised cost report Form CMS-2552-10. However, because 
cost reports that were filed on the revised cost report Form CMS-2552-
10 are not currently accessible in the HCRIS, we were unable to 
calculate distinct CCRs for CT scans, MRIs, and cardiac catheterization 
using the new standard cost centers for these services. We believe that 
we will have cost report data available for an analysis of creating 
distinct CCRs for CT scans, MRIs, and cardiac catheterization for the 
CY 2014 OPPS rulemaking.
    Comment: Many commenters supported CMS' proposal to use data from 
the ``Implantable Devices Charged to Patients'' cost center to create a 
distinct CCR for use in calculating the OPPS relative payment weights 
for CY 2013. The commenters also encouraged CMS to continue to engage 
in educational efforts related to the use of the new cost center so 
that hospitals understand how to accurately report data in the new cost 
center. In addition, the commenters suggested that the Medicare 
administrative contractors (MACs) develop an audit program that would 
identify hospitals that have not reported data for the new cost center.
    Response: We appreciate the commenters' support of our proposal to 
use data from the ``Implantable Devices Charged to Patients'' cost 
center to create a distinct CCR. We agree with commenters that it is 
important that hospitals understand how to accurately report data in 
the ``Implantable Devices Charged to Patients'' cost center, and we 
have worked to add more clarity to the cost report instructions under 
the new Medicare cost report form CMS-2552-10. The new cost report form 
also facilitates greater audit scrutiny from the MACs. Line 121 of 
Worksheet S-2, Part I, of cost report form CMS-2552-10 asks ``Did this 
facility incur and report costs for implantable devices charged to a 
patient? Enter in column 1 `Y' for yes and `N' for no.''
    Comment: Two commenters recommended that CMS wait until CY 2014 
OPPS rulemaking to determine if the ``Implantable Devices Charged to 
Patients'' cost center should be used to create a distinct CCR. The 
commenters did not believe that data from 2,063 hospitals provide a 
meaningful representation of all of the hospitals subject to the OPPS 
from which to base the proposal to use the new cost center for CY 2013.
    Response: We disagree with the commenters and believe that data 
from the 2,063 hospitals that utilized the ``Implantable Devices 
Charged to Patients'' cost center, out of approximately 3,800 
hospitals, are sufficient and appropriate for creating a distinct CCR 
to use in the calculation of the CY 2013 OPPS relative payment weights.
    Comment: Commenters expressed disappointment that, because the 
revised cost report Form CMS-2552-10 was not accessible in the HCRIS at 
the time of the proposed rule, CMS was not able to create distinct CCRs 
for CT scans, MRIs, and cardiac catheterization services for use in the 
calculation of the CY 2013 OPPS relative payment weights. The 
commenters urged CMS to analyze the data in the new CT scan, MRI, and 
cardiac catheterization cost centers when the data are available and 
utilize the new cost centers in the development of the OPPS relative 
payment weights as soon as possible.
    Response: We expect that we will have sufficient and appropriate 
cost report data available for an analysis of creating distinct CCRs 
for CT scans, MRIs, and cardiac catheterization for the CY 2014 
rulemaking. If so, as was done for the ``Implantable Devices Charged to 
Patients'' cost center for the CY 2013 OPPS/ASC proposed rule, we 
expect to provide an impact analysis in the CY 2014 OPPS/ASC proposed 
rule that will enable the public to assess the full impact of the use 
of the new CCRs specific to CT scans, MRIs, and cardiac catheterization 
on payments for all services.
    Comment: One commenter recommended that CMS require the use of the 
new nonstandard cost center for cardiac rehabilitation instead of 
making its use optional.
    Response: We created the new nonstandard cost center for cardiac 
rehabilitation because we believed that

[[Page 68225]]

this would facilitate more accurate cost reporting for these services. 
The nonstandard cost centers are additional common cost centers 
available to hospitals for reporting when preparing their Medicare 
hospital cost report. To the extent hospitals provide services captured 
by nonstandard cost centers, they should report the relevant 
nonstandard cost centers as well. However, we do not specify a revenue 
code-to-cost center crosswalk that hospitals must adopt to prepare the 
cost report and, therefore, we do not believe that we should require 
hospitals to use the nonstandard cost center for cardiac 
rehabilitation.
    After consideration of the public comments we received, we are 
finalizing our proposal to use data from the ``Implantable Devices 
Charged to Patients'' cost center to create a distinct CCR for use in 
calculating the OPPS relative payment weights for CY 2013.
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 OPPS payment rates for CY 2013. 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 final 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 2011 claims that were used to 
calculate the final payment rates for the CY 2013 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 most recently 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 this final rule with comment 
period, we proposed to use geometric mean costs to calculate the 
relative weights on which the CY 2013 OPPS payment rates are based. 
While this policy changes the cost metric on which the relative 
payments are based, the data process in general remains the same, under 
the methodologies that we use to obtain appropriate claims data and 
accurate cost information in determining estimated service cost.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.e. of this final rule with comment period to calculate the costs 
we used to establish the relative weights used in calculating the OPPS 
payment rates for CY 2013 shown in Addenda A and B to this final rule 
with comment period (which are available via the Internet on the CMS 
Web site). For the proposed rule, we provided a comparison file so that 
the public could provide meaningful comment on our proposal to base the 
CY 2013 OPPS relative payment weights on geometric mean costs. We refer 
readers to section II.A.4. of this final rule with comment period for a 
discussion of the conversion of APC costs to scaled payment weights.
    Comment: Commenters expressed concern with respect to the 
volatility of the OPPS payment rates from year to year. The commenters 
suggested a ``stability policy'' and suggested that the costs from 
claims be adjusted to limit changes from year to year and asked that 
CMS limit any decreases in payment compared to the prior year to no 
more than a 5-percent decline.
    Response: As previously discussed in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74139), there are a number of factors 
that contribute to cost fluctuations from one year to the next, 
including (but not limited to) hospital behavior in adjusting mix of 
services, hospital costs and charges changes each year resulting in 
changes to the CCRs, reassignments of HCPCS codes, changes to OPPS 
payment policy (for example, changes to packaging), and implementation 
of composite APCs. We cannot stabilize hospital-driven fundamental 
inputs to the calculation of OPPS payment rates. However, we have 
strived to resolve some of the other potential reasons for instability 
from year to year. Specifically, we continue to seek ways to use more 
claims data so that we have fewer APCs for which there are small 
numbers of single bills used to set the APC costs. Moreover, we have 
tried to eliminate APCs with very small numbers of single bills where 
we could do so. We recognize that changes to payment policies, such as 
the packaging of payment for ancillary and supportive services and the 
implementation of composite APCs, may contribute to volatility in 
payment rates in the short term. However, we believe that larger 
payment packages and bundles should help to stabilize payments in the 
long term by enabling us to use more claims data and by establishing 
payments for larger groups of services. Further, in seeking to mitigate 
fluctuations in the OPPS, we believe that implementing the policy 
suggested by the commenters would make payments less reflective of the 
true service costs, which would be contrary to a purpose of our 
proposed CY 2013 policy of establishing relative payment weights based 
on geometric mean costs. Limiting decreases to payments across all APCs 
in a budget neutral payment system could unfairly reduce the payments 
for other services due to the effects of the scaling that is necessary 
to maintain budget neutrality and would distort the relativity of 
payment that is based on the cost of all services.
a. Claims Preparation
    For this final rule with comment period, we used the CY 2011 
hospital outpatient claims processed through June 30, 2012, to 
calculate the geometric mean costs of APCs that underpin the relative 
payment weights for CY 2013. To begin the calculation of the relative 
payment weights for CY 2013, we pulled all claims for outpatient 
services furnished in CY 2011 from the national claims history file. 
This is not the population of claims paid under the OPPS, but all 
outpatient claims (including, for example, critical access hospital 
(CAH) claims and hospital claims for clinical laboratory services for 
persons who are neither inpatients nor outpatients of the hospital).
    We then excluded claims with condition codes 04, 20, 21, and 77 
because these are claims that providers submitted to Medicare knowing 
that no payment would be made. For example, providers submit claims 
with a condition code 21 to elicit an official denial notice from 
Medicare and document that a service is not covered. We then excluded 
claims for services furnished in Maryland, Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands because 
hospitals in those geographic areas are not paid under the OPPS, 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 121 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B

[[Page 68226]]

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.
    2. Claims that were bill types 12X, 13X or 14X. Claims with bill 
types 12X and 13X are hospital outpatient claims. Claims with bill type 
14X are laboratory specimen claims, of which we use a subset for the 
limited number of services in these claims that are paid under the 
OPPS.
    3. Claims that were bill type 76X (CMHC).
    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 claims from all hospitals for which CCRs 
were flagged as invalid.
    We identified claims with condition code 41 as partial 
hospitalization services of hospitals and moved them to another file. 
We note that the separate file 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.
    In the past several years, we have developed payment policy for 
nonpass-through separately paid drugs and biologicals based on a 
redistribution methodology that accounts for pharmacy overhead by 
allocating cost from packaged drugs to separately paid drugs. This 
typically would have required us to reduce the cost associated with 
packaged coded and uncoded drugs in order to allocate that cost. 
However, for CY 2013, as we proposed, we are paying 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. Therefore, under this policy, we do not redistribute the 
packaged cost. We refer readers to section V.B.3. of this final rule 
with comment period for a complete discussion of our policy to pay for 
separately paid drugs and biologicals in CY 2013.
    We then removed line-items that were not paid during claim 
processing, presumably for a line-item rejection or denial. The number 
of edits for valid OPPS payment in the Integrated Outpatient Code 
Editor (I/OCE) and elsewhere has grown significantly in the past few 
years, especially with the implementation of the full spectrum of 
National Correct Coding Initiative (NCCI) edits. To ensure that we are 
using valid claims that represent the cost of payable services to set 
payment rates, we removed line-items with an OPPS status indicator that 
were not paid during claims processing in the claim year, but have a 
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' 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 2012 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 2013, as we proposed, we are continuing the policy we 
implemented for CY 2012 to exclude line-item data for pass-through 
drugs and biologicals (status indicator ``G'' for CY 2011) and nonpass-
through drugs and biologicals (status indicator ``K'' for CY 2011) 
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 2012 OPPS/ASC final rule with comment period (76 
FR 74141) of line-items with a status indicator of ``S,'' ``T,'' ``V,'' 
or ``X,'' we believe that unpaid line-items represent services that are 
invalidly reported and, therefore, should not be

[[Page 68227]]

used for ratesetting. 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.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2013 OPPS, we then split the remaining claims into five 
groups: single majors; multiple majors; single minors; multiple minors; 
and other claims. (Specific definitions of these groups are presented 
below.) For CY 2013, as we proposed, we are continuing our current 
policy of defining major procedures as any HCPCS code having a status 
indicator of ``S,'' ``T,'' ``V,'' or ``X''; defining minor procedures 
as any code having a status indicator of ``F,'' ``G,'' ``H,'' ``K,'' 
``L,'' ``R,'' ``U,'' or ``N'':and classifying ``other'' procedures as 
any code having a status indicator other than one that we have 
classified as major or minor. For CY 2013, as we proposed, we are 
continuing to assign status indicator ``R'' to blood and blood 
products; status indicator ``U'' to brachytherapy sources; status 
indicator ``Q1'' to all ``STVX-packaged codes''; status indicator 
``Q2'' to all ``T-packaged codes''; and status indicator ``Q3'' to all 
codes that may be paid through a composite APC based on composite-
specific criteria or paid separately through single code APCs when the 
criteria are not met.
    As discussed in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68709), we established status indicators ``Q1,'' ``Q2,'' and 
``Q3'' to facilitate identification of the different categories of 
codes. As we proposed, we are treating these codes in the same manner 
for data purposes for CY 2013 as we have treated them since CY 2008. 
Specifically, we are continuing to evaluate whether the criteria for 
separate payment of codes with status indicator ``Q1'' or ``Q2'' are 
met in determining whether they are treated as major or minor codes. 
Codes with status indicator ``Q1'' or ``Q2'' are carried through the 
data either with status indicator ``N'' as packaged or, if they meet 
the criteria for separate payment, they are given the status indicator 
of the APC to which they are assigned and are considered as ``pseudo'' 
single procedure claims for major codes. Codes assigned status 
indicator ``Q3'' are paid under individual APCs unless they occur in 
the combinations that qualify for payment as composite APCs and, 
therefore, they carry the status indicator of the individual APC to 
which they are assigned through the data process and are treated as 
major codes 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.e. 
of this final rule with comment period.
    Specifically, as we proposed, we divided 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,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''); claims with 
one unit of a status indicator ``Q1'' code (``STVX-packaged'') where 
there was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' 
on the same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Procedure Major Claims: Claims with more than one 
separately payable procedure (that is, status indicator ``S,'' ``T,'' 
``V,'' or ``X,'' which includes codes with status indicator ``Q3''), or 
multiple units of one payable procedure. These claims include those 
codes with a status indicator ``Q2'' code (``T-packaged'') where there 
was no procedure with a status indicator ``T'' on the same claim on the 
same date of service but where there was another separately paid 
procedure on the same claim with the same date of service (that is, 
another code with status indicator ``S,'' ``V,'' or ``X''). We also 
include in this set claims that contained one unit of one code when the 
bilateral modifier was appended to the code and the code was 
conditionally or independently bilateral. In these cases, the claims 
represented more than one unit of the service described by the code, 
notwithstanding that only one unit was billed.
    3. Single 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'' (``STVX-
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'' (``STVX-packaged'') or more than one unit 
of a code with status indicator ``Q1'' but no codes with status 
indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service; or 
claims that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with 
status indicator ``Q2'' but no code with status indicator ``T'' on the 
same date of service.
    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment or clinical 
laboratory tests, and do not contain a code for a separately payable or 
packaged OPPS service. Non-OPPS claims include claims for therapy 
services paid sometimes under the OPPS but billed, in these non-OPPS 
cases, with revenue codes indicating that the therapy services would be 
paid under the Medicare Physician Fee Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for 
the single major file, the multiple major file, and the multiple minor 
file used 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.
(2) Creation of ``Pseudo'' Single Procedure Claims
    To develop ``pseudo'' single procedure claims for this final rule 
with comment period, 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 use the bypass codes listed in Addendum N to this final 
rule with comment period (which is available via the Internet on our 
Web site) and discussed in section II.A.1.b. of this final rule with 
comment period to remove separately payable procedures which we 
determined contained limited

[[Page 68228]]

or no packaged costs or that were otherwise suitable for inclusion on 
the bypass list from a multiple procedure bill. As discussed above, we 
ignore the ``overlap bypass codes,'' that is, those HCPCS codes that 
are both on the bypass list and are members of the multiple imaging 
composite APCs, in this initial assessment for ``pseudo'' single 
procedure claims. The final CY 2013 ``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). 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, 
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.e.(5) of 
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 would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC costs on which the CY 2013 OPPS payments are 
based. Having identified ``single session'' claims for the imaging 
composite APCs, we reassessed the claim to determine if, after removal 
of all lines for bypass codes, including the ``overlap bypass codes,'' 
a single unit of a 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.
    As we proposed, we also examine the multiple procedure minor claims 
to determine whether we could create ``pseudo'' single procedure 
claims. Specifically, where the claim contained multiple codes with 
status indicator ``Q1'' (``STVX-packaged'') on the same date of service 
or contained multiple units of a single code with status indicator 
``Q1,'' we selected the status indicator ``Q1'' HCPCS code that had the 
highest CY 2012 relative payment weight, set the units to one on that 
HCPCS code to reflect our policy of paying only one unit of a code with 
a status 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 2012 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 2012 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, 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 2012 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 2012 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 2012 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'' 
(``STVX-packaged''), we selected the T-packaged status indicator ``Q2'' 
HCPCS code that had the highest relative payment weight for CY 2012 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 2012 relative payment weight; 
other codes with status indicator ``Q2''; codes with status indicator 
``Q1'' (``STVX-packaged''); and other packaged HCPCS codes and packaged 
revenue code costs. We selected status indicator ``Q2'' HCPCS codes 
instead of ``Q1'' HCPCS codes because ``Q2'' HCPCS codes have higher CY 
2012 relative payment weights. If a status indicator ``Q1'' HCPCS code 
had a higher CY 2011 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 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 XII.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

[[Page 68229]]

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 modifier (Modifier 50 (Bilateral procedure)) 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.
    Comment: Commenters supported the proposed process for creating 
``pseudo'' single procedure claims.
    Response: We appreciate the commenters' support and will continue 
to look for ways to refine the process to secure more claims data for 
use in calculating costs.
    After consideration of the public comments we received, we are 
finalizing our proposals to continue to apply the methodology described 
above for the purpose of creating ``pseudo'' single procedure claims 
for the CY 2013 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this final rule with 
comment period (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 services reported under packaged revenue codes in Table 2 below 
that appeared on the claim without a HCPCS code into the cost of the 
single major procedure remaining on the claim.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that 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, and as we proposed, we 
are continuing to compare the final list of packaged revenue codes that 
we are adopting for CY 2013 to the revenue codes that the I/OCE will 
package for CY 2013 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 2013, as we did for CY 2012, we reviewed the changes to 
revenue codes that were effective during CY 2011 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we are packaging for CY 2013. We believe that the charges 
reported under the revenue codes listed in Table 2 below continue to 
reflect ancillary and supportive services for which hospitals report 
charges without HCPCS codes. Therefore, for CY 2013, we proposed to 
continue to package the costs that we derive from the charges reported 
without HCPCS code under the revenue codes displayed in Table 2 below 
for purposes of calculating the geometric mean costs on which the final 
CY 2013 OPPS/ASC payment rates are based.
    We did not receive any public comments on our proposed list of 
packaged revenue codes. Therefore, for the reasons set forth in the 
proposed rule (77 FR 45079 through 45081), we are finalizing the 
proposed packaged revenue codes for CY 2013, without modification, 
which are identified in Table 2 below. We note that these revenue codes 
include only revenue codes that were in effect in CY 2011, the year of 
the claims data on which the final CY 2013 OPPS payment rates are 
based.
BILLING CODE 4120-01-P

[[Page 68230]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.001


[[Page 68231]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.002


[[Page 68232]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.003

BILLING CODE 4120-01-C
    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 on or after July 1, 2004, 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 
fiscal intermediary or MAC was required to allocate the sum of charges 
for services with a status indicator equaling ``S'' or ``T'' based on 
the relative 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 proposed to continue these processes for the 
CY 2013 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 and final 
rule contains the formula we use to standardize the total cost for the 
effects of the wage index. As has been our policy since the inception 
of the OPPS, we use the pre-reclassified wage indices for 
standardization because we believe that they better reflect the true 
costs of items and services in the area in which the hospital is 
located than the post-reclassification wage indices and, therefore, 
would result in the most accurate unadjusted geometric mean costs.
    In accordance with our longstanding practice, we also proposed to 
exclude 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 116 million 
claims were left. Using these approximately 116 million claims, we 
created approximately 120 million single and ``pseudo'' single 
procedure claims, of which we used slightly more than 120 million 
single bills (after trimming out approximately 1 million claims as 
discussed in section II.A.1.a. of this final rule with comment period) 
in the CY 2013 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 CY 2013 OPPS, we proposed to calculate the APC relative 
payment weights using geometric mean costs; 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 2013 OPPS/ASC policy to calculate relative payment weights 
based on geometric means, we refer readers to section II.A.2.f. of this 
final rule with comment period.
    We proposed to use these claims to calculate the CY 2013 geometric 
mean costs for each separately payable HCPCS code and each APC. The 
comparison of HCPCS code-specific and APC geometric mean costs 
determines the applicability of the 2 times rule. Section 1833(t)(2) of 
the Act provides that, subject to certain exceptions, the items and 
services within an APC group shall not be treated as comparable with 
respect to the use of resources if the highest median cost (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, as part of the CY 2013 policy to develop the 
OPPS relative payment weights based on geometric mean costs, we also 
are applying the 2 times rule based on geometric mean costs. For a 
detailed discussion of the CY 2013 policy to develop the APC relative 
payment weights based on geometric mean costs, we refer readers to 
section II.A.2.f. of this final rule with comment period.
    We note that, for purposes of identifying significant HCPCS 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 120 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 bills and which comprises less 
than 2

[[Page 68233]]

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 2013 policy 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 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. Section III. of this final rule with 
comment period includes a discussion of many of the HCPCS code 
assignment changes that resulted from examination of the geometric mean 
costs and for other reasons. 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.
    Comment: Some commenters asked that CMS provide an adjustment for 
medical education costs under the OPPS. These commenters stated that 
CMS indicated that it would study the costs and payment differential 
among different classes of providers in the April 7, 2000 OPPS final 
rule but has not done so. The commenters requested that CMS conduct its 
own analysis and that, if that analysis showed a difference in their 
payment to cost ratios (similar to the comparison study performed to 
calibrate the cancer hospital payment adjustment) due to the unique 
missions of teaching hospitals, CMS should add a teaching payment 
adjustment under the OPPS.
    Response: Unlike payment under the IPPS, the law does not 
specifically provide for payment for direct or indirect graduate 
medical education costs to be made under 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, such as adjustments for certain 
classes of hospitals.'' We have not found such an adjustment to be 
necessary to ensure equitable payments to teaching hospitals and, 
therefore, have not developed such an adjustment. As the commenters 
recognized, the cancer hospital payment adjustment discussed in section 
II.F. of this final rule with comment period was established based on 
section 1833(t)(18) of the Act. Similarly, those hospitals were 
permanently held harmless and continued to receive TOPs under section 
1833(t)(7)(d)(ii) of the Act. Furthermore, in this final rule with 
comment period, we have developed OPPS relative payment weights that we 
believe provide appropriate and adequate payment for the complex 
medical services, such as new technology services and device-dependent 
procedures, which we understand are furnished largely by teaching 
hospitals. The impacts of the final CY 2013 policies, by class of 
hospital, are displayed in Table 57 in section XXII. of this final rule 
with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2013 methodology for calculating the costs 
upon which the CY 2013 OPPS payment rates are based.
    As we discuss in sections II.A.2.d. and II.A.2.e. and in section 
VIII.B. of this final rule with comment period, in some cases, APC 
geometric mean costs are 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.e. 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.
(2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    At the August 27-28, 2012 meeting of the Advisory Panel on Hospital 
Outpatient Payment (the Panel), we provided the Data Subcommittee with 
a list of all APCs fluctuating by greater than 10 percent when 
comparing the CY 2013 OPPS/ASC proposed rule costs based on CY 2011 
claims processed through June 30, 2012, to those based on CY 2012 OPPS/
ASC final rule data (CY 2010 claims processed through June 30, 2011). 
The Data Subcommittee reviewed the fluctuations in the APC costs and 
their respective weights.
    At the August 27-28, 2012 Panel meeting, the Panel made a number of 
recommendations related to the data process. The Panel's 
recommendations and our responses follow.
    Recommendation: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that Traci Rabine serve as the 
acting chair of the Data Subcommittee for the August 2012 HOP Panel 
meeting.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that CMS continue to provide a 
list of APCs fluctuating by more than 10 percent in costs.
    CMS Response: We are accepting this recommendation.
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years and a detailed 
discussion of how we developed the standard device-dependent APC 
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66739 through 66742). Overviews of the 
procedure-to-device edits and device-to-procedure edits used in 
ratesetting for device-dependent APCs are available in the CY 2005 OPPS 
final rule with comment period (69 FR 65761 through 65763) and the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45081 through 45082), 
we proposed for CY 2013 to use the standard methodology for calculating 
costs for device-dependent APCs that was finalized in the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74148 through 74151). This 
methodology utilizes claims data that generally represent the full cost 
of the required device and the most recent cost report data. 
Specifically, we proposed to calculate the costs for device-dependent 
APCs for CY 2013 using only the subset of single procedure claims from 
CY 2011 claims data that pass the procedure-to-device and device-to-

[[Page 68234]]

procedure edits; do not contain token charges (less than $1.01) for 
devices; do not contain the ``FB'' modifier signifying that the device 
was furnished without cost to the provider, or where a full credit was 
received; and do not contain the ``FC'' modifier signifying that the 
hospital received partial credit for the device. The procedure-to-
device edits require that when a particular procedural HCPCS code is 
billed, the claim must also contain an appropriate device code, while 
the device-to-procedure edits require that a claim that contains one of 
a specified set of device codes also contain an appropriate procedure 
code. We stated in the proposed rule that we continue to believe the 
standard methodology for calculating costs for device-dependent APCs 
gives us the most appropriate costs for device-dependent APCs in which 
the hospital incurs the full cost of the device. In Table 4A of the 
proposed rule, we listed the APCs for which we proposed to use our 
standard device-dependent APC ratesetting methodology for CY 2012.
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel created several new CPT codes 
describing services related to device-dependent APCs, to be effective 
beginning January 1, 2013. Our standard process for dealing with new 
CPT codes effective on January 1 for the upcoming calendar year is to 
assign each code to the APC that we believe contains services that are 
comparable with respect to clinical characteristics and resources 
required to furnish the service. The new CPT code is given a comment 
indicator of ``NI'' in Addendum B to the final rule with comment period 
to identify it as a new interim APC assignment for the new year and the 
APC assignment for the new codes is then open to public comment for 60 
days following the publication of the final rule with comment period. 
As with all new CPT codes, we encourage interested stakeholders to 
review those codes identified with the ``NI'' in Addendum B and 
assigned to device-dependent APCs and submit public comments on those 
assignments.
    Our interim assignment of some of the new CPT codes for CY 2013 to 
device-dependent APCs prompted us to change the titles of two APCs to 
reflect more accurately the clinical configurations of those APCs for 
CY 2013. Specifically, we assigned, on an interim basis, the following 
codes to device-dependent APC 0107, currently titled ``Insertion of 
Cardioverter-Defibrillator'': CPT code 0319T (Insertion or replacement 
of subcutaneous implantable defibrillator system with subcutaneous 
electrode), 0321T (Insertion of subcutaneous implantable defibrillator 
pulse generator only with existing subcutaneous electrode), and 0323T 
(Removal of subcutaneous implantable defibrillator pulse generator with 
replacement of subcutaneous implantable defibrillator pulse generator 
only). We note that the title of APC 0108 is currently ``Insertion/
Replacement/Repair of AICD Leads, Generator and Pacing Electrode.'' In 
order to streamline and simplify the titles of APCs 0107 and 0108, 
which both contain procedures for the implantation of cardioverter-
defibrillator pulse generators, leads, and electrodes, we are revising 
their titles to reflect the insertion of cardioverter-defibrillators 
without specifying the component pieces involved. Specifically, we are 
revising the title of APC 0107 to read ``Level I Implantation of 
Cardioverter-Defibrillator'' and the title of APC 0108 to read ``Level 
II Implantation of Cardioverter-Defibrillator.''
    The creation of new CPT codes involving intracoronary stent 
placement procedures for CY 2013 also requires us to create nine new 
HCPCS C-codes and to delete two existing HCPCS G-codes in order to 
maintain the correct implementation of existing OPPS policy for CY 
2013. Specifically, since CY 2003, under the OPPS, we assign coronary 
stent placement procedures to separate APCs based on the use of 
nondrug-eluting or drug-eluting stents (APC 0104 (Transcatheter 
Placement of Intracoronary Stents) or APC 0656 (Transcatheter Placement 
of Intracoronary Drug-Eluting Stents), respectively). In order to 
effectuate this policy, we created HCPCS G-codes G0290 (Transcatheter 
placement of a drug eluting intracoronary stent(s), percutaneous, with 
or without other therapeutic intervention, any method; single vessel) 
and G0291 (Transcatheter placement of a drug eluting intracoronary 
stent(s), percutaneous, with or without other therapeutic intervention, 
any method; each additional vessel) for drug-eluting intracoronary 
stent placement procedures that parallel existing CPT codes 92980 
(Transcatheter placement of an intracoronary stent(s), percutaneous, 
with or without other therapeutic intervention, any method; single 
vessel) and 92981 (Transcatheter placement of an intracoronary 
stent(s), percutaneous, with or without other therapeutic intervention, 
any method; each additional vessel), which are used to describe 
nondrug-eluting intracoronary stent placement procedures. CPT codes 
92980 and 92981 are assigned to APC 0104, while HCPCS codes G0290 and 
G0291 are assigned to APC 0656. We refer readers to the CY 2003 OPPS 
final rule with comment period (67 FR 66732 through 66734) for more 
information regarding the initial implementation of this policy.
    Effective January 1, 2013, the AMA's CPT Editorial Panel is 
deleting CPT codes 92980 and 92981 and replacing them with the 
following new CPT codes:
     CPT code 92928 (Percutaneous transcatheter placement of 
intracoronary stent(s), with coronary angioplasty when performed; 
single major coronary artery or branch), 92929 (Percutaneous 
transcatheter placement of intracoronary stent(s), with coronary 
angioplasty when performed; each additional branch of a major coronary 
artery (List separately in addition to code for primary procedure));
     CPT code 92933 (Percutaneous transluminal coronary 
atherectomy, with intracoronary stent, with coronary angioplasty when 
performed; single major coronary artery or branch);
     CPT code 92934 (Percutaneous transluminal coronary 
atherectomy, with intracoronary stent, with coronary angioplasty when 
performed; each additional branch of a major coronary artery (List 
separately in addition to code for primary procedure));
     CPT code 92937 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of intracoronary 
stent, atherectomy and angioplasty, including distal protection when 
performed; single vessel);
     CPT code 92938 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of intracoronary 
stent, atherectomy and angioplasty, including distal protection when 
performed; each additional branch subtended by the bypass graft (List 
separately in addition to code for primary procedure));
     CPT code 92941 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial infarction, coronary artery or coronary artery bypass graft, 
any combination of intracoronary stent, atherectomy and angioplasty, 
including aspiration thrombectomy when performed, single vessel);
     CPT code 92943 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of

[[Page 68235]]

intracoronary stent, atherectomy and angioplasty; single vessel); and
     CPT code 92944 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of 
intracoronary stent, atherectomy and angioplasty; each additional 
coronary artery, coronary artery branch, or bypass graft (List 
separately in addition to code for primary procedure)).
    In order to maintain the existing policy of differentiating payment 
for intracoronary stent placement procedures involving nondrug-eluting 
and drug-eluting stents, we are deleting HCPCS codes G0290 and G0291 
and replacing them with the following new HCPCS C-codes to parallel the 
new CPT codes:
     HCPCS code C9600 (Percutaneous transcatheter placement of 
drug eluting intracoronary stent(s), with coronary angioplasty when 
performed; single major coronary artery or branch);
     HCPCS code C9601 (Percutaneous transcatheter placement of 
drug-eluting intracoronary stent(s), with coronary angioplasty when 
performed; each additional branch of a major coronary artery (List 
separately in addition to code for primary procedure));
     HCPCS code C9602 (Percutaneous transluminal coronary 
atherectomy, with drug eluting intracoronary stent, with coronary 
angioplasty when performed; single major coronary artery or branch);
     HCPCS code C9603 (Percutaneous transluminal coronary 
atherectomy, with drug-eluting intracoronary stent, with coronary 
angioplasty when performed; each additional branch of a major coronary 
artery (List separately in addition to code for primary procedure));
     HCPCS code C9604 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of drug-eluting 
intracoronary stent, atherectomy and angioplasty, including distal 
protection when performed; single vessel);
     HCPCS code C9605 (Percutaneous transluminal 
revascularization of or through coronary artery bypass graft (internal 
mammary, free arterial, venous), any combination of drug-eluting 
intracoronary stent, atherectomy and angioplasty, including distal 
protection when performed; each additional branch subtended by the 
bypass graft (List separately in addition to code for primary 
procedure));
     HCPCS code C9606 (Percutaneous transluminal 
revascularization of acute total/subtotal occlusion during acute 
myocardial infarction, coronary artery or coronary artery bypass graft, 
any combination of drug-eluting intracoronary stent, atherectomy and 
angioplasty, including aspiration thrombectomy when performed, single 
vessel);
     HCPCS code C9607 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of 
drug-eluting intracoronary stent, atherectomy and angioplasty; single 
vessel); and
     HCPCS code C9608 (Percutaneous transluminal 
revascularization of chronic total occlusion, coronary artery, coronary 
artery branch, or coronary artery bypass graft, any combination of 
drug-eluting intracoronary stent, atherectomy and angioplasty; each 
additional coronary artery, coronary artery branch, or bypass graft 
(List separately in addition to code for primary procedure)).
    The interim APC assignment for CPT codes 92928, 92933, 92929, 
92934, 92937, 92938, 92941, 92943, and 92944 is APC 0104, and the 
interim APC assignment for HCPCS codes C9600, C9601, C9602, C9603, 
C9604, C9605, C9606, C9607, and C9608 is APC 0656 for CY 2013.
    Comment: One commenter requested that CPT code 0304T (Insertion or 
removal and replacement of intracardiac ischemia monitoring system 
including imaging supervision and interpretation when performed and 
intra-operative interrogation and programming when performed; device 
only) be placed in APC 0107 (Level I Implantation of Cardioverter-
Defibrillators (ICDs)), rather than APC 0090 (Insertion/Replacement of 
Pacemaker Pulse Generator), because CPT code 0304T describes the 
insertion or removal and replacement of a device, which is similar to 
other CPT codes assigned to APC 0107, such as CPT code 33262 (Removal 
of pacing cardioverter-defibrillator pulse generator with replacement 
of pacing cardioverter-defibrillator pulse generator; single lead 
system). The commenter also stated that CPT code 33224 (Insertion of 
pacing electrode, cardiac venous system, for left ventricular pacing, 
with attachment to previously placed pacemaker or pacing cardioverter-
defibrillator pulse generator (including revision of pocket, removal, 
insertion, and/or replacement of existing generator) is better aligned 
with APC 0107 than with its current APC assignment of APC 0655 
(Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker 
or Pacing Electrode).
    Response: We disagree with the commenter's assertion that CPT codes 
0304T and 33224 should be placed in APC 0107. APC 0107 includes 
procedures involving the insertion of a cardioverter-defibrillator, and 
CPT codes 0304T and 33224 do not describe such procedures.
    Comment: One commenter suggested that CMS consider the assignment 
of different APCs for upgrades to a pacemaker or cardioverter-
defibrillator based on the number of leads inserted, which can result 
in cost differences among procedures.
    Response: The commenter did not provide specific CPT codes for 
pacemaker or cardioverter-defibrillator insertion procedures for us to 
consider. Generally speaking, however, we believe that our standard 
ratesetting methodology for device-dependent APCs would appropriately 
capture hospitals' varying costs based on the number of leads inserted 
during these procedures because we use data from hospital claims and 
cost reports that would reflect any such differences in costs.
    Comment: Commenters expressed appreciation for the proposed 
increase in payment for the cochlear implant procedure, described by 
CPT code 69930 (Cochlear device implantation, with or without 
mastoidectomy) which is assigned to APC 0259 (Level VII ENT 
Procedures). However, the commenters also expressed concern that the 
increase does not reflect the actual cost of the procedure and device. 
The commenters indicated potential coding errors by major hospital 
facilities where claims for less expensive osseointegrated auditory 
device implant procedures (such as those assigned to APC 0425 (Level II 
Arthroplasty or Implantation with Prosthesis)) were included in the 
dataset used for calculation of cochlear implants, and requested that 
CMS review the APC 0259 source data and remove the claims that were 
inadvertently included as part of the original dataset to ensure the 
appropriate payment.
    Response: We employ procedure-to-device and device-to-procedure 
edits to ensure that the appropriate procedures and devices are 
correctly billed together and those same edits are again used in 
modeling the OPPS payment rates for the respective device-dependent 
APCs. Only claims containing the appropriate procedure and device code 
pairings are used to model the estimated APC cost for device-dependent 
APCs. We also note that the cochlear implant procedure and the 
osseointegrated

[[Page 68236]]

auditory device implant procedures are in different APCs; therefore, 
only single claims containing one of these procedures would be used to 
model the estimated APC cost for their respective APCs. Further, claims 
with multiple major procedures generally are not entered into the 
dataset used for calculating estimated APC costs. Therefore, we do not 
believe that the inclusion of claims containing both cochlear implant 
procedures and osseointegrated auditory device implant procedures would 
result in inaccurate procedure or APC cost estimations.
    Comment: Some commenters pointed out an apparent discrepancy 
between the listed proposed payment rate for APC 0425 in Addendum B to 
the CY 2013 OPPS/ASC proposed rule when compared to the listed proposed 
payment rate for APC 0425 in the data file entitled ``CY 2013 OPPS 
Comparison Between Proposed Geometric Mean and Median-Based Payments.'' 
Commenters requested that CMS review its proposed payment rates and 
determine which proposed payment rate reflects the correct geometric 
mean cost for APC 0425 for use in CY 2013 OPPS ratesetting.
    Some commenters also requested that CMS reconfigure APC 0425 to 
ensure the procedures in the APC are similar from both a cost and 
clinical cohesion perspective and thereby facilitate Medicare hospital 
outpatient payment rates that are more in line with hospitals' actual 
costs for orthopedic arthroplasty procedures. Specifically, the 
commenters argued that the osseointegrated auditory device implant 
procedures assigned to APC 0425, such as the procedure described by CPT 
code 69714 (Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy), are not related to the orthopaedic 
joint replacement procedures also assigned to APC 0425. The commenters 
also stated the proposed composition of APC 0425 violated the 2 times 
rule because CPT code 69717 (Replacement (including removal of existing 
device), osseointegrated implant, temporal bone, with percutaneous 
attachment to external speech processor/cochlear stimulator; without 
mastoidectomy) has a proposed mean cost of $5,382 and CPT code 25446 
(Arthroplasty with prosthetic replacement; distal radius and partial or 
entire carpus (total wrist)) has a proposed mean cost of $15,020.
    Response: We recognize the discrepancy between the proposed payment 
rate for APC 0425 in Addendum B to the CY 2013 OPPS/ASC proposed rule 
and the proposed payment rate for APC 0425 listed in the ``CY 2013 OPPS 
Comparison Between Proposed Geometric Mean and Median-Based Payments'' 
data file. The cost statistics used in the generation of the ``CY 2013 
OPPS Comparison Between Proposed Geometric Mean and Median-Based 
Payments'' data file did not reflect the final configuration of the 
proposed CY 2013 OPPS relative payment weights; thus, the proposed 
payment rate reflected in that data file was inaccurate.
    We believe that the current configuration of APC 0425 is 
appropriate as all procedures within the APC share clinical and 
resource similarity. Specifically, we disagree with the commenters who 
asserted that the osseointegrated auditory device implant procedures 
assigned to APC 0425 are not related to the orthopaedic joint 
replacement procedures also assigned to APC 0425. As we have stated in 
the past (73 FR 68539), all procedures assigned to APC 0425, including 
the osseointegrated auditory device implant procedures, involve the 
implantation of a prosthetic device into bone. We also note the 
assignments of CPT codes 69717 and 25446 to APC 0425 do not violate the 
2 times rule as the commenters claimed. As discussed in section 
III.B.2. of the proposed rule and this final rule with comment period, 
we consider only those HCPCS codes that are significant, based on the 
number of claims, in making this determination. 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 cost to be significant. CPT codes 69717 and 25446 do 
not meet this criteria and their inclusion in the same APC, therefore, 
does not violate the 2 times rule because they are not considered 
significant.
    Comment: One commenter stated that CMS should study further the 
claims for any device-dependent APC for which the calculated proposed 
payment reduction would be greater than 10 percent and take action to 
correct issues that may artificially reduce these payments.
    Response: We routinely examine all APCs with a greater than 10 
percent fluctuation in costs as part of our annual rulemaking process.
    Comment: Commenters supported CMS' determination that urology 
procedures in APCs 0385 (Level I Prosthetic Urological Procedures), 
0386 (Level II Prosthetic Urological Procedures), and 0674 (Prostate 
Cryoablation) should be categorized as device-dependent APCs. The 
commenters also requested the mandatory reporting of all HCPCS device 
C-codes on hospital claims for services involving devices and asserted 
that CMS should require complete and correct coding for packaged 
services. The commenters urged CMS to continue to promote device coding 
edits, while encouraging hospitals to remain vigilant in reporting the 
costs of performing device related services, and educating hospitals on 
the importance of accurate coding for devices, supplies, and other 
technologies.
    Response: We appreciate the commenters' support and will continue 
to promote device coding edits, as well as encourage hospitals to 
report all costs in performing device related services. As we have 
stated in the past (73 FR68535 through 68536 and 74 FR 60367), we agree 
that accurate reporting of device, supply, and technology charges will 
help to ensure that these items are appropriately accounted for in 
future years' OPPS payment rates. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68575), we strongly encourage 
hospitals to report a charge for each packaged service they furnish, 
either by billing the packaged HCPCS code and a charge for that service 
if separate reporting is consistent with CPT and CMS instructions, by 
increasing the charge for the separately paid associated service to 
include the charge for the packaged service, or by reporting the charge 
for the packaged service with an appropriate revenue code but without a 
HCPCS code. Any of these means of charging for the packaged service 
will result in the cost of the packaged service being incorporated into 
the cost we estimate for the separately paid service. If a HCPCS code 
is not reported when a packaged service is provided, we acknowledge 
that it can be challenging to specifically track the utilization 
patterns and resource cost of the packaged service itself. However, we 
have no reason to believe that hospitals have not considered the cost 
of the packaged service in reporting charges for the independent, 
separately paid service.
    After consideration of the public comments we received, we are 
finalizing our proposed policy to use the standard methodology for 
calculating costs for device-dependent APCs for CY 2013 that was 
finalized in the CY 2012 OPPS/ASC final rule with comment period.

[[Page 68237]]

    Table 3 below lists the APCs for which we used our standard device-
dependent APC ratesetting methodology for CY 2013. We refer readers to 
Addendum A to this final rule with comment period (which is available 
via the Internet on the CMS Web site) for the payment rates for these 
device-dependent APCs for CY 2013.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR15NO12.005

(2) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as 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 2013 OPPS/ASC proposed rule (77 FR 45082 through 45083), 
we proposed to continue for CY 2013 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 would then apply this mean ratio to the overall 
CCRs of hospitals not reporting costs and charges for blood cost 
centers on their cost reports in order to simulate blood-specific CCRs 
for those hospitals. We calculated the costs upon which the proposed CY 
2013 payment rates for blood and blood products were 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 noted that we used geometric mean unit costs for 
each blood and blood product to calculate the proposed payment rates, 
consistent with the methodology we proposed for other items and 
services, discussed in section II.A.2.f. of the proposed rule and this 
final rule with comment period.
    We stated in the proposed rule that we continue to believe the 
hospital-specific, blood-specific CCR methodology best 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 stated in the proposed rule that we 
believe that it yields more accurate estimated costs for these 
products.
    Comment: Some commenters expressed concern that the proposed APC 
payment rates for some blood products are less than the acquisition 
costs of those products, citing a published study of a national survey 
of blood acquisition and overhead costs. According to the commenters, 
the safety and availability of blood may be jeopardized without 
adequate payment. The commenters asked that CMS formally consider and 
evaluate potential alternative methodologies for setting APC payment 
rates for blood products, preferably by seeking input from affected 
stakeholders. The commenters also stated that the use of the geometric 
mean methodology to calculate blood costs would result in lower payment 
rates compared to the use of median costs to calculate the payment 
rates for blood and blood products and urged CMS to use the median cost 
instead.
    Response: As we have stated in the past (75 FR 71838 through 71839 
and 76 FR 74152), we continue to believe that using blood-specific CCRs 
applied to hospital claims data results in payment that appropriately 
reflect hospitals' relative costs of providing blood and blood products 
as reported to us by

[[Page 68240]]

hospitals. We will consider any information presented to us from 
affected stakeholders regarding alternative ratesetting methodologies. 
We address the use of geometric mean costs to calculate blood payment 
rates in section II.A.2.c. of this final rule with comment period.
    Comment: One commenter expressed concern regarding coding and 
payment for pre-storage pooled, leukocyte reduced platelets. According 
to the commenter, hospitals currently bill for pre-storage pooled, 
leukocyte reduced platelets using HCPCS code P9031 (Platelets, 
leukocytes reduced, each unit) based on the number of platelet 
concentrates (PCs) that are combined to create one unit of the blood 
product. The commenter stated that because the number of PC units used 
to make a therapeutic dose of pre-storage pooled, leukocyte reduced 
platelets is variable, blood centers must notify hospitals of the 
number of PCs in each therapeutic dose for the hospital's billing 
purposes, even though it does not affect the cost of the product to the 
hospital.
    According to the commenter, a new technology exists that can make a 
unit of pre-storage pooled, leukocyte reduced platelets out of fewer 
PCs. However, the commenter expressed concern that the current coding 
and payment based on the use of HCPCS code P9031 unfairly and 
inappropriately disadvantages the use of this technology. The commenter 
indicated that where a greater number of PCs are needed to make a unit 
of pre-storage pooled, leukocyte reduced platelets, the hospital may 
end up being paid at a rate that significantly exceeds the cost of the 
product. However, according to the commenter, where the blood center 
can make the pre-storage pooled, leukocyte reduced platelets using 
fewer PCs, the hospital may end up receiving payment that is not 
sufficient to cover the cost of the product.
    The commenter stated that a separate code will be necessary to 
differentiate pre-storage pooled, leukocyte reduced platelets from 
other platelet products, and that an application for a unique HCPCS 
code is currently pending. The commenter urged CMS, for OPPS purposes, 
to take action to ensure appropriate payment for pre-storage pooled, 
leukocyte reduced platelets, regardless of whether a new HCPCS code is 
created.
    Response: The outcome of the commenter's application for a unique 
HCPCS code for pre-storage pooled, leukocyte reduced platelets is 
beyond the scope of OPPS rulemaking. We note that it is an expected and 
appropriate outcome of a prospective payment system that hospitals 
would receive payments that are less than their costs in some cases and 
exceed their costs in other cases, as the commenter described is 
occurring in the case of pre-storage pooled, leukocyte reduced 
platelets. Therefore, we do not believe that it is necessary for us to 
take action to ensure appropriate payment for pre-storage pooled, 
leukocyte reduced platelets at this time. However, we are interested in 
hearing from other stakeholders regarding the current incentives and 
disincentives that exist in the marketplace for pre-storage pooled, 
leukocyte reduced platelets and invite public comment on payment for 
the blood product described by HCPCS code P9031 in this final rule with 
comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, 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, for CY 2013. We continue 
to believe that this methodology in CY 2013 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 refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site) for 
the final CY 2013 payment rates for blood and blood products (which are 
identified with status indicator ``R''). For a more detailed discussion 
of the blood-specific CCR methodology, we refer readers to the CY 2005 
OPPS proposed rule (69 FR 50524 through 50525). For a full history of 
OPPS payment for blood and blood products, we refer readers to the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66807 through 
66810).
(3) Brachytherapy Sources
    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Public Law 108-173 (MMA), mandated the creation of additional groups 
of covered OPD services that classify devices of brachytherapy 
consisting of a seed or seeds (or radioactive source) (``brachytherapy 
sources'') separately from other services or groups of services. The 
additional groups must reflect the number, isotope, and radioactive 
intensity of the brachytherapy sources furnished and must include 
separate groups for palladium-103 and iodine-125 sources. For the 
history of OPPS payment for brachytherapy sources, we refer readers to 
prior OPPS proposed and final rules. As we have stated previously (72 
FR 66780, 73 FR 41502, 74 FR 60533 through 60534, 75 FR 71978, and 76 
FR 74160), we believe that adopting the general OPPS prospective 
payment methodology for brachytherapy sources is appropriate for a 
number of reasons. The general OPPS payment methodology uses 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 cost. We 
believe that the OPPS prospective payment methodology, as opposed to 
payment based on hospitals' charges adjusted to cost, has provided 
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.
    Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45087), we 
proposed to use the costs from CY 2011 claims data for setting the 
proposed CY 2013 payment rates for brachytherapy sources, as we 
proposed for most other items and services that will be paid under the 
CY 2013 OPPS. We based the proposed rates for brachytherapy sources 
using geometric mean unit costs for each source, consistent with the 
methodology proposed for other items and services, discussed in section 
II.A.2.f. of the proposed rule. We proposed to continue the other 
payment policies for brachytherapy sources 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 non-stranded NOS 
codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest 
stranded or non-stranded prospective payment rate for such sources, 
respectively, on a per source basis (as opposed, for example, to a per 
mCi), which is based on the policy we established in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66785). 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

[[Page 68241]]

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 superseded for a period of time 
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.
    Consistent with our policy regarding APC payments made on a 
prospective basis, as we did for CY 2011 and CY 2012, we proposed to 
subject brachytherapy sources to outlier payments under section 
1833(t)(5) of the Act, and also to subject brachytherapy source payment 
weights to scaling for purposes of budget neutrality. Hospitals can 
receive outlier payments for brachytherapy sources if the costs of 
furnishing brachytherapy sources meet the criteria for outlier payment 
specified at 42 CFR 419.43(d). In addition, implementation of 
prospective payment for brachytherapy sources provides opportunities 
for eligible hospitals to receive additional payments in CY 2013 under 
certain circumstances through the 7.1 percent rural adjustment, as 
described in section II.E. of the proposed rule and this final rule 
with comment period.
    We referred readers to Addendum B to the proposed rule (which was 
available via the Internet on the CMS Web site) for the proposed CY 
2013 payment rates for brachytherapy sources, identified with status 
indicator ``U.'' We invited public comment on this proposed policy and 
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. In the proposed 
rule, we provided an appropriate address for receipt of these 
recommendations; the address is repeated at the end of this section. We 
indicated that we will continue to add new brachytherapy source codes 
and descriptors to our systems for payment on a quarterly basis.
    Comment: A number of commenters opposed our proposal to base the 
payment for brachytherapy sources on geometric mean costs, while other 
commenters supported the proposal. Commenters also addressed other 
payment issues related to brachytherapy:
    First, some commenters claimed that there are longstanding problems 
with OPPS claims data for brachytherapy source payment. For example, 
commenters stated that high dose rate (HDR) sources can be used to 
treat multiple patients because they decay over a 90-day period. The 
commenters stated that, as a result, the per source cost depends on the 
number of patients treated as well as the number of treatments and the 
intensity of the treatments within the 90-day period, making adequate 
payment for all hospitals difficult. Commenters asserted, as further 
examples of problems with our claims data, that our claims data 
continue to show a huge variation in unit costs on claims across 
hospitals; that more than half of the brachytherapy APCs have proposed 
payment rates based on 50 or fewer hospitals; and that our claims data 
contain rank order anomalies between high-activity palladium-103 (HCPCS 
code C2635) and low-activity palladium-103 sources (HCPCS codes 2640 
and C2641), claiming that high-activity palladium-103 always costs more 
than low-activity palladium-103.
    Second, commenters stated that brachytherapy source payments 
proposed for CY 2013 are unstable and fluctuate significantly from CY 
2012 levels. They expressed concern about unpredictable changes in 
payment rates for brachytherapy sources from year to year, stating that 
proposed rates for some sources would change significantly, ranging 
from a decrease of 14.2 percent for HCPCS code C2643 (Brachytherapy 
source, non-stranded, cesium-131, per source) to an increase of 216 
percent for HCPCS code C1716 (Brachytherapy source, non-stranded, gold-
198, per source).
    Response: In response to the commenters' concerns regarding the 
proposal to base payment for brachytherapy sources on geometric mean 
cost, we refer readers to section II.A.2.f. of this final rule with 
comment period, where we address the use of the geometric means 
methodology for determining OPPS payments for brachytherapy sources for 
CY 2013.
    We disagree with the commenters who stated that the CY 2013 
proposed payment rates for brachytherapy sources based on geometric 
mean cost would change payment levels significantly from the CY 2012 
payment rates. While the commenters are correct that the proposed CY 
2013 payment rate changes range from -14.2 to 216 percent, when we 
compare the CY 2013 proposed payment rates to the CY 2012 final payment 
rates, we find that 10 of the 16 brachytherapy source codes will 
receive increases or decreases of less than 10 percent, indicating 
stability for the majority of the brachytherapy sources. Moreover, when 
we compare the CY 2013 proposed payment rates to the CY 2012 final 
payment rates, we find that 10 of the 16 brachytherapy source codes 
will receive increased payment amounts per source, while 6 of the 16 
codes will receive decreased payments per source.
    With regard to the commenters who articulated concerns about 
perceived longstanding problems such as variability of brachytherapy 
source payment rates (which they have repeatedly opined in prior 
years), we are pleased that, unlike in past years, the commenters did 
not express objection to prospective payment for brachytherapy sources. 
As we stated previously (72 FR 66782, 74 FR 60534, 75 FR 71979, and 76 
FR 74161), 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. As we also 
explained previously (72 FR 66782, 74 FR 60535, and 75 FR 71979), a 
prospective payment system such as the OPPS relies on the concept of 
averaging, where the payment may be more or less than the estimated 
cost of providing a service for a particular patient, but with the 
exception of outlier cases, it 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 other component items and services and because 
relative weights are typically estimated using a smaller set of claims.
    As we have stated previously (75 FR 71979 and 76 FR 74161), under 
the budget neutral provision for the OPPS, it is the relativity of 
costs of services, not their absolute costs, that is important, and we 
believe that brachytherapy sources are appropriately paid according to 
the standard OPPS payment approach. Furthermore, some sources may have 
costs and payment rates based on 50 or fewer hospitals because it is 
not uncommon for OPPS prospective payment 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

[[Page 68242]]

brachytherapy source claims for many cases and comprise the universe of 
hospitals using particular low-volume sources, for which we are 
required to pay separately by statute. Further, our methodology for 
estimating 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 lost. We believe 
that prospective payment rates based on claims from those hospitals 
furnishing a particular source appropriately reflect the cost of that 
source for hospitals.
    In the case of high and low activity iodine-125 sources, our claims 
data show that the hospitals' relative costs for the high activity 
source as reported on hospital claims and in cost report data are 
greater than the low activity sources, as we have noticed in the past. 
However, this relationship is reversed for palladium-103 sources, as a 
few commenters pointed out. As we have stated in the past (75 FR 71979 
and 76 FR 74162), we do not have any information about the expected 
cost differential between high and low activity sources of various 
isotopes other than what is available in our claims and hospital cost 
report data. For high activity palladium-103, only 8 hospitals reported 
this service in CY 2010, compared to 139 and 203 hospitals for low-
activity palladium-103 sources described by HCPCS codes C2640 and 
C2641, respectively. As we stated regarding this issue in the CYs 2010, 
2011, and 2012 OPPS/ASC final rules with comment period (74 FR 60535, 
75 FR 71979, and 76 FR 74162, respectively), it is clear that fewer 
hospitals furnished high-activity palladium-103 sources than 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 number of hospitals reporting the low-
activity sources. These varied cost distributions clearly contribute to 
the observed relationship in costs between the different types of 
sources. However, we see no reason why our standard ratesetting 
methodology for brachytherapy sources that relies on all claims from 
all hospitals furnishing brachytherapy sources will not yield valid 
costs for those hospitals furnishing the different brachytherapy 
sources upon which CY 2013 prospective payments rates are based.
    As we indicated in the CYs 2011 and 2012 OPPS/ASC final rules with 
comment period (75 FR 71980 and 76 FR 74162, respectively), we agree 
that high dose rate (HDR) brachytherapy sources such as HDR iridium-192 
have a fixed active life and must be replaced every 90 days; as a 
result, hospitals' per-treatment cost for the source would be dependent 
on the number of treatments furnished per source. The source cost must 
be amortized over the life of the source. Therefore, in establishing 
their 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 their charges for the source accordingly, as we have 
stated previously (72 FR 66783, 74 FR 60535, 75 FR 71980, and 76 FR 
74162). For most of these OPPS services, our practice is to establish 
prospective payment rates based on the costs from hospitals' claims 
data to provide incentives for efficient and cost effective delivery of 
these services.
    Comment: One commenter requested that CMS establish appropriate 
payment for HCPCS code A9527 (Iodine, I-125, sodium iodide solution, 
therapeutic, per millicurie (mCi)), claiming that the source has not 
been available for patients from June 2010 to July 2012, when it became 
available for purchase by providers. The commenter stated that the 
claims from two hospitals that reported HCPCS code A9527 are erroneous. 
The commenter requested that CMS use external data based upon actual 
hospital invoices to assign payment for HCPCS code A9527, which, 
according to the commenter, cost hospitals in CY 2012 $28.00 per 
millicurie (mCi), which is above the proposed payment rate of $20.86.
    Response: We have been paying for I-125 brachytherapy solution 
since 2003, both as HCPCS code A9527 and its predecessor code in the 
OPPS, C2632 (Brachytherapy solution, iodine-125, per mCi). Our claims 
data over the period of 2004 through 2011 show a consistent range of 
costs of $16.83 to $29.42 per mCi, with several thousand units of 
claims in most of those years. The claims data for HCPCS code A9527 
reflect claims for 8 providers, rather than 2 as indicated by the 
commenter. Therefore, we believe that we are obtaining adequate and 
consistent data on HCPCS code A9527. We will maintain our use of claims 
data for HCPCS code A9527 in our OPPS ratesetting for CY 2013.
    Comment: One commenter requested that CMS add a new C-code and APC 
for a high-activity cesium-131 brachytherapy source, which is designed 
to generate isotropic emission of therapeutic radiation and to be used 
primarily for the treatment of head and neck and eye cancer.
    Response: We appreciate the commenter informing us of a new high-
activity cesium-131 source. However, our evaluation process of new 
sources for addition to our set of codes is beyond the scope of this 
rulemaking. As we state elsewhere in this final rule with comment 
period, and in previous rules, such as the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74163), we ask parties to submit 
recommendations to us for new HCPCS codes to describe new brachytherapy 
sources consisting of a radioactive isotope, including a detailed 
rationale to support recommended new sources. We suggest to the 
commenter to send its recommendation for this new brachytherapy source, 
along with the detailed rationale to support the new source, to the 
address provided at the end of this section. We will continue to add 
new brachytherapy source codes and descriptors to our systems on a 
quarterly basis.
    Comment: One commenter supported CMS' proposal to continue the 
policy of paying for new sources for which we have no claims data, with 
prospective payment rates based on the consideration of external data 
as well as other relevant information. The commenter expressed 
appreciation for CMS' efforts to establish appropriate payment rates 
for brachytherapy sources in a timely manner, and recommended that CMS 
finalize this proposal.
    Response: We appreciate the support and recognition of our efforts 
to provide appropriate and timely payment. We are finalizing our 
proposal to pay for new sources using external data and other relevant 
information.
    After consideration of the public comments we received, we are 
finalizing our proposal to pay for brachytherapy sources at prospective 
payment rates based on their source-specific geometric mean costs for 
CY 2013. We refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) for the final CY 2013 payment rates 
for brachytherapy sources, identified with status indicator ``U.'' We 
also are finalizing our proposals to continue our policies regarding 
payment for NOS codes for stranded and non-stranded sources and new 
brachytherapy sources for which we have no claims data. Specifically, 
we are finalizing our proposals to continue payment for stranded and 
non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to 
the lowest stranded or non-stranded prospective

[[Page 68243]]

payment for such sources, respectively, as discussed in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66786); and our proposal 
to assign HCPCS codes for new brachytherapy sources to their own APCs, 
with payment rates based on consideration of external data and other 
relevant information, in the absence of claims data. Once claims data 
are available, our standard ratemaking process will be applied to the 
calculation of the cost for the new brachytherapy source.
    Consistent with our policy regarding APC payments made on a 
prospective basis, we are finalizing our proposal to subject the cost 
of brachytherapy sources to the outlier provision of section 1833(t)(5) 
of the Act, and also to subject brachytherapy source payment relative 
weights to scaling for purposes of budget neutrality.
    As stated in the proposed rule (77 FR 45087), we continue to invite 
hospitals and other parties to submit recommendations to us for new 
HCPCS codes to describe new brachytherapy sources consisting of a 
radioactive isotope, including a detailed rationale to support 
recommended new sources. Such recommendations should be directed to the 
Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare 
and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We 
will continue to add new brachytherapy source codes and descriptors to 
our systems for payment on a quarterly basis.
e. 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 and as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service. Combining payment for multiple, 
independent services into a single OPPS payment in this way 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, cardiac electrophysiologic 
evaluation and ablation services, mental health services, multiple 
imaging services, and cardiac resynchronization therapy 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 2013 OPPS/ASC proposed rule (77 FR 45087 through 45094), 
we proposed for CY 2013 to continue our composite policies for extended 
assessment and management services, LDR prostate brachytherapy, cardiac 
electrophysiologic evaluation and ablation services, mental health 
services, multiple imaging services, and cardiac resynchronization 
therapy services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), 
II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), 
respectively, of the proposed rule.
    Comment: One commenter encouraged CMS to create payments that drive 
hospitals to develop low cost deliveries of care instead of rewarding 
them for excess deliveries of care, such as beneficiaries receiving up 
to three CT scans in a single emergency department visit.
    Response: We agree with the commenter that it is important to 
create payment methodologies that encourage efficiency. As we have 
stated in the past, we believe that composite APCs enable hospitals to 
manage their resources with maximum flexibility by monitoring and 
adjusting the volume and efficiency of services themselves. With 
respect to CT scans in particular, as we discuss in section 
II.A.2.e.(5) of this final rule with comment period, we provide a 
single payment each time a hospital bills more than one CT on the same 
date of service.
    The final composite policies for extended assessment and management 
services, LDR prostate brachytherapy, cardiac electrophysiologic 
evaluation and ablation services, mental health services, multiple 
imaging services, and cardiac resynchronization therapy services are 
discussed in the following sections (II.A.2.e.(1), II.A.2.e.(2), 
II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), 
respectively) of this final rule with comment period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45088), we proposed to 
continue to include composite APC 8002 (Level I Extended Assessment and 
Management Composite) and composite APC 8003 (Level II Extended 
Assessment and Management Composite) in the OPPS for CY 2013. Beginning 
in CY 2008, we created these two composite APCs to provide payment to 
hospitals in certain circumstances when extended assessment and 
management of a patient occur (an extended visit). In most 
circumstances, observation services are supportive and ancillary to the 
other services provided to a patient. In the circumstances when 
observation care is provided in conjunction with a high level visit or 
direct referral and is an integral part of a patient's extended 
encounter of care, payment is made for the entire care encounter 
through one of the two composite APCs as appropriate. We refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 
through 74165) for a full discussion of this longstanding policy.
    For CY 2013, we proposed to continue the extended assessment and 
management composite APC payment methodology and criteria for APCs 8002 
and 8003 that we finalized for CYs 2009 through 2012. We continue to 
believe that the composite APCs 8002 and 8003 and related policies 
provide the most appropriate means of paying for these services. We 
also proposed to calculate the costs for APCs 8002 and 8003 using the 
same methodology that we used to calculate the costs for composite APCs 
8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we proposed 
to use all single and ``pseudo'' single procedure claims from CY 2011 
that met the criteria for payment of each composite APC and apply the 
standard packaging and trimming rules to the claims before calculating 
the CY 2013 costs. The proposed CY 2013 cost resulting from this 
methodology for composite APC 8002 was approximately $446, which was 
calculated from 17,072 single and ``pseudo'' single claims that met the 
required criteria. The proposed CY 2013 cost for composite APC 8003 was 
approximately $813, which was calculated from 255,231 single and 
``pseudo'' single claims that met the required criteria.
    We did not receive any public comments on this proposal. We are 
finalizing our proposed policy, without modification, to calculate the 
costs for APCs 8002 and 8003 using the same

[[Page 68244]]

methodology that we used to calculate the costs for composite APCs 8002 
and 8003 for the CY 2008 OPPS (72 FR 66649). The final CY 2013 cost 
resulting from this methodology for composite APC 8002 is approximately 
$453, which was calculated from 19,028 single and ``pseudo'' single 
claims that met the required criteria. The final CY 2013 cost for 
composite APC 8003 is approximately $821, which was calculated from 
284,861 single and ``pseudo'' single claims that met the required 
criteria.
    At its August 2012 meeting, the Advisory Panel on Hospital 
Outpatient Payment (the Panel) recommended that CMS continue to report 
clinic/emergency department visit and observation claims data and, if 
CMS identifies changes in patterns of utilization or cost, that CMS 
bring those issues to the Visits and Observation Subcommittee. 
Additionally, the Panel recommended that CMS examine the costs and 
frequency for Level I and Level II Extended Assessment and Management 
Composite APCs associated with greater than 24 hours of observation, if 
available, and report the findings to the Visits and Observation 
Subcommittee. The Panel recommended that Scott Manaker, M.D., Ph.D., be 
named the chair of the Visits and Observation Subcommittee. The Panel 
recommended that the work of the Visits and Observation Subcommittee 
continue. We are accepting these recommendations and will provide the 
requested data to the Panel at a future meeting.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex), 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 based the payment for composite APC 
8001 (LDR Prostate Brachytherapy Composite) on the 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 and a detailed 
description of how we developed the LDR prostate brachytherapy 
composite APC.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45088 through 45089), 
we proposed for CY 2013 to continue to pay for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008 through CY 2012. That is, we proposed to use CY 
2011 claims on which both CPT codes 55875 and 77778 were billed on the 
same date of service with no other separately paid procedure codes 
(other than those on the bypass list) to calculate the payment rate for 
composite APC 8001. Consistent with our CY 2008 through CY 2012 
practice, we proposed not to use the claims that met these criteria in 
the calculation of the costs for APC 0163 (Level IV Cystourethroscopy 
and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial 
Radiation Source Application), the APCs to which CPT codes 55875 and 
77778 are assigned, respectively. We proposed to continue to calculate 
the costs for APCs 0163 and 0651 using single and ``pseudo'' single 
procedure claims. We stated that we believe that this composite APC 
contributes to our goal of creating hospital incentives for efficiency 
and cost containment, while providing hospitals with the most 
flexibility to manage their resources. We also stated that we continue 
to believe that data from claims reporting both services required for 
LDR prostate brachytherapy provide the most accurate cost upon which to 
base the composite APC payment rate.
    Using a partial year of CY 2011 claims data available for the CY 
2013 proposed rule, we were able to use 650 claims that contained both 
CPT codes 55875 and 77778 to calculate the cost upon which the proposed 
CY 2013 payment for composite APC 8001 was based. The proposed cost for 
composite APC 8001 for CY 2013 was approximately $3,362.
    Comment: A few commenters supported the proposed payment 
methodology and policy for APC 8001. The commenters also supported the 
continued use of the LDR prostate brachytherapy composite APC 
methodology and the proposed increase in payment for CY 2013.
    Response: We appreciate the commenters' support.
    We are finalizing, without modification, our proposed policy for 
composite APC 8001. Using a full year of CY 2011 claims data available 
for this CY 2013 final rule with comment period, we were able to use 
677 claims that contained both CPT codes 55875 and 77778 to calculate 
the cost upon which the final CY 2013 payment for composite APC 8001 is 
based. The final cost for composite APC 8001 for CY 2013 is 
approximately $3,348.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one specified electrophysiologic ablation 
service. Correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). 
Calculating a composite APC for these services allowed us to utilize 
many more claims than were available to establish the individual APC 
costs for these services, and advanced our stated goal of promoting 
hospital efficiency through larger payment bundles. In order to 
calculate the cost upon which the payment rate for composite APC 8000 
is based, we used multiple procedure claims that contained at least one 
CPT code from Group A for evaluation services and at least one CPT code 
from Group B for ablation services reported on the same date of service 
on an individual claim. Table 9 in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66656) identified the CPT codes that are assigned 
to Groups A and B. For a full discussion of how we identified the Group 
A and Group B procedures and established the payment rate for the

[[Page 68245]]

cardiac electrophysiologic evaluation and ablation composite APC, we 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66655 through 66659). Where a service in Group A is furnished on 
a date of service that is different from the date of service for a CPT 
code in Group B for the same beneficiary, payments are made under the 
appropriate single procedure APCs and the composite APC does not apply.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we proposed 
for CY 2013 to continue to pay for cardiac electrophysiologic 
evaluation and ablation services using the composite APC methodology 
proposed and implemented for CY 2008 through CY 2012. We stated that we 
continue to believe that the cost for these services calculated from a 
high volume of correctly coded multiple procedure claims would result 
in an accurate and appropriate proposed payment for cardiac 
electrophysiologic evaluation and ablation services when at least one 
evaluation service is furnished during the same clinical encounter as 
at least one ablation service. Consistent with our practice since CY 
2008, we proposed not to use the claims that met the composite payment 
criteria in the calculation of the costs for APCs 0085 and 0086, to 
which the CPT codes in both Groups A and B for composite APC 8000 are 
otherwise assigned. We proposed that the costs for APCs 0085 and 0086 
would continue to be calculated using single procedure claims. For CY 
2013, using a partial year of CY 2011 claims data available for the 
proposed rule we were able to use 11,358 claims containing a 
combination of Group A and Group B CPT codes to calculate a proposed 
cost of approximately $11,458 for composite APC 8000.
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel created five new CPT codes 
describing cardiac electrophysiologic evaluation and ablation services, 
to be effective January 1, 2013. These five new codes are:
     CPT code 93653 (Comprehensive electrophysiologic 
evaluation including insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia with 
right atrial pacing and recording, right ventricular pacing and 
recording, His recording with intracardiac catheter ablation of 
arrhythmogenic focus; with treatment of supraventricular tachycardia by 
ablation of fast or slow atrioventricular pathway, accessory 
atrioventricular connection, cavo-tricuspid isthmus or other single 
atrial focus or source of atrial re-entry);
     CPT code 93654 (Comprehensive electrophysiologic 
evaluation including insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia with 
right atrial pacing and recording, right ventricular pacing and 
recording, His recording with intracardiac catheter ablation of 
arrhythmogenic focus; with treatment of ventricular tachycardia or 
focus of ventricular ectopy including intracardiac electrophysiologic 
3D mapping, when performed, and left ventricular pacing and recording, 
when performed);
     CPT code 93655 (Intracardiac catheter ablation of a 
discrete mechanism of arrhythmia which is distinct from the primary 
ablated mechanism, including repeat diagnostic maneuvers, to treat a 
spontaneous or induced arrhythmia (List separately in addition to code 
for primary procedure));
     CPT code 93656 (Comprehensive electrophysiologic 
evaluation including transseptal catheterizations, insertion and 
repositioning of multiple electrode catheters with induction or 
attempted induction of an arrhythmia with atrial recording and pacing, 
when possible, right ventricular pacing and recording, His bundle 
recording with intracardiac catheter ablation of arrhythmogenic focus, 
with treatment of atrial fibrillation by ablation by pulmonary vein 
isolation); and
     CPT code 93657 (Additional linear or focal intracardiac 
catheter ablation of the left or right atrium for treatment of atrial 
fibrillation remaining after completion of pulmonary vein isolation 
(List separately in addition to code for primary procedure)).
    The CPT Editorial Panel also deleted two electrophysiologic 
ablation codes, CPT code 93651 (Intracardiac catheter ablation of 
arrhythmogenic focus; for treatment of supraventricular tachycardia by 
ablation of fast or slow atrioventricular pathways, accessory 
atrioventricular connections or other atrial foci, singly or in 
combination) and CPT code 93652 (Intracardiac catheter ablation of 
arrhythmogenic focus; for treatment of ventricular tachycardia), 
effective January 1, 2013.
    Our standard process for dealing with new CPT codes effective on 
January 1 for the upcoming calendar year is to assign each code to the 
APC that we believe contains services that are comparable with respect 
to clinical characteristics and resources required to furnish the 
service. The new CPT code is given a comment indicator of ``NI'' in 
Addendum B to the final rule with comment period to identify it as a 
new interim APC assignment for the new year and the APC assignment for 
the new CPT codes is then open to public comment for 60 days following 
the publication of the final rule with comment period.
    New CPT codes 93653, 93654, and 93656 are primary 
electrophysiologic services that encompass evaluation as well as 
ablation, while new CPT codes 93655 and 93657 are add-on codes. Because 
CPT codes 93653, 93654, and 93656 already encompass both evaluation and 
ablation services, we are assigning them to composite APC 8000 with no 
further requirement to have another electrophysiologic service from 
either Group A or Group B furnished on the same date of service, and we 
are assigning them interim status indicator ``Q3'' (Codes that may be 
paid through a composite APC) in Addendum B to this final rule with 
comment period. To facilitate implementing this policy, we are 
assigning CPT codes 93653, 93654, and 93656 to a new Group C, which 
will be paid at the composite APC 8000 payment rate. (We note that we 
will use single and ``pseudo'' single claims for CPT codes 93653, 
93654, and 93656 when they become available for calculating the costs 
upon which the payment rate for APC 8000 will be based in future 
ratesetting.) Because CPT codes 93655 and 93657 are dependent services 
that may only be performed as ancillary services to the primary CPT 
codes 93653, 93654, and 93656, we believe that packaging CPT codes 
93655 and 93657 with the primary procedures is appropriate, and we are 
assigning them interim status indicator ``N.'' Because the CPT 
Editorial Panel deleted CPT codes 93651 and 93652, effective January 1, 
2013, we are deleting them from the Group B code list, leaving only CPT 
93650 (Intracardiac catheter ablation of atrioventricular node 
function, atrioventricular conduction for creation of complete heart 
block, with or without temporary pacemaker placement) in Group B at 
this time.
    As is our usual practice for new CPT codes that were not available 
at the time of the proposed rule, our treatment of new CPT codes 93653, 
93654, 93655, 93656, and 93657 is open to public comment for a period 
of 60 days following the publication of this final rule with comment 
period.
    We did not receive any public comments on our proposal to continue 
to pay for cardiac electrophysiologic evaluation and ablation services 
using the composite APC methodology. We are finalizing our proposed 
policy for CY 2013 to continue to pay for cardiac

[[Page 68246]]

electrophysiologic evaluation and ablation services using the composite 
APC methodology proposed and implemented for CY 2008 through CY 2012. 
We note that we are modifying our proposal for CY 2013 to reflect the 
CPT coding changes as discussed above. For CY 2013, using a full year 
of CY 2011 claims data available for this final rule with comment 
period, we were able to use 12,235 claims containing a combination of 
Group A and Group B CPT codes to calculate a final cost of 
approximately $11,466 for composite APC 8000.
    Table 4 below lists the groups of procedures upon which we will 
base composite APC 8000 for CY 2013.
BILLING CODE 4120-01-P

[[Page 68247]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.006


[[Page 68248]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.007

(4) Mental Health Services Composite APC (APC 0034)
(a) Mental Health Services Composite Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed 
for CY 2013 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 provided by a hospital, which we consider to be the 
most resource-intensive of all outpatient mental health treatments for 
CY 2013. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 to 18455) for the initial discussion of 
this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    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 partial hospitalization payment for a hospital, those 
specified mental health services would be assigned to APC 0034 (Mental 
Health Services Composite). We proposed to continue to set the payment 
rate for APC 0034 at the same rate as we pay for APC 0176 (Level II 
Partial Hospitalization (4 or more services) for Hospital-Based PHPs), 
which is the maximum partial hospitalization per diem payment for a 
hospital, and that the hospital would continue to be paid one unit of 
APC 0034. Under this policy, the I/OCE would continue to determine 
whether to pay for these specified mental health services individually 
or make a single payment at the same rate as the APC 0176 per diem rate 
for partial hospitalization for all of the specified mental health 
services furnished by the hospital on that single date of service.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2013 proposal, without modification, to 
continue our longstanding policy of limiting the aggregate payment for 
specified less resource-intensive mental health services furnished on 
the same date by a hospital to the payment for APC 0176, which is the 
maximum partial hospitalization per diem payment for a hospital for CY 
2013.
(b) Coding Changes
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel deleted 16 psychotherapy and 
psychiatric diagnostic evaluation CPT codes to which the mental health 
services composite APC methodology applies, and replaced them with 12 
new CPT codes, to be effective January 1, 2013. The new and deleted CPT 
codes are included in Table 5 below. Our standard process for 
addressing new CPT codes effective on January 1 for the upcoming 
calendar year is to assign each code to the APC that we believe 
contains services that are comparable with respect to clinical 
characteristics and resources required to furnish the service. The new 
CPT code is given a comment indicator of ``NI'' in Addendum B to the 
final rule with comment period to identify it as a new interim APC 
assignment for the new year and the APC assignment for the new codes is 
then open to public comment for 60 days following the publication of 
the final rule with comment period.

[[Page 68249]]

    Because the new mental health CPT codes in Table 5 replace CPT 
codes that are subject to the mental health composite APC, and because 
all of the HCPCS codes in the respective APCs to which these codes are 
assigned for CY 2013 are subject to the mental health composite APC, 
the new separately payable mental health CPT codes also will be 
assigned to composite APC 0034 with an interim status indicator of 
``Q3'' (Codes that may be paid through a composite APC) in Addendum B 
to this final rule with comment period. The single code APC assignment, 
the composite APC assignment, and the interim status indicator 
assignment for each of these new CPT codes are included in Table 5 
below. As discussed above for new CPT codes that were not available at 
the time of the proposed rule, our treatment of these new mental health 
CPT codes is open to public comment for a period of 60 days following 
the publication of this final rule with comment period. The current 
single code APC assignments for all of the HCPCS codes to which the 
mental health composite APC policy applies, along with their composite 
APC assignment and their APC assignments when the composite methodology 
does not apply, can be found in Addendum M to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
BILLING CODE 4120-01-P

[[Page 68250]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.008


[[Page 68251]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.009

BILLING CODE 4120-01-C
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Effective January 1, 2009, we provide a single payment each time a 
hospital bills more than one imaging procedure within an imaging family 
on the same date of service, 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 8 of the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74171 through 74175).
    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 in the policy do not involve contrast, both CT/CTA 
and MRI/MRA scans can be provided either with or without contrast. The 
five multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs as having at least one or more imaging procedures from 
the same family performed with contrast on the same date of service. 
For example, if the hospital performs an MRI without contrast during 
the same session as at least one other MRI with contrast, the hospital 
will receive payment for APC 8008, the ``with contrast'' composite APC.
    We make a single payment for those imaging procedures that qualify 
for composite APC payment, as well as any packaged services furnished 
on the same date of service. The standard (noncomposite) APC 
assignments continue to apply for single imaging procedures and 
multiple imaging procedures performed across families. For a full 
discussion of the development of the multiple imaging composite APC 
methodology, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68559 through 68569).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed to 
continue for CY 2013 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 would reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session. The proposed CY 2013 payment rates 
for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 
8006, APC 8007, and APC 8008) were based on costs calculated from a 
year of CY 2011 claims available for the CY 2013 OPPS/ASC proposed rule 
that qualified for composite payment under the current policy (that is, 
those claims with more than one procedure within the same family on a 
single date of service). To calculate the proposed costs, we used the 
same methodology that we used to calculate the final CY 2012 costs for 
these composite APCs, as described in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74169). The imaging HCPCS codes that we 
removed from the bypass list for purposes of calculating the proposed 
multiple imaging composite APC costs, pursuant to our established 
methodology (76 FR 74169), appeared in Table 11 of the proposed rule.
    We were able to identify approximately 1.0 million ``single 
session'' claims out of an estimated 1.5 million potential composite 
cases from our ratesetting claims data, more than half of all eligible 
claims, to calculate the proposed CY 2013 costs for the multiple 
imaging composite APCs.
    Comment: One commenter supported the proposed payment rate for APC 
8004, while acknowledging the increased proposed payment rate for the 
ultrasound composite and for other standard (non-composite) ultrasound 
procedures.
    Response: We appreciate the commenter's support.
    Comment: Several commenters supported CMS' decision not to propose 
any new multiple imaging composite APCs, and requested that CMS analyze 
the potential impact on utilization and access for any newly proposed 
multiple imaging composite APCs, and to provide notice and seek comment 
for any new proposals.
    Response: We appreciate the feedback regarding the multiple imaging 
composite APCs. As is our usual practice, we will analyze our claims 
data and provide public notice and seek comment for any new proposals 
through our annual rulemaking process.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, to calculate 
multiple imaging composite APC costs for CY 2013 pursuant to our 
established methodology. For this final rule with comment period, we 
were able to identify approximately 1.0 million ``single session'' 
claims out of an

[[Page 68252]]

estimated 1.6 million potential composite cases from our ratesetting 
claims data, more than half of all eligible claims, to calculate the 
final CY 2013 costs for the multiple imaging composite APCs.
    Table 6 below lists the HCPCS codes that will be subject to the 
multiple imaging composite policy and their respective families and 
approximate composite APC costs for CY 2013. Table 7 below lists the 
OPPS imaging family services that overlap with HCPCS codes on the CY 
2013 bypass list. We note that we mistakenly did not include CPT code 
70547 (Magnetic resonance angiography, neck; without contrast 
material(s)) on this list in the proposed rule. We are adding it to 
this list for the final rule with comment period because it is part of 
the MRI and MRA with and without contrast imaging family and is also on 
the CY 2013 bypass list.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR15NO12.015

BILLING CODE 4120-01-C
(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizing a pacing electrode implanted in combination with an 
implantable cardioverter defibrillator (ICD) is known as CRT-D. 
Hospitals commonly report the implantation of a CRT-D system using CPT 
code 33225 (Insertion of pacing electrode, cardiac venous system, for 
left ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual 
chamber system) (List separately in addition to code for primary 
procedure)) and CPT code 33249 (Insertion or repositioning of electrode 
lead(s) for single or dual chamber pacing cardioverter-defibrillator 
and insertion of pulse generator). As described in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74176), over the past several 
years, stakeholders have pointed out significant fluctuations in the 
payment rate for CPT code 33225 and that, because the definition of CPT 
code 33225 specifies that the pacing electrode is inserted at the same 
time as an ICD or pacemaker, CMS would not have many valid claims upon 
which to calculate an accurate cost. In response to these concerns, we 
established a policy beginning in CY 2012 to recognize CPT codes 33225 
and 33249 as a single, composite service when the procedures are 
performed on the same day and to assign them to APC 0108 (Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) 
when they appear together on a claim with the same date of service. We 
refer readers to the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74176 through 74182) for a full description of how we developed 
this policy.
    As described in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74182), hospitals continue to use the same CPT codes to report 
CRT-D implantation services, and the I/OCE will identify when the 
combination of CPT codes 33225 and 33249 on the same day qualify for 
composite service payment. We make a single composite payment for such 
cases. When not performed on the same day as the service described by 
CPT code 33225, the service described by CPT code 33249 is also 
assigned to APC 0108. When not performed on the same day as the service 
described by CPT code 33249, the service described by CPT code 33225 is 
assigned to APC 0655.
    In order to ensure that hospitals correctly code for CRT services 
in the future, we also finalized a policy in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74182) to implement claims processing 
edits that will return to providers incorrectly coded claims on which a 
pacing electrode insertion (the procedure described by CPT code 33225) 
is billed without one of the following procedures to insert an ICD or 
pacemaker, as specified by the AMA in the CPT codebook:
     33206 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial);
     33207 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); ventricular);
     33208 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial and ventricular);
     33212 (Insertion or replacement of pacemaker pulse 
generator only; single chamber, atrial or ventricular);
     33213 (Insertion or replacement of pacemaker pulse 
generator only; dual chamber, atrial or ventricular);
     33214 (Upgrade of implanted pacemaker system, conversion 
of single chamber system to dual chamber system (includes removal of 
previously placed pulse generator, testing of existing lead, insertion 
of new lead, insertion of new pulse generator));
     33216 (Insertion of a single transvenous electrode, 
permanent pacemaker or cardioverter-defibrillator);
     33217 (Insertion of 2 transvenous electrodes, permanent 
pacemaker or cardioverter-defibrillator);
     33222 (Revision or relocation of skin pocket for 
pacemaker);
     33233 (Removal of permanent pacemaker pulse generator);
     33234 (Removal of transvenous pacemaker electrode(s); 
single lead system, atrial or ventricular);
     33235 (Removal of transvenous pacemaker electrode(s); dual 
lead system, atrial or ventricular);
     33240 (Insertion of single or dual chamber pacing 
cardioverter-defibrillator pulse generator); or
     33249 (Insertion or repositioning of electrode lead(s) for 
single or dual chamber pacing cardioverter-defibrillator and insertion 
of pulse generator).
    In the CY 2013 OPPS/ASC proposed rule (77 FR45094), we proposed to 
continue for CY 2013 to recognize CRT-D as a single, composite service 
as described above and finalized in the CY 2012 OPPS/ASC final rule 
with comment period. By continuing to recognize these procedures as a 
single, composite service, we are able to use a higher volume of 
correctly coded claims for CPT code 33225, which, because of its add-on 
code status, is always performed in conjunction with another procedure 
and, therefore, to address the inherent ratesetting challenges 
associated with CPT code 33225. We also noted that this policy is 
consistent with the principles of a prospective payment system, 
specifically to place

[[Page 68259]]

similar services that utilize technologies with varying costs in the 
same APC in order to promote efficiency and decision making based on 
individual patient's clinical needs rather than financial 
considerations. In calculating the costs upon which the proposed 
payment rate for APC 0108 was based for CY 2013, for the proposed rule, 
we included single procedure claims for the individual services 
assigned to APC 0108, as well as single procedure claims that contain 
the composite CRT-D service, defined as the combination of CPT codes 
33225 and 33249 with the same date of service. We were able to use 
9,790 single claims from the CY 2013 proposed rule claims data to 
calculate a proposed cost of approximately $31,491 for APC 0108. 
Because CPT codes 33225 and 33249 may be treated as a composite service 
for payment purposes, we proposed to continue to assign them status 
indicator ``Q3'' (Codes that may be paid through a composite APC) in 
Addendum B to the proposed rule. The assignment of CPT codes 33225 and 
33249 to APC 0108 when treated as a composite service was also 
reflected in Addendum M to the proposed rule (which is available via 
the Internet on the CMS Web site).
    As we noted in the proposed rule (77 FR 45094), we revised the 
claims processing edits in place for CPT code 33225 due to revised 
guidance from the AMA in the CPT code book specifying the codes that 
should be used in conjunction with CPT code 33225. Specifically, on 
February 27, 2012, the AMA posted a correction as errata to the CY 2012 
CPT code book on the AMA Web site at http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This correction removed CPT code 33222 
(Revision or relocation of skin pocket for pacemaker) as a service that 
should be provided in conjunction with CPT code 33225, and added CPT 
codes 33228 (Removal of permanent pacemaker pulse generator with 
replacement of pacemaker pulse generator; dual lead system), 33229 
(Removal of permanent pacemaker pulse generator with replacement of 
pacemaker pulse generator; multiple lead system), 33263 (Removal of 
pacing cardioverter-defibrillator pulse generator with replacement of 
pacing cardioverter-defibrillator pulse generator; dual lead system), 
and 33264 (Removal of pacing cardioverter-defibrillator pulse generator 
with replacement of pacing cardioverter-defibrillator pulse generator; 
multiple lead system). In accordance with this revised guidance, we 
deleted CPT code 33222 as a code that can satisfy the claims processing 
edit for CPT code 33225, and added CPT codes 33228, 33229, 33263, and 
33264 as codes that can satisfy this edit beginning in CY 2012.
    Comment: One commenter requested that CMS delay the status 
indicator change from ``T'' to ``Q3'' for CPT code 33225, stating that 
CMS does not have sufficient cost data to allow a composite payment for 
this procedure. The commenter also asked that CPT code 33225 be 
assigned to APC 0655 while CMS carries out further analysis.
    Response: We disagree with the commenter that we do not have 
sufficient cost data to allow a composite payment for the procedure 
described by CPT code 33225. For this final rule with comment period, 
we were able to use 3,413 single claims containing the CRT-D composite 
service, defined as the combination of CPT codes 33225 and 33249 with 
the same date of service, to calculate the cost of APC 0108. We note 
that we did not propose to change the status indicator for CPT code 
33225 from ``T'' to ``Q3'' for CY 2013 as the commenter indicated; 
rather, we proposed to continue to apply the ``Q3'' status indicator to 
CPT code 33225 in accordance with the status indicator and policy for 
this code finalized in the CY 2012 OPPS/ASC final rule with comment 
period. We also note that, when not performed on the same day as the 
service described by CPT code 33249, the service described by CPT code 
33225 is assigned to APC 0655 and not paid as a composite service.
    After consideration of the public comment we received, we are 
finalizing our proposed policy, without modification, to continue to 
recognize CRT-D as a single, composite service as described above and 
finalized in the CY 2012 OPPS/ASC final rule with comment period. In 
calculating the costs upon which the final payment rate for APC 0108 is 
based for CY 2013, for this final rule with comment period, we included 
single procedure claims for the individual services assigned to APC 
0108, as well as single procedure claims that contain the composite 
CRT-D service, defined as the combination of CPT codes 33225 and 33249 
with the same date of service. We were able to use 11,251 single claims 
from the CY 2013 final rule claims data to calculate a final cost of 
approximately $31,561 for APC 0108. Because CPT codes 33225 and 33249 
may be treated as a composite service for payment purposes, we are 
continuing to assign them status indicator ``Q3'' (Codes that may be 
paid through a composite APC) in Addendum B to this final rule with 
comment period.
f. Geometric Mean-Based Relative Payment Weights
    As we discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45094 
through 45098), when the Medicare program was first implemented, 
payment for hospital services (inpatient and outpatient) was based on 
hospital-specific reasonable costs attributable to furnishing services 
to Medicare beneficiaries. Although payment for most Medicare hospital 
inpatient services became subject to a PPS under section 1886(d) of the 
Act in 1983, Medicare hospital outpatient services continued to be paid 
based on hospital-specific costs. This methodology for payment provided 
little incentive for hospitals to furnish such outpatient services 
efficiently and in a cost effective manner. At the same time, advances 
in medical technology and changes in practice patterns were bringing 
about a shift in the site of medical care from the inpatient setting to 
the outpatient setting.
    In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. 
L. 99-509), the Congress paved the way for development of a PPS for 
hospital outpatient services. Section 9343(g) of OBRA 1986 mandated 
that fiscal intermediaries require hospitals to report claims for 
services under the Healthcare Common Procedure Coding System (HCPCS). 
Section 9343(c) of OBRA 1986 extended the prohibition against 
unbundling of hospital services under section 1862(a)(14) of the Act to 
include outpatient services as well as inpatient services. The codes 
under the HCPCS enabled us to determine which specific procedures and 
services were billed, while the extension of the prohibition against 
unbundling ensured that all nonphysician services provided to hospital 
outpatients were reported on hospital bills and captured in the 
hospital outpatient data that were used to develop an outpatient PPS.
    The brisk increase in hospital outpatient services further led to 
an interest in creating payment incentives to promote more efficient 
delivery of hospital outpatient services through a Medicare outpatient 
PPS. Section 9343(f) of OBRA 1986 and section 4151(b)(2) of the Omnibus 
Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 101-508) 
required that we develop a proposal to replace the hospital outpatient 
payment system with a PPS and submit a report to the Congress on the 
proposed system. The statutory framework for the OPPS was established 
by the Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) with section 
4523 amending section 1833 of

[[Page 68260]]

the Act by adding subsection (t), which provides for a PPS for hospital 
outpatient department services and the BBRA of 1999 (Pub. L. 106-113), 
with section 201 further amending section 1833(t) of the Act. The 
implementing regulations for these statutory authorities were codified 
at 42 CFR part 419, effective for services furnished on or after August 
1, 2000.
    Section 1833 of the Act sets forth the methodological requirements 
for developing the PPS for hospital outpatient services (the OPPS). At 
the onset of the OPPS, there was significant concern over observed 
increases in the volume of outpatient services and corresponding 
rapidly growing beneficiary coinsurance. Accordingly, much of the focus 
was on finding ways to address those issues. Section 1833(t)(2)(C) of 
the Act initially provided that relative payment weights for covered 
outpatient department services be established based on median costs 
under section 4523(a) of the BBA of 1997. Later, section 201(f) of the 
BBRA of 1999 amended section 1833(t)(2)(C) of the Act to allow the 
Secretary the discretion to base the establishment of relative payment 
weights on either median or mean hospital costs. Since the OPPS was 
initially implemented, we have established relative payment weights 
based on the median hospital costs for both statistical reasons and 
timely implementation concerns. The proposed rule for the OPPS was 
published prior to the passage of the BBRA of 1999, which amended the 
Act to permit the use of mean costs. At that time, we noted that making 
payment for hospital outpatient services based on the median cost of 
each APC was a way of discouraging upcoding that occurs when individual 
services that are similar have disparate median costs, as well as 
associating services for which there are low claims volume into the 
appropriate classifications based on clinical patterns and their 
resource consumption (63 FR 47562).
    As discussed in the CY 2000 OPPS final rule with comment period (65 
FR 18482 through 18483), initial implementation of the payment system 
for hospital outpatient services was delayed due to multiple extensions 
of the proposed rule comment period, Year 2000 (Y2K) system concerns, 
and other systems challenges in developing the OPPS. Even though the 
BBRA of 1999 passed during that period of time, and provided the 
Secretary with the discretion to establish relative payment weights 
under the OPPS based on mean hospital costs, we determined that 
reconstructing the database to evaluate the impact of using mean costs 
would have postponed implementation of the OPPS further. There were 
important challenges at the time, including being responsive to 
stakeholder comments regarding the initial OPPS and addressing 
implementation issues so that the payment and claims processing systems 
would work correctly. To do so in a timely manner was critical; 
therefore, median costs were selected as an appropriate metric on which 
to base payment relativity, both based on the statistical reasons noted 
above and practical implementation concerns.
    In addition to the reasons discussed above, developing relative 
payment weights based on median costs was a way of attenuating the 
impact of cost outlier cases. In an environment where facility coding 
practices were still in their infancy, median costs served to minimize 
the impact of any coding errors. Using median costs to establish 
service cost relativity served the same function as any measure of 
central tendency (including means), ensuring that the relative payment 
weights used in the OPPS would, in general, account for the variety of 
costs associated with providing a service.
    Since the beginning of the OPPS and throughout its development, we 
have striven to find ways to improve our methods for estimating the 
costs associated with providing services. The dialogue with the public 
regarding these issues, the meaningful information and recommendations 
that the Panel (previously the APC Panel) has provided, and the 
policies we have established to better derive the costs on which OPPS 
payment is calculated have contributed to improving cost estimation. 
However, challenges remain in our continuing effort to better estimate 
the costs associated with providing services. These challenges include 
our limited ability to obtain more meaningful information from the 
claims and cost report data available and ensuring that the approach 
used to calculate the payments for services accurately captures the 
relative costs associated with providing the services. Over the years, 
we have implemented many changes to the OPPS cost modeling process to 
help address these challenges.
    To obtain more information from the claims data we have available, 
we first began bypassing codes from the standard process to develop 
``pseudo'' single claims in CY 2003 (67 FR 66746). In CY 2006, this 
concept later evolved into the bypass list (and its corresponding 
criteria for addition) which allows us to extract more cost information 
from claims that would otherwise be unusable for modeling service cost 
(70 FR 68525). In CY 2008, we examined clinical areas where packaging 
of services was appropriate, which allows us to use more claims in 
modeling the payments for primary procedures and encourage providers to 
make cost efficient choices where possible (72 FR 66610 through 66649). 
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), 
we noted that this packaging approach increased the number of 
``natural'' single bills, while simultaneously reducing the universe of 
codes requiring single bills for ratesetting. Beginning in CY 2008, we 
also established composite APCs for services that are typically 
provided together in the same encounter, allowing us to use even more 
previously unusable claims (due to containing multiple separately 
payable major codes) for modeling service cost, as well as develop APCs 
that reflect the combined encounter (72 FR 66650 through 66658). We 
have implemented many steps to obtain more information from the claims 
and cost report data available to us, and continue to examine ways in 
which we can derive more meaningful information on service costs for 
use in ratesetting.
    In our experience in working with the OPPS, we also have 
implemented many processes to ensure that the cost information we 
derive from cost reports and claims data is accurate. In the beginning 
of the OPPS, we implemented a cost trim of three standard deviations 
outside the geometric mean cost, similar to the cost data trim in the 
IPPS, because it would ensure that the most aberrant data were removed 
from ratesetting (65 FR 18484). We also have implemented similar trims 
to the hospital departmental CCR and claims based unit data related to 
the services (71 FR 67985 through 67987).
    During the CY 2008 rulemaking cycle, we contracted with Research 
Triangle Institute, International (RTI) to examine possible 
improvements to the OPPS cost estimation process after RTI had 
investigated similar issues in the IPPS setting (72 FR 66659 through 
66602). There was significant concern that charge compression, which 
results from the hospital practice of attaching a higher mark-up to 
charges for low cost supplies and a lower mark-up to charges for higher 
cost supplies, was influencing the cost estimates on which the OPPS 
relative payment weights are based. Based on RTI's recommendations in 
its July 2008 report, available on the Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf, in CY 2009, we finalized

[[Page 68261]]

modifications to the Medicare cost report form to create an 
``Implantable Medical Devices Charged to Patients'' cost center to 
address public commenters' concerns related to charge compression in 
the ``Medical Supplies Charged to Patients'' cost center (73 FR 48458 
through 48467). These modifications helped to address potential issues 
related to hospital mark-up practices and how they are reflected in the 
CCRs on the Medicare hospital cost reporting form.
    In CY 2010, we incorporated a line item trim into our data process 
that removed lines that were eligible for OPPS payment in the claim 
year but received no payment, presumably because of a line item 
rejection or denial due to claims processing edits (74 FR 60359). This 
line item trim was developed with the goal of using additional lines to 
model prospective payment.
    In addition to these process changes that were designed to include 
more accurate cost data in ratesetting, we have developed a number of 
nonstandard modeling processes to support service or APC specific 
changes. For example, in the device-dependent APCs, we have 
incorporated edits into the cost estimation process to ensure that the 
full cost of the device is incorporated into the primary procedure.
    While we have already implemented numerous changes to the data 
process in order to obtain accurate resource cost estimates associated 
with providing a procedure, we continue to examine possible areas of 
improvement. In the past, commenters have expressed concern over the 
degree to which payment rates reflect the costs associated with 
providing a service, believing that, in some cases, high cost items or 
services that might be packaged are not accordingly reflected in the 
payment weights (72 FR 66629 through 66630 and 66767). As mentioned 
above, in the CY 2008 OPPS/ASC final rule with comment period, we 
developed a packaging policy that identified a number of clinical areas 
where services would be commonly performed in a manner that was 
typically ancillary and supportive to other primary procedures. 
Packaging for appropriate clinical areas provides an incentive for 
efficient and cost-effective delivery of services. In that final rule 
with comment period, we recognized that there were strengths and 
weaknesses associated with using median costs as the metric for 
developing the OPPS relative payment weights (72 FR 66615). Medians are 
generally more stable than means because they are less sensitive to 
extreme observations, but they also do not reflect subtle changes in 
cost distributions. As a result, the use of medians rather than means 
under the OPPS usually results in relative payment weight estimates 
being less sensitive to packaging decisions, as well as changes in the 
cost model due to factors such as the additional claims processed 
between the proposed rule and the final rule.
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated costs of providing a service or package of services for a 
particular patient (73 FR 68570). Establishing the cost-based relative 
payment weights based on a measure of central tendency, such as means 
or medians, ensures that the payments for the package of services 
should generally account for the variety of costs associated with 
providing those services. Prospective payments are ultimately adjusted 
for budget neutrality and updated by an OPD update factor, which 
affects the calculated payments, but the accuracy of the cost-based 
weights is critical in ensuring that the relative payment weights are 
adjusted appropriately.
    We recognize that median costs have historically served and may 
continue to serve as an appropriate measure on which to establish 
relative payment weights. However, as discussed above, the metric's 
resistance to outlier observations is balanced by its limited ability 
to be reflective of changes to the dataset used to model cost or 
changes beyond the center of the dataset. While there was significant 
concern in the initial years of the OPPS regarding outlier cost values 
and the possible introduction of potentially aberrant values in the 
cost modeling, hospital experience in coding under the system, the data 
modeling improvements we have made to obtain more accurate cost 
information while removing erroneous data, and other changes in our 
experience with the system have all lessened the potential impact of 
error values (rather than actual, accurate cost outliers). As noted 
above, over the history of the OPPS, we have made multiple refinements 
to the data process to better capture service costs, respond to 
commenter concerns regarding the degree to which OPPS relative payment 
weights accurately reflect service cost and APC payment volatility from 
year to year, and better capture the variety of resource cost 
associated with providing a service as provided under section 
1833(t)(2)(C) of the Act. In the CY 2013 OPPS/ASC proposed rule (77 FR 
45098), we proposed for CY 2013 to shift the basis for the CY 2013 APC 
relative payment weights that underpin the OPPS from median costs to 
geometric mean-based costs.
    Geometric means better encompass the variation in costs that occur 
when providing a service because, in addition to the individual cost 
values that are reflected by medians, geometric means reflect the 
magnitude of the cost measurements, and are thus more sensitive to 
changes in the data. We believe developing the OPPS relative payment 
weights based on geometric mean costs would better capture the range of 
costs associated with providing services, including those cases 
involving high-cost packaged services, and those cases where very 
efficient hospitals have provided services at much lower costs. The use 
of geometric mean-based costs also would allow us to detect changes in 
the cost of services earlier, because changes in cost often diffuse 
into the industry over time as opposed to impacting all hospitals 
equally at the same time. Medians and geometric means both capture the 
impact of uniform changes, that is, those changes that influence all 
providers, but only geometric means capture cost changes that are 
introduced slowly into the system on a case-by-case or hospital-by-
hospital basis.
    We stated that an additional benefit of this proposed policy 
relates to the 2 times rule, described in section III.B. of the 
proposed rule, which is our primary tool for identifying clinically 
similar services that have begun to deviate in terms of their financial 
resource requirements. We stated that basing HCPCS projections on 
geometric mean costs would increase the sensitivity of this tool as we 
configure the APC mappings because it would allow us to detect 
differences when higher costs occur in a subset of services even if the 
number of services does not change. This information would allow us to 
better ensure that the practice patterns associated with all the 
component codes appropriately belong in the same APC.
    In addition to better incorporating those cost values that surround 
the median and, therefore, describing a broader range of clinical 
practice patterns, we stated in the proposed rule that basing the 
relative payment weights on geometric mean costs may also promote 
better stability in the payment system. In the short term, geometric 
mean-based relative payment weights would make the relative payment 
weights more reflective of the service costs. Making this change also 
may promote more payment stability in the long term by including a 
broader range of observations in the relative payment

[[Page 68262]]

weights, making them less susceptible to gaps in estimated cost near 
the median observation and also making changes in the relative payment 
weight a better function of changes in estimated service costs.
    We noted that this proposed change would bring the OPPS in line 
with the IPPS, which utilizes hospital costs derived from claims and 
cost report data to calculate prospective payments, and specifically, 
mean costs rather than median costs to form the basis of the relative 
payment weights associated with each of the payment classification 
groups. We stated in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74181) our intent to explore methods to ensure our 
payment systems do not provide inappropriate payment incentives to 
provide services in one setting of care as opposed to another setting 
of care based on financial considerations rather than clinical needs. 
By adopting a means cost-based approach to calculating relative payment 
weights under the OPPS, we stated that we expect to achieve greater 
consistency between the methodologies used to calculate payment rates 
under the IPPS and the OPPS, which would put us in a better position 
from an analytic perspective to make cross-system comparisons and 
examine issues of payment parity.
    For the reasons described above, in the CY 2013 OPPS/ASC proposed 
rule (77 FR 45098), we proposed to establish the CY 2013 OPPS relative 
payment weights based on geometric mean costs. While this would involve 
a change to the metric used to develop the relative payment weights, 
the use of claims would not be affected. We proposed to continue to 
subset claims using the data processes for modeling the standard APCs 
and the criteria-based APCs described in section II.A.2. of the 
proposed rule, where appropriate. The reasoning behind implementing 
modeling edits or changes in the criteria-based APCs would not be 
affected because the process of developing the relative payment weights 
based on a measure of central tendency is the last step of the modeling 
process, and occurs only once the set of claims used in ratesetting has 
been established.
    One important step that occurs after the development of relative 
payment weights is the assignment of individual HCPCS codes (services) 
to APCs. In our analysis of the impacts of a process conversion to 
geometric means, we determined that the change to means would not 
significantly influence the application of the 2 times rule. Very few 
services would need to be shifted to new APCs because of 2 times rule 
violations because the use of geometric means would resolve some 
violations that would exist under the use of medians, even as it 
creates other violations due to new cost projections. The net impact of 
the proposed change results in seven more violations of the 2 times 
rule created by the entire rebasing process than would exist if median-
based values were used.
    During the development of this proposed policy, we also determined 
that the cumulative effect of data shifts over the 12 years of OPPS 
introduced a number of inconsistencies in the APC groupings based on 
clinical and resource homogeneity. We believe that a shift to payments 
derived from geometric means would improve our ability to identify 
resource distinctions between previously homogenous services, and we 
intend to use this information over the next year to reexamine our APC 
structure and assignments to consider further ways of increasing the 
stability of payments for individual services over time.
    We noted that this proposed policy to establish all OPPS relative 
payment weights using geometric mean costs would apply to all APCs that 
would have previously been paid based on median costs. In addition, we 
proposed to calculate the relative payment weights for line item based 
payments such as brachytherapy sources, which were discussed in section 
II.A.2.d.(6) of the proposed rule, as well as blood and blood products, 
which were discussed in section II.A.2.d.(2) of the proposed rule, 
based on their proposed geometric mean costs for the CY 2013 OPPS.
    We indicated that the CY 2013 proposed policy to base relative 
payment weights on geometric mean costs would specifically include the 
CMHC and hospital-based partial hospitalization program APCs, which 
were previously based on median per diem costs. Their estimated 
payments would continue to be included in the budget neutral weight 
scaling process, and their treatment is similar to other nonstandard 
APCs discussed in section II.A. of the proposed rule. The process for 
developing a set of claims that is appropriate for modeling these APCs 
would continue to be the same as in recent years, with the only 
proposed difference being that a geometric mean per diem cost would be 
calculated rather than a median per diem cost. The proposed CY 2013 
partial hospitalization payment policies were described in section 
VIII. of the proposed rule.
    In the proposed rule, we stated that we believe it is important to 
make the transition from medians to means across all APCs in order to 
capture the complete range of costs associated with all services, and 
to ensure that the relative payment weights of the various APCs are 
properly aligned. If some OPPS payments calculated using relative 
payment weights are based on means while others are based on medians, 
the ratio of the two payments will not accurately reflect the ratio of 
the relative costs reported by the hospitals. This is of particular 
significance in the process of establishing the budget neutral weight 
scaler, discussed in section II.A.4. of the proposed rule.
    We noted that the few exceptions to the applications of the 
geometric mean-based relative payment weights would be the same 
exceptions that exist when median-based weights are applied, including 
codes paid under different payment systems or not paid under the OPPS, 
items and services not paid by Medicare, items or services paid at 
reasonable cost or charges reduced to cost, among others. For more 
information about the various proposed payment status indicators for CY 
2013, we referred readers to Addendum D1 to the proposed rule (which 
was available via the Internet on the CMS Web site).
    We proposed for CY 2013 that payment for nonpass-through separately 
payable drugs and biologicals will continue to be developed through its 
own separate process. Payments for drugs and biologicals are included 
in the budget neutrality adjustments, under the requirements in section 
1833(t)(9)(B) of the Act, but the budget neutral weight scaler is not 
applied to their payments because they are developed through a separate 
methodology, outside the relative payment weight based process. We 
noted that, for CY 2013, we proposed to pay for nonpass-through 
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. Also, as is our standard 
methodology, for CY 2013, we proposed to use payment rates based on the 
ASP data from the fourth quarter of CY 2011 for budget neutrality 
estimates, packaging determinations, and the impact analyses. For items 
that did not have an ASP-based payment rate, such as some therapeutic 
radiopharmaceuticals, we proposed to use their mean unit cost derived 
from the CY 2011 hospital claims data to determine their per day cost. 
The nonpass-through separately payable drug and biological payment 
policy for CY 2013 is described in greater detail in section V.B. of 
the proposed rule and this final rule with comment period.

[[Page 68263]]

    Comment: Many commenters expressed cautious support for the 
proposal to calculate the relative payment weights based on geometric 
mean costs. The commenters believed that the inclusion of additional 
cost data in developing the APC relative payment weights would 
represent an improvement to the ratesetting process, while the 
generally limited provider impacts and enhanced sensitivity to cost 
changes in calibrating the 2 times rule would be appropriate. While the 
commenters supported improvements in the accuracy of the OPPS relative 
payment weights and the goals of the proposed policy, they requested 
that CMS proceed with caution and transparency in this process to avoid 
unintended consequences on beneficiaries and hospitals. The commenters 
also suggested that CMS monitor changes in frequency and cost 
distributions for services for several years to ensure that no access 
to care issues develop as a result of the geometric means-based payment 
policy. Several commenters requested a transitional approach to 
relative payment weights based on geometric mean costs to mitigate any 
potentially negative payment effects.
    Response: We appreciate the commenters' support. As discussed in 
the CY 2013 OPPS/ASC proposed rule, we believe that using geometric 
mean costs to calculate the APC relative payment weights will make them 
more reflective of the range of service costs, introduce greater 
sensitivity to the 2 times rule, as well as potentially allow for 
cross-system payment comparisons (77 FR 45094). We believe that the 
numerous changes we have made to the data process to obtain additional 
information from the available cost report and claims data and ensure 
the accuracy of the cost estimation, in addition to hospital experience 
with the OPPS, have prepared us to make this incremental change. We 
agree that the change to base the relative payment weights on geometric 
mean costs is appropriate.
    We recognize the concerns that commenters have regarding a 
transitional process towards geometric mean-based APC payment and the 
possibility that payment fluctuations based on both the naturally 
occurring variation from year to year and those variations associated 
with basing the relative payment weights on geometric mean costs may 
occur. However, we do not believe that an approach to geometric mean-
based OPPS relative payment weights beyond the changes we have proposed 
for the CY 2013 OPPS is necessary or appropriate. Prior to proposing 
this change, we evaluated the last 4 years of OPPS claims data to model 
the fluctuations that would have resulted from geometric or arithmetic 
means in comparison to our traditional medians. We determined that 
there was no significant difference in the degree of fluctuation with 
geometric means or with medians, and we also believe that the one-time 
differences created by the switch are typically small; therefore, we do 
not believe that a transition period is necessary. In the CY 2013 OPPS/
ASC proposed rule, we noted that we made limited changes in APC 
assignments except where necessary as a result of the proposal to base 
the relative payment weights on geometric mean costs and stated our 
intention to further examine appropriate OPPS reconfigurations in the 
future to resolve potential clinical or resource homogeneity 
inconsistencies in the future to promote stability (77 FR 45097). 
Geometric mean costs more fully encompass the range of costs, including 
packaged costs, associated with providing a service and, therefore, may 
result in payments that are more reflective of actual cost. 
Transitioning into a geometric mean-based system would not be 
practical, as one of the overarching goals of using geometric mean 
costs is better relativity across the OPPS. Applying a phased-in 
approach would potentially distort the relativity of the OPPS payment 
weights. As we discuss in section II.A.2 of this final rule with 
comment period, there are various reasons that contribute to cost 
fluctuation from year to year. We believe that artificially introducing 
stability into the payment system could potentially distort the 
relativity of the payment system, especially when doing so could 
potentially dampen both decreases and increases.
    We agree that continued monitoring of changes in cost distributions 
and the frequency of services is important in understanding the impact 
of basing the APC relative payment weights on geometric mean costs. 
However, we note that the frequency of services may change from year to 
year based on a variety of factors, issues unrelated to OPPS payment, 
and situations where APC overpayment may have potentially led to 
inappropriate incentives to provide care. Despite the consideration of 
the many reasons that may cause service frequency and cost structures 
to change over time, we will continue to monitor these data, as well as 
make that information available online through the cost statistics 
files associated with each rulemaking cycle.
    Comment: A number of commenters disagreed with the proposal to base 
the CY 2013 OPPS/ASC relative payment weights on geometric mean costs. 
Many of these commenters preferred continued use of median costs in the 
ratesetting process. Several commenters believed that the geometric 
mean costs were inappropriate for OPPS ratesetting for statistical 
reasons, including their heightened sensitivity to lower cost inliers 
and lowered sensitivity for high-cost outliers relative to arithmetic 
means. Other commenters were concerned about the range between minimum 
and maximum cost values for each APC, and believed them to be 
implausible. A few commenters stated that while there have been 
advances in coding practice over the past decade, the same problems of 
upcoding and outliers will continue to exist, and that the original 
selection of median costs would continue to be appropriate. One 
commenter suggested that, beyond the initial years of the OPPS, there 
have been no cost reporting and coding practice improvements over the 
years.
    Response: We noted in the CY 2013 OPPS/ASC proposed rule that 
median costs have historically served and may continue to serve as an 
appropriate measure on which to base the relative payment weights (77 
FR 45096). However, we believe that a policy of developing the relative 
payment weights based on geometric mean costs would represent an 
improvement beyond our current use of the cost information available to 
us.
    In our discussion in the CY 2013 OPPS/ASC proposed rule relating to 
basing the relative payment weights on geometric mean costs, we stated 
that there are a variety of reasons that one metric might be more 
appropriate than the other. However, the reasoning for selecting one 
metric relative to any others must be considered in the context of the 
issues at that time. In our discussion of our proposal to develop the 
relative payment weights based on geometric mean costs, we described 
the issues at the initial development of the OPPS and our original 
reasons for selecting median costs as the preferred metric. We also 
described in the proposed rule the many data process changes that we 
made over the history of the OPPS, including various trimming 
methodologies, processes to generate more information from the claims 
and cost report data available to us, steps to address charge 
compression, modeling and payment edits, modeling configurations to 
make payment more reflective of the service or services provided, and 
others (77 FR 45095 through 45096). In addition, we discussed our 
belief that CMS and hospital experience with the OPPS as well as the 
coding methodologies for

[[Page 68264]]

payment would have improved over the past decade. Finally, we discussed 
various aspects of the geometric means proposal that would affect other 
policy areas, such as ASC payment, application of the 2 times rule, and 
other payment methodologies under the OPPS. For these reasons, we 
established the CY 2013 OPPS/ASC proposal to base the relative payment 
weights using geometric mean costs (77 FR 45094 through 45098).
    We recognize that there are different aspects of each statistical 
metric that may make any of them preferable to the others. Means-based 
methodologies, whether arithmetic means or geometric means, incorporate 
a broader range of estimated cost values into the relative payment 
weights, whereas medians are less sensitive to that range of costs as 
well as any changes in them. Depending on whether sensitivity towards 
changes in service costs is viewed as a relevant objective or not may 
guide whether selecting means or medians is a preferable alternative. 
As described above, several commenters have suggested that the lack of 
sensitivity towards cost changes is precisely why medians remain the 
preferable option. However, in the CY 2013 OPPS/ASC proposed rule, we 
noted comments in the past expressing concern regarding the degree to 
which payment rates failed to reflect the costs associated with 
providing a service (77 FR 45096). In light of those concerns, we 
believe that geometric means and their ability to better reflect 
packaging patterns and ranges in cost represent an improvement in our 
cost estimation process.
    With regards to the varying level of sensitivity towards cost 
outliers that geometric means represent, as described above, there are 
various benefits and drawbacks to each selected metric. Accordingly, 
the relative payment weights associated with any service may rise or 
fall, depending on the specific distribution of reported costs, and 
where the geometric mean appears not only relative to the median but 
also that of APC 606 (Level 3 Hospital Clinic Visits). While commenters 
have suggested that there is a systemic risk for ``implausible'' 
values, we believe that many of the outlier values present in the data 
represent actual cost outliers rather than errors, with different 
accounting assumptions creating different populations of values. At the 
low-cost and high-cost ends of the cost spectrum for each APC, there is 
thus the potential for both ``spurious'' (atypical and/or incorrect) 
data as well as accurate data to appear. Furthermore, while the minimum 
and maximum values identify the most extreme outlier values, they do 
not necessarily reflect the distribution of costs within the model; the 
minimum and maximum values may not accurately represent the range of 
costs describing the codes with greatest representation within an APC.
    While commenters suggested that there has not been much of an 
improvement we believe the possibility exists that conditions and 
circumstances have stabilized to a certain degree over the past decade. 
Part of the argument for medians at the inception of the OPPS was that 
the coding system was still new, as was our use of claims data to 
calculate prospective payments. Given the many improvements we have 
made to our internal process of modeling and using data, we would 
expect that coding and cost reporting practices have improved over that 
time period as both CMS and hospitals have had the opportunity to 
develop more experience with the system.
    Comment: Some commenters believed that aligning the OPPS relative 
payment weights on geometric mean costs would hamper hospitals' ability 
to plan budgets for each year, given the degree to which payments might 
fluctuate. The commenters also believed that geometric mean costs would 
lead to greater instability of OPPS payment. Some commenters were 
concerned about the negative impacts of APC payments declining due to 
use of geometric mean costs, believing that those changes hindered 
hospitals' ability to provide high quality health care.
    Response: We do not believe that the policy of calculating relative 
payment weights based on geometric mean costs will inevitably lead to 
greater payment instability. There are a variety of factors that may 
contribute to payment volatility from year to year, as we have 
previously described in section II.A.2. of this final rule with comment 
period. While there may be some interim fluctuation in the short term 
as we realign the OPPS to be based on geometric mean costs, we expect 
many of those issues to stabilize over time. When discussing payment 
stability, the natural inclination is to view stability as a fixed 
numerical value that stays the same over time. We evaluated this 
numerical definition of stability and determined that it was not 
significantly greater when geometric means were used. However, another 
view of payment stability is through the relationship between costs and 
the degree to which they are reflected in payments. We believe that a 
policy of using geometric mean costs to develop the APC relative 
payment weights will make them more reflective of the costs associated 
with providing services. Further, using geometric mean costs helps 
ensure that the relative payment weights accurately reflect the 
distribution of costs associated with providing services, and mitigates 
the possibility that any fluctuation occurs due to gaps in the 
distribution of the model, rather than any material changes to the 
service costs.
    We also disagree with the commenter's belief that use of geometric 
mean costs in calculating the relative payment weights will lead to 
hospitals being unable to provide access to high-quality health care. 
Geometric mean costs encompass a broader range of costs, and will 
result in payments that more fully reflect the range of costs both on 
the low and high ends, than median-based costs. We believe that this 
will ultimately be an improvement in the data process as well as OPPS 
payment policy. Although, as commenters have noted, there are many APC 
payment rates that decline as a result of the alignment of relative 
payments weights based on geometric mean costs, we note that a number 
of APC payment rates also increase as a result of this policy. We 
believe that, for most provider classes that furnish a mixed array of 
services to meet the various needs of their patients, the financial 
impacts from the changes in APC payment rates will be relatively 
limited. In consideration of all of those factors, we believe that the 
use of geometric mean costs will result in APC payments that are more 
reflective of the range of service costs.
    Comment: One commenter believed that median costs and the fact that 
they do not reflect subtle changes in cost distributions was 
appropriate to use to determine the OPPS payment rates, given aberrant 
coding, billing, and charging practices by hospitals. The commenter 
also believed that OPPS outlier payments would address issues where 
high-cost services did not have those costs reflected in their APC 
payments. Several commenters suggested that lack of sensitivity towards 
packaging patterns when using median cost was why median costs would be 
a more appropriate metric. Other commenters believed that the hospital 
claims do not provide reliable data and that the Medicare cost report 
data at the departmental level are not accurate because there is no 
financial incentive to report accurate data. Commenters also stated 
that RTI identified flawed cost data and pointed out that charges on 
hospital claims do not match those on the cost reports. One commenter 
requested that CMS delay the proposal to use geometric mean

[[Page 68265]]

costs in ratesetting until it can verify that the data are not flawed.
    Response: We appreciate the need for accurate and reliable cost 
information for use in the OPPS ratesetting process. Many of the 
changes we have made to our data process over the past decade have 
arisen with consideration of the need for accurate and reliable cost 
information. To a certain extent, we can mitigate the issues raised by 
those concerns through data process changes like trimming 
methodologies, such as those for the line items as well as cost and 
unit outliers, and modeling changes, such as those for composite and 
device-dependent methodologies, to more accurately estimate cost. 
However, more broadly, we rely on OPPS providers to submit accurate 
cost and charge information to establish the relativity in the OPPS on 
which APC payments are based.
    We value the comments that stakeholders provide with regards to 
potential data improvements as well as methods by which we can obtain 
more accurate data. In situations such as the proton beam APCs for the 
CY 2013 OPPS/ASC proposed rule and subsequent information about cost 
report revisions and inaccurate coding, we must balance our reliance on 
information from OPPS providers with the complementing goal of 
obtaining accurate cost information. As we described in the CY 2013 
OPPS/ASC proposed rule, we have taken steps to address issues such as 
charge compression in areas such as the former ``Medical Supplies 
Charged to Patients'' cost center by establishing a new standard cost 
center for ``Implantable Medical Devices Charged to Patients.''
    In the case of calculating relative payment weights based on 
geometric mean costs, we believe that such a change, while affecting 
the OPPS very broadly, would not involve much manipulation of the data. 
Although several commenters have suggested that the lack of sensitivity 
towards cost outliers is appropriate, we also have received comments 
and HOP Panel presentations in the past regarding the degree to which 
APC relative payments fail to reflect high-cost packaged services. 
Calculating relative payment weights based on geometric mean cost is 
one way of being responsive to those concerns regarding the degree to 
which correctly reported claims with unusually high costs are 
incorporated into the relative payment weights. While we agree that 
OPPS outliers do help mitigate the financial risk associated with 
performing certain services that require additional complexity or 
resources, we also believe that developing the relative payment weights 
based on geometric mean-based costs will help ensure that payments are 
more reflective of the range of service cost.
    In the CY 2013 OPPS/ASC proposed rule, in our proposal to base the 
CY 2013 relative payments weights on geometric mean costs, we described 
the many changes we have made since the inception of the OPPS to 
improve upon our data process. These improvements have helped us obtain 
more information from the claims and cost report data we have available 
to us, in addition to ensuring the accuracy of the resource cost 
estimates we use to model the APC relative payment weights. While we 
continue to look for ways in which we can improve the OPPS and our 
modeling of the estimated costs used to develop the relative payment 
weights, we do not believe that the cost information and methods 
through which we establish the relative payment weights are inherently 
flawed. Aligning the relative payment weights based on geometric mean 
costs may be a significant change in how the relative payment weights 
are calculated; however, the change can be viewed as incremental based 
on the other data improvements throughout the history of the OPPS, as 
described earlier in this section.
    We believe that incentives exist for accurate cost reporting beyond 
direct financial incentives. We believe that external perceptions of 
incorrect reporting are based primarily on the failure to consider 
limitations of the data collection methodology when making assumptions 
and conclusions. The Medicare cost report form allows hospitals to 
report in a manner that is consistent with their own financial 
accounting systems and, therefore, should be accurate for each 
individual hospital.
    The regulations at 42 CFR 413.24(f)(4)(iv) specify the 
certification statement on the first page of the Medicare cost report 
(Hospital and Hospital Heath Care Complex Cost Report, Form CMS-2552-
10) that must be signed by the hospital's administrator or chief 
financial officer certifying that the data contained in the cost report 
are true and accurate. Also included on the certification page is a 
``penalty statement'' which conveys to the hospital official signing 
the cost report that misrepresentation or falsification of any 
information contained in the cost report is punishable by criminal, 
civil, and administrative action, fine, and/or imprisonment under 
Federal law. Further, the ``penalty statement'' also states that if 
services identified in the cost report were provided or procured 
through the payment directly or indirectly of a kickback or were 
otherwise illegal, then criminal, civil, and administrative action, 
fine, and/or imprisonment may result. We believe that the possibility 
of mandatory cost report adjustments by fiscal intermediaries or MACs 
where erroneous amounts are found to exist and the possibility of 
Federal prosecution where potentially false claims and/or fraudulent 
conduct are found to exist act as reasonable incentives to complete the 
cost report accurately. Further, the cost report data and their use in 
the OPPS cost estimation and payment rate development process, combined 
with potential penalties for inaccurate reporting, provide financial 
incentive for reporting costs accurately.
    We recognize that hospitals are complex entities, each having their 
own accounting systems and reporting methodology. As such, the cost and 
charge data that they provide through the Medicare cost report forms 
are structured in a way that reflects their own internal accounting 
systems. Although we would obtain the most accurate information by 
using a highly structured reporting format across hospitals, in using 
these data for OPPS ratesetting, we must balance between our use of 
these data for the cost estimation process and the burden associated 
with forcing hospitals to convert to a government-mandated standardized 
financial management system. The current mechanism allows us to collect 
information that is accurate in the aggregate and that further, at a 
granular level, reflects the relative allocation of costs to 
departments and services by the industry as a whole without creating 
additional burden.
    We note that while the RTI investigation into charge compression 
and the calculation of the relative payment weights yielded areas where 
the cost estimation process could be improved, there was no suggestion 
that the process or data itself were fundamentally flawed. We also note 
that we have tried to be responsive to the concerns raised in the RTI 
report regarding charge compression and the accuracy of the relative 
payment weights, for example, through the creation of the new 
``Implantable Medical Devices Charged to Patients'' standard cost 
center or through the packaged cost redistribution to account for 
pharmacy overhead in the past several years. Regarding the concern 
about the matching process between the data used to calculate the CCRs 
on the Medicare cost report and the claims-

[[Page 68266]]

based charges, we note that we use the most updated accurate 
information made available to us and match them to the degree possible 
to accurately calculate estimated costs. In the revenue code-to-cost 
center modeling crosswalk that we use to estimate cost, the hierarchy 
of cost center CCRs is based on our best assumption of where those 
revenue code charges would be placed even though it may not necessarily 
reflect every hospitals' individual cost report structure.
    As discussed earlier in this section, we have made many 
improvements to the OPPS data process over the course of the past 
decade. Many of those changes were intended to either derive more 
information from the claims and cost report data we have available to 
us, while others were intended to estimate cost in a way that more 
accurately represented the provision of the service and associated 
resources. We believe that basing the relative payment weights on 
geometric mean costs will improve the degree to which our APC payments 
reflect the range of resource costs associated with providing services, 
and represents an incremental data improvement. Therefore, we do not 
believe it is appropriate to postpone the use of geometric mean costs 
in establishing the CY 2013 OPPS/ASC relative payment weights.
    Comment: Several commenters requested clarification regarding why 
CMS selected geometric mean costs as the metric for our proposed policy 
for calculating the CY 2013 OPPS/ASC relative payment weights rather 
than arithmetic mean costs. Other commenters noted that using 
arithmetic means would bring the OPPS even further in line with the 
IPPS ratesetting methodology.
    Response: While developing the proposal to establish the CY 2013 
OPPS/ASC relative payment weights using geometric mean costs, we also 
reviewed the volatility associated and impact of an OPPS based on 
arithmetic mean costs. We also considered many of the same issues that 
commenters described with respect to the use of arithmetic means, 
including whether their ability to more sensitively consider the 
variety of cost patterns, provide a better reflection of total costs, 
and to synchronize the OPPS system with the IPPS methodology, would be 
a preferable option among the three metrics.
    We noted that because only natural and ``pseudo'' single major 
claims would be used to model the relativity of the OPPS, arithmetic 
means would not truly reflect total cost in the system. Although 
arithmetic mean costs would be more sensitive towards outlier values 
than both geometric mean costs and median costs, there would also be 
greater volatility associated with the use of them due to their 
sensitivity towards outlier values. Similarly, the short-term 
transition from medians to arithmetic means would also include a 
greater range of both positive and negative provider payment impacts 
and would result in the need for more reconfiguration of the APCs to 
resolve 2 times rule violations than geometric mean costs. While we 
have discussed our intention to perform a thorough review of the OPPS 
in the future that may involve more significant reconfiguration, that 
review would be performed with the goal of developing more accurate and 
stable payment rates, to the extent that they reflect the range of 
service costs. Although we stated the possibility of using these 
geometric mean based payments for exploring cross-system payment 
comparisons, we recognize that there may be aspects of each payment 
system data methodology that may be unique. While using arithmetic mean 
costs would potentially capture the full range of costs better than 
both geometric means and medians, that benefit has limited value in a 
relative system such as the OPPS, where all total costs are reduced to 
relative rates. Conversely, it also would potentially allow an 
inappropriate impact due to aberrant values because there would be no 
mitigation of the influence of outlier costs, which could be accurate 
or aberrant values. Therefore, we viewed the use of geometric mean 
costs as a balanced approach between both the strengths and weaknesses 
of using medians and arithmetic means.
    Comment: Several commenters expressed concern with regard to the 
decline in APC payment to CMHCs due to use of the geometric mean cost 
for calculating the OPPS relative payment weights, and recommended that 
CMS continue to monitor the impact of its payment policies on CMHCs.
    Response: Over the past several years, we have made changes to the 
calculation of PHP relative payment weights to more accurately align 
their PHP APC payments to their specific costs. These changes to PHP 
relative payment weights have included establishing a separate cost 
estimation process based on provider type as well as a two-tiered APC 
payment system under which we pay one amount for days with 3 services 
and a higher amount for days with 4 or more services for both CMHC and 
hospital-based PHPs. As discussed in the CY 2013 OPPS/ASC proposed 
rule, we believe that the use of geometric mean costs rather than 
median costs in the ratesetting process is one such improvement because 
it allows the payment metric to consider a broader range of service 
costs (77 FR 45097). We will continue to monitor the impact of our 
payment policies on OPPS providers, including CMHCs.
    Comment: One commenter was concerned with the minimum and maximum 
values associated with APCs 0690 (Level I Electronic Analysis of 
Devices) and 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or 
Vascular Devices). In the case of APC 0690, the commenter suggested 
that the APC payment rate be set to the median cost and not allowed to 
drop below the payment that CMS would have calculated using medians. 
For CPT 0307T (Removal of intracardiac ischemia monitoring device), the 
commenter also believed that its placement in APC 0105 was appropriate. 
However, the commenter requested that CMS perform an analysis to 
determine whether some of the procedures might be more appropriately 
placed in a different APC.
    Response: In the case of both of these APCs, the presence of high-
cost, low-volume services in the claims used to model each APC creates 
outliers that foster the perception that the services spread more 
evenly across the range between the minimum and maximum values than 
actually is the case. Those minimum and maximum values represent 
individual points at the most extreme ends of the model, and include 
service cost estimations that do not contribute significantly enough to 
the APC weight to be considered in the application of the 2 times rule. 
In that sense, those values can be misleading because the minimum and 
maximum should be considered as the most extreme outlier cases; we 
evaluate the range through the application of the 2 times rule, which 
only considers services that have sufficient volume to demonstrate 
stability and reliability and which significantly contribute to the 
relative payment weight of the APC. Both medians and means are measures 
of central tendency and have strengths and weaknesses when considering 
the degree to which they accurately represent the dataset. Similarly, 
the minimum and maximum values are informative in identifying the most 
extreme outliers of a dataset but do not necessarily reflect the bulk 
of the distribution.
    For CPT codes 0305T and 0306T which are assigned to APC 0690, we 
note that the geometric mean cost ($34.78) was slightly higher than the

[[Page 68267]]

median cost ($33.71) for the APC in the data used for the CY 2013 OPPS/
ASC proposed rule. In addition, after calculation of budget neutrality 
and other adjustments, the national unadjusted payment rate for a 
geometric mean cost-based APC payment was proposed to be higher than a 
median cost-based one for CY 2013. Finally, for prospective APC payment 
rates which are calculated through the standard process, we would not 
pay using the cost as a rate but we would use the estimated costs to 
establish the relative payment weights on which OPPS payments are 
based. Therefore, we are not setting the payment rate for APC 0690 at 
the median cost.
    We appreciate the commenters' support regarding the placement of 
CPT code 0307T in APC 0105. We do not agree that having a wide 
distribution of costs in an APC necessarily implies that a problem in 
the construction of the APC exists, particularly in cases where we 
believe the clinical placement and resource use is appropriate. As 
described above, the minimum and maximum values identified within each 
CPT or APC are the most extreme outliers, and may not necessarily 
reflect where the majority of the cost estimates are within each code. 
For application of the 2 times rule discussed in section III.B. of this 
final rule with comment period, we only consider codes that are 
``significant'' in their contribution towards the cost estimates in the 
APC as being useful in the identification of how similar the services 
within an APC are to each other, from a cost perspective. However, this 
does not eliminate the need to consider clinical factors when 
constructing the APC assignments. We do not believe that differences in 
the distribution of costs for a service automatically creates the need 
for further study, especially because the purpose of geometric mean 
costs is to more fully include those cost observations. Similarly, the 
APC configurations are intended to group together services with 
clinical and resource homogeneity. However, in the CY 2013 OPPS/ASC 
proposed rule, we stated our intention of using the information we have 
available to us to reexamine the APC structure and assignments to 
consider further ways of increasing the stability of payments over 
time, and will consider these issues as we do so in the future.
    Comment: Commenters expressed concern with regard to the impact of 
the use of geometric mean-based costs for other specific APCs as well 
as certain clinical areas. APCs that commenters requested specific 
detail about included APCs 0690 (Level I Electronic Analysis of 
Devices); 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or 
Vascular Devices); 0331 (Combined Abdomen and Pelvis CT without 
Contrast); 0334 (Combined Abdomen and Pelvis CT with Contrast); 0383 
(Cardiac Computed Tomographic Imaging); 0336 (Magnetic Resonance 
Imaging and Magnetic Resonance Angiography without Contrast); 0337 
(Magnetic Resonance Imaging and Magnetic Resonance Angiography without 
Contrast followed by Contrast); 0308 (Positron Emission Tomography 
(PET) imaging); 0402 (Level II Nervous System Imaging); 0408 (Level III 
Tumor/Infection Imaging); 0169 (Lithotripsy); 0385 (Level I Prosthetic 
Urological Procedures); 0386 (Level II Prosthetic Urological 
Procedures); and 0674 (Prostate Cryoablation). Other clinical areas 
that commenters expressed concern about included otolaryngological and 
orthopaedic procedures. One commenter requested that CMS ensure that 
there was no disproportionate impact to any given medical specialty.
    Response: In the case of these APCs, generally the issue is that 
the geometric mean costs reflect lower cost values than otherwise 
indicated by the median value. We have identified numerous other data 
issues or policies beyond the use of geometric mean costs that may 
attribute to potential declines in the relative payment weight.
    For APCs 0331 and 0334, this is the first year where actual data 
are available for ratesetting based on the new CY 2011 computed 
tomography of abdomen/pelvis codes: CPT codes 74176 (Computed 
tomography, abdomen and pelvis; without contrast material); 74177 
(Computed tomography, abdomen and pelvis; with contrast material(s)); 
and 74178 (Computed tomography, abdomen and pelvis, without contrast 
material in one or both body regions, followed by contrast material(s) 
and further sections in one or both body regions). For more discussion 
on the Computed Tomography of Abdomen/Pelvis APCs, we refer readers to 
section II.A.7.c. of this final rule with comment period.
    Another influencing factor may be the use of the new standard cost 
center for ``Implantable Devices Charged to Patient''. For device-
dependent APCs 0385, 0386, and 0674, there may be effects based on use 
of the new standard cost center CCR being mapped to revenues codes 
where appropriate. For a discussion of the cost report CCRs used to 
estimate service cost, we refer readers to section II.A.1.c. of this 
final rule with comment period.
    For APC 0169, the estimated costs of the APC may have changed based 
on corrections to the revenue code-to-cost center crosswalk described 
in the second correction notice to the CY 2012 OPPS/ASC final rule with 
comment period (77 FR 24409). Further, because CPT code 50590 
(Lithotripsy, extracorporeal shock wave) is the only code used to model 
the APC, any variation with the estimated costs for the CPT code will 
directly affect the APC relative payment weight.
    For all the APCs referenced by commenters, the relative payment 
weights based on using geometric mean costs now include a greater range 
of resource costs associated with furnishing the services. Declines in 
their APC relative payment weights can partially be attributable to 
these changes in the degree to which the relative payment are 
reflective of costs. As we have noted, there also may be additional 
influencing factors that have led to those changes, including use of 
actual rather than simulated claims data, the use of the new 
``Implantable Medical Devices Charged to Patients'' standard cost 
center, the corrections we made to our revenue code-to-cost center 
modeling crosswalk in our data process, and others. We also note that, 
because of budget neutrality, for each APC that commenters identified 
as having decreased payments, there are other APCs that have increased 
payments. As a general matter, we believe that, in their totality, the 
newly based APC payment rates better reflect the underlying costs in 
both cases.
    We have typically analyzed the impacts of any proposals at the CPT 
code, APC, and provider levels of granularity, as most hospitals 
furnish a variety of services to Medicare beneficiaries. We do not 
believe that observed declines or increases in the payments for codes 
are typically associated with any individual specialty because, as we 
have noted, there are both increases and decreases in relative payment 
weight associated with this proposal. Additionally, changes generally 
are due to the degree to which medians were insensitive to the range of 
service costs.
    Comment: One commenter expressed concern regarding the impact of 
geometric means-based payment on blood products because many of the 
blood product APCs would experience declines in payment. The commenter 
recommended that blood products continue to be separately paid based on 
simulated median costs or that a CY 2013 payment floor be set at the CY 
2012 APC payment rates.

[[Page 68268]]

    Response: While we appreciate the concerns expressed by the 
commenter, we do not believe that it is appropriate to establish the 
relative payment weights using different cost metrics for various APC 
categories. Doing so would potentially distort the cost relativity and 
APC payments of services paid through the OPPS. We note that, to ensure 
that the cost estimation process for blood products is as accurate as 
possible, we have continued to use simulated CCRs where appropriate, as 
discussed under section II.A.d.2. of this final rule with comment 
period. Similarly, we do not believe that setting a payment floor for a 
specific set of services is appropriate. The estimated resource costs 
associated with providing a service change from year to year and 
establishing arbitrary payment floors would decrease the degree to 
which APC payments reflect the range of costs associated with providing 
a service.
    Comment: Commenters also expressed concern regarding the use of 
geometric mean costs as the basis for APC relative payment weights for 
brachytherapy sources and recommended that they not be used in 
establishing the relative payment weights. The commenters believed that 
geometric mean costs would be inappropriate for use in ratesetting, in 
particular for the case of brachytherapy sources.
    One commenter stated that the geometric mean is inappropriate for 
use in determining payment levels under the OPPS because it will 
overemphasize the weight of low and potentially spurious values in the 
data. The commenter had other statistical concerns regarding the extent 
to which there were high-cost and low-cost outliers that they believed 
were not plausible values as well as variation in estimated costs for 
brachytherapy relative to other OPPS services. The commenter attributed 
that variation as being due to hospital reporting practices, and 
contrasted that variation in the OPPS to the IPPS, where the commenter 
believed the main concern was high-cost outliers and high-cost values. 
Under the commenter's belief that geometric means would pay 
inadequately for brachytherapy, the commenter also believed it would 
create a disincentive to use brachytherapy in the treatment of cancer 
and create access to care issues. The commenter stated that CMS would 
be acting contrary to the intent of the cost-based payment extensions 
for brachytherapy payment from CY 2004 through CY 2009. Further, the 
commenter stated that CMS did not provide sufficient warning to other 
policymakers in CYs 2010 and 2011 regarding the likelihood that it 
might potentially change the cost metric used to establish relative 
payment weights. The commenter believed that geometric mean costs 
should not be used to develop the relative payment weights of 
brachytherapy sources.
    Response: As with all other OPPS services that would be affected by 
the proposed policy, we do not believe that the use of geometric mean 
costs in establishing the APC relative payment weights for 
brachytherapy sources is inappropriate. While the use of geometric mean 
costs will include the weight of low values in the data, we note that 
it also better incorporates cost observations from the higher values in 
the data. This can be seen in the increases in the relative payment 
weight for certain brachytherapy sources based on using geometric mean 
costs. As discussed earlier in this section, the values now being 
included could potentially include spurious values on both ends of the 
dataset, as well as legitimate and accurate data. We believe that 
encompassing a broader range of service costs in establishing the 
relative payment weights is a technical improvement and may increase 
the degree to which payments reflect the range of costs associated with 
providing a service.
    Both the IPPS and OPPS contain reporting variations due to the 
different charging practices among hospitals. While we agree that some 
of the variations in cost outlier values may be due to the fact that 
brachytherapy sources rely on charges and costs associated with a CCR, 
that does not imply that they are necessarily inappropriate, as all 
OPPS payments rely on charges and CCRs. As we have noted earlier in 
this section, as long as providers are using generally acceptable 
accounting practices (GAAP), and the cost report structure reflects 
their charging practices, we believe that this results in accurate 
calculations. While the commenter has suggested that the variation in 
the costs of brachytherapy sources is inappropriate, this can be 
attributed to both accounting and real cost differences among the 
various providers that furnish the service in addition to low frequency 
of line items which may be used to model cost. Although medians may be 
less sensitive to cost outliers, or even the range of costs, we believe 
that is both a strength and a weakness of that metric, but is not a 
reflection of greater or lesser accuracy. While commenters have 
provided examples with a sample size of three values to illustrate 
their point regarding sensitivity to low cost values, we note that 
cases with this order of extreme observations used to model the 
relative payment weights would be exceptionally rare. For example, the 
commenter posited a reported charge of $0.01 which is not only 
extremely unlikely but also is not supported by institutional claims 
processing. In situations where there are few claims available to model 
the service costs, the basic issue is the claims volume and their use 
in establishing the relative payment weights, and not necessarily the 
fact that medians or geometric means are used. We can address small 
claim volumes in some cases through assigning similar services based on 
resource costs or clinical similarity to the same APCs. However, this 
method of addressing variability based on low claims volume is 
unavailable as a tool for line item cost-based APCs.
    We do not believe that changes in payment based on the use of 
geometric mean costs will create a disincentive towards using 
brachytherapy as a viable option in the treatment of cancer. As we 
noted earlier in this section, there is variation even among the 
brachytherapy APCs, which suggests that some of those APC payment rates 
may now better reflect the range of costs associated with them. There 
also is extreme variation in the costs reported by individual hospitals 
for each service within the APC. In considering whether a median cost-
based system or a geometric mean-based system is more appropriate at 
this juncture, the inclination is to view declines in payments as 
aberrant, without consideration of increases in payment. However, it is 
equally possible that medians and their lack of sensitivity towards 
outliers may have led to more payments based on overstated costs than 
would have been appropriate when considering the broader range of 
service costs. As discussed in an earlier response, we will continue to 
monitor the impact of this proposal to base the relative payment 
weights on geometric mean costs.
    With respect to the comments regarding the process through which we 
establish payment policy for each prospective payment year, we note 
that the OPPS rulemaking process occurs annually, and is intended to 
give providers notice as well as the opportunity to inform rulemaking 
and express their stances regarding various policy proposals. While 
being able to prepare for each rulemaking cycle so that each 
prospective payment policy proposal is known years in advance may be 
preferred by commenters, it is not operationally feasible. As we have 
discussed in this section, as well as in the CY 2013 OPPS/ASC proposed 
rule,

[[Page 68269]]

the situations that were pressing during the inception of the initial 
OPPS, and the changes we have made since then, have allowed us to 
consider different issues as well as areas for improvement. We believe 
that basing the relative payment weights on geometric mean costs is one 
such improvement. Although Congress did extend the prior cost-based 
methodology for brachytherapy sources from CYs 2004 through 2009, we 
note that no such additional extension has been enacted. Further, the 
discretion to use a median-based or mean-based system in establishing 
the OPPS relative payment weights predates those extensions, as 
authorized by section 201(f) of the BBRA of 1999.
    While we recognize the concerns regarding the payments for 
brachytherapy sources based on geometric mean costs, we continue to 
believe that this change will result in more accuracy in the cost 
estimation. We do not believe that paying for some services based on 
median costs while using geometric mean costs for other services is 
appropriate, equitable, or consistent with statute. Further, using 
different cost metrics for different services could distort the 
relativity of services within the system and increase the inaccuracy 
and instability of service payment.
    Comment: Several commenters noted that they had difficulty modeling 
the budget neutrality and impact calculations, and suggested that CMS 
provide a more thorough explanation before proceeding with the proposal 
to establish OPPS relative payment weights based on geometric mean 
costs. The commenters stated that lack of a study, in particular one 
that studies the effect of using geometric mean costs as the basis for 
the relative payment weights over time, made it difficult for them to 
make an informed decision. The commenters also stated that an 
explanation regarding the impacts was necessary before proceeding, with 
several commenters noting that the effect of basing the relative 
payment weights on geometric mean costs was not evenly distributed by 
provider types. One commenter disagreed that there would generally be 
limited financial impact to hospitals, due to the fluctuations in 
certain APCs. Some commenters claimed that the proposal to base the 
relative payment weights on geometric mean costs disproportionately 
affected teaching hospitals. Other commenters asked CMS to provide a 
list of APCs whose costs fluctuated above a certain threshold each 
year, so that those APCs could be identified through rulemaking for 
public comment and to allow for presentations before the HOP Panel. A 
few commenters expressed concern in using geometric mean costs for 
small sample sizes, as was the case with those associated with proton 
beam therapy.
    Response: For the past several years, each OPPS/ASC rule has 
included a discussion summarizing both our data process, as well as the 
calculations associated with budget neutrality and hospital impacts. 
However, we also make available online a claims accounting document 
that summarizes in great detail the claims manipulation that goes into 
modeling the costs used to develop the relative payment weights, as 
well as the calculations and data processes used to model budget 
neutrality and the hospital impacts each cycle. The budget neutrality 
and hospital impacts portions of this document were developed beginning 
with the CY 2007 OPPS proposed rule, and have been available for every 
OPPS rulemaking cycle thereafter.
    While we appreciate the concerns that commenters have with regard 
to studying the effects over time, we believe that any increased 
fluctuations due to geometric mean-based payments are generally not 
significant enough to create cause for concern. This data process 
change applied to the cost metric used to develop the relative payment 
weights more fully captures the range of costs associated with 
providing a service. However, service costs and APC payments fluctuate 
over time for a variety of reasons, as we have previously discussed in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74139). As 
we have discussed earlier in this section, we will continue to monitor 
the impact of using geometric mean costs to establish the APC relative 
payment weights and any changes in service frequency or beneficiary 
access. Our investigation into the impact of using geometric mean costs 
to establish the relative payment weights also suggest that there 
should be limited volatility in the payment rates after this initial 
change. We note that some services do have payment decreases associated 
with using geometric mean-based relative weights. However, many 
services also experience payment increases as a result of the geometric 
mean-based calculation, presumably because the relative payment weights 
more accurately reflect higher costs associated with provisions of 
those services. Finally, we note that the one-time effect of converting 
from medians to means this year is not to be confused with the much 
less significant effect of year-to-year variation associated with 
means.
    We agree with the commenters' concern regarding the issue of APCs 
with small sample sizes. However, our concern has less to do with the 
use of geometric mean costs being used to model the relative payment 
weights where they are appropriate, but more with the degree to which a 
substantive cost baseline can be established. In general, APCs with 
relatively low service costs or those where there is low claims volume 
tend to be more vulnerable to cost and payment volatility. We continue 
to examine methods and APC configurations, such as larger bundles, to 
mitigate any concerns related to those issues. As the commenter 
discussed regarding the case of proton beam therapy, there are 
situations where the costs of the service reflect only provision from a 
small number of providers and, therefore, may not establish a broad 
baseline as is the case for most APCs. However, in the case of the 
proton beam APCs, a sufficiently large volume of claims had been 
provided and the geometric means helped carry out our intention of 
capturing the full range of costs. As discussed in the APC-specific 
policy section of this final rule with comment period, section II.D., 
the issues relayed by the commenter primarily were due to presumed 
idiosyncrasies and errors in the submission of the cost reports, which, 
in turn, affected the estimation of costs, and was further impacted by 
the coding practices at an individual provider. We note that the 
potential of these issues to affect the relative payment weights would 
occur both under a median-based system, provided there was enough 
significant volume, as well as under geometric mean costs.
    In both the CY 2013 OPPS/ASC proposed rule and in this CY 2013 
OPPS/ASC final rule with comment period, we have included a column in 
the impact tables that separately shows the effects of the use of 
geometric mean costs on the APC relative payment weights. At a very 
basic level, provider categories that experienced more significant 
negative or positive payment impacts did so because of the mix of 
services furnished by those providers based on our claims data. We note 
that the OPPS provider payment impacts identified in section XXIII. of 
this CY 2013 OPPS/ASC final rule are relatively limited. Some 
commenters have stated that the policy of developing relative payment 
weights using geometric mean costs disproportionately affects teaching 
hospitals; other commenters have noted that the impacts are not 
identical based on the provider categories. That differential in the 
impacts is to be

[[Page 68270]]

expected based on this policy, just as any estimated payment impact 
based on the mix of services that a hospital provides will vary from 
year to year. Because this policy affects the calculation of the 
relative payment weights and does not affect the relative payment 
weights uniformly, it is natural for the changes in those weights to 
have corresponding variation reflected in the provider impacts based on 
the mix of services furnished by providers. In the provider impact 
table in this CY 2013 OPPS/ASC final rule with comment period, we note 
that, even among major and minor teaching hospitals, there are 
different estimated impacts based on this policy. We further note that, 
while the payment category may reflect an increase or decrease in total 
estimated payment, even among the hospitals in that category, there may 
be differential impacts that may not necessarily be in the same 
direction. As discussed earlier in this section, we will continue to 
monitor any changes that may be associated with the policy of 
calculating the relative payment weights using geometric mean costs.
    We make available with each proposed rule and final rule cost 
statistics files that include information about costs by CPT code and 
APC, as well as modeling and total frequency information for each code. 
Addenda A and B which show the payment rates associated with each rule, 
also are made available on the CMS Web site. Therefore, the information 
to continue monitoring changes in APC payment, code frequency, and cost 
are made available to the public.
    Comment: One commenter supported the goal of making cross-system 
payment comparison of payment parity. Two commenters cautioned against 
using OPPS payments based on geometric mean costs as a basis for 
examining payment parity across the prospective payment systems. They 
noted that other factors may be involved that would cause those 
comparisons to potentially be inappropriate, including the acuity of 
the patients, case-mix, ratesetting methodologies, and resource use in 
different care settings, as well as different payment adjustments in 
each system.
    Response: While we believe that each of the payment systems has an 
internally consistent methodology, we recognize the value of including 
useful information in making potential payment comparisons. We note 
that we already implement cross-system payment and utilization 
comparisons in cases such as the MPFS DRA imaging cap, the ASC cap on 
separately payable radiology services, the cap on ASC office-based 
covered surgical procedures, and the comparison of service provision 
across settings for purposes of the inpatient list. The goal in making 
any potential payment comparisons is to analyze the differences and 
similarities in as appropriate a manner as possible.
    As we discussed in the CY 2012 OPPS/ASC final rule with comment 
period, in the context of the proposed Cardiac Resynchronization 
Therapy composite APC, there are various goals associated with making 
cross-system payment comparisons, including ensuring that we do not 
create an inappropriate payment incentive to provide services in one 
setting of care as opposed to another, using more accurate information 
where it is available, and constructing the payment groups to be more 
clinically and resource similar to each other where appropriate, among 
others (76 FR 74179 through 74182). We specifically noted that there 
could be many payment approaches that could be chosen for comparison 
purposes for any given item or service (76 FR 74181).
    After consideration of the public comments we received, we are 
finalizing our proposal to develop the APC relative payment weights 
using geometric mean costs in the manner described above.
    As we also discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 
45097), under the revised ASC payment system that was effective January 
1, 2008, we established a standard ASC ratesetting methodology that 
bases payment for most ASC covered surgical procedures and some covered 
ancillary services on the OPPS relative payment weights (72 FR 42491 
through 42493). Therefore, because we proposed to calculate CY 2013 
OPPS relative payment weights using geometric mean costs, we also 
proposed that CY 2013 ASC payment rates under the standard ASC 
ratesetting methodology would be calculated using the OPPS relative 
payment weights that are based on geometric mean costs. We noted that 
basing the relative payment weights on geometric mean costs rather than 
median costs affects the proposed CY 2013 payment rates. We stated that 
differences in the proposed payment rates, as with any changes from 
year to year, affect other parts of the OPPS, including the copayments 
described in section II.I. of the proposed rule as well as the fixed-
dollar outlier threshold described in section II.G. of the proposed 
rule.
    We did not receive any public comments on the adoption of OPPS 
relative payment weights based on geometric means in the ASC system. 
For a more detailed discussion of the ASC ratesetting methodology, we 
refer readers to section XIV. of this final rule with comment period.
    Under the CY 2013 proposed policy to base the relative payment 
weights on geometric mean costs, we also proposed to revise the related 
regulations that currently reflect a median cost-based OPPS to instead 
reflect a geometric mean cost-based OPPS. Specifically, we proposed to 
revise 42 CFR 419.31, which describes the 2 times rule discussed in 
section III.B. of the proposed rule and this final rule with comment 
period and the development of relative payment weights based on the 
cost metrics discussed in section II.A.4 of the proposed rule and this 
final rule with comment period.
    Comment: One commenter stated that CMS did not address why it did 
not apply the 2 times rule based on geometric means while continuing to 
use medians for calculating the relative weights because the commenter 
believed that it would improve the detection of changes in service cost 
while basing relative payment weights on the less volatile median.
    Response: In the CY 2013 OPPS/ASC proposed rule, we discussed the 
impact of evaluating the 2 times rule based on geometric mean costs 
rather than median costs, noting that while doing so did not 
significantly affect the application of the rule, it created several 
additional 2 times rule violations in the rebasing process (77 FR 
45097). Similar to the IPPS and since the inception of the OPPS, we 
have used a statistical outlier trim of three standard deviations 
beyond the geometric mean cost, even though we have historically used 
median costs as the metric on which to base the relative payment 
weights. The application of the 2 times rule is inherently tied to the 
configuration of the APCs and, therefore, how individual codes are 
paid. To apply the 2 times rule based on geometric mean cost and 
reconfigure the APCs based on that metric, while calculating relative 
payment weights based on medians, would be an inconsistency in the data 
process in the same way that using geometric mean costs for some 
services and median costs for others would be. Further, section 
1833(t)(2) of the Act states that the application of the 2 times rule 
should be based on the metric selected in section 1833(t)(2)(C) of the 
Act.
    After consideration of the public comments we received, we are 
finalizing our proposal to apply the 2 times rule based on geometric 
mean costs and the corresponding changes in 42 CFR 419.31.

[[Page 68271]]

    In section XXII. of this final rule with comment period, which 
discusses the regulatory impact analysis, we are providing an 
additional column in the impact tables for the OPPS that identifies the 
estimated impact due to APC recalibration of a geometric means-based 
OPPS as well as a column that estimates the impact of recalibration 
based on CY 2011 claims and historical cost report data. As depicted in 
the impact tables, many provider categories will experience limited 
impacts under the final policy to base the OPPS relative payment 
weights on geometric means. We note that the impact tables only 
estimate the OPPS payment impact based on the most current available 
claims and cost report data, and that providers' actual payments may 
vary, depending on the mix of services provided in the actual claims 
year. Also, the budget neutral payment adjustments ensure that, under a 
geometric mean-based system or a median cost-based system, aggregate 
OPPS payments will remain the same.
    Section XXII. of this final rule with comment period contains an 
OPPS provider impact table that estimates the effect of policy changes 
and budget neutrality adjustments on provider payment under the CY 2013 
OPPS. Column 3 of the impact table shows the estimated impact by 
provider category of calculating the CY 2013 OPPS payments based on 
geometric mean costs rather than median costs. While the policy to 
shift the basis for relative payment weights to geometric mean costs 
may involve some changes to the relative weights on which OPPS payments 
are based, providers will generally experience limited impacts to 
payment as a result of the CY 2013 final policy. Those provider 
categories that are estimated to experience increased payments as a 
result of the policy to base the CY 2013 relative payment weights on 
geometric mean costs generally included non-IPPS hospitals that 
provided psychiatric, hospital-based PHPs, and other services whose 
relative payment weights increased based on geometric mean costs. As 
noted above, we recognize that there may be fluctuations in the 
relative payment weights based on this CY 2013 final policy, but we 
believe that this policy represents an improvement that more accurately 
estimates the costs associated with providing services.
    In our experience developing the OPPS, we have implemented many 
changes to obtain more cost information from the claims and cost report 
data available to us, in an effort to arrive at more accurate estimates 
of service cost. Many of those changes are described above and in prior 
OPPS final rules. Despite the challenges created by the complexity of 
the data and the diversity of facility accounting systems, we continue 
to examine possible process and data changes that may further improve 
precision, validity, and utility. Commenters have historically 
expressed concerns about the degree to which OPPS relative payment 
weights are reflective of the service costs associated with providing 
them, APC payment rate volatility from year to year, and other cost 
modeling related issues. We recognize that some of those issues will 
remain because they are related to naturally occurring changes in the 
economic environment, clinical practice, and the nature of payment 
systems, among other reasons. However, we believe that basing the OPPS 
relative payment weights on geometric means better captures the range 
of costs associated with providing services, improves payment accuracy 
while limiting year-to-year volatility, and allows reconfigurations in 
the APC environment using a metric that provides greater computational 
depth. For these reasons, and those discussed above, we are basing the 
CY 2013 OPPS/ASC final relative payment weights on geometric mean 
costs.
3. Changes to Packaged Services
a. Background
    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. However, with the exception of 
outlier cases, overall payment is adequate to ensure access to 
appropriate care. The OPPS packages payment for multiple interrelated 
services into a single payment to create incentives for providers to 
furnish services in the most efficient way by enabling hospitals to 
manage their resources with maximum flexibility, thereby encouraging 
long-term cost containment. For example, where there are a variety of 
supplies that could be used to furnish a service, some which are more 
expensive than others, packaging encourages hospitals to use the most 
cost-efficient item that meets the patient's needs, rather than to 
routinely use a more expensive item, which could result if separate 
payment is provided for the items. Packaging also encourages hospitals 
to 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. 
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 services and lower cost 
cases requiring fewer ancillary services. For these reasons, packaging 
payment for items and services that are typically ancillary and 
supportive to a primary service has been a fundamental part of the OPPS 
since its implementation in August 2000.
    We use the term ``dependent service'' to refer to the HCPCS codes 
that represent services that are typically ancillary and supportive to 
a primary diagnostic or therapeutic modality. We use the term 
``independent service'' to refer to the HCPCS codes that represent the 
primary therapeutic or diagnostic modality into which we package 
payment for the dependent service. In future years, as we consider the 
development of larger payment groups that more broadly reflect services 
provided in an encounter or episode of care, it is possible that we 
might propose to bundle payment for a service that we now refer to as 
``independent.''
    We assign status indicator ``N'' to those HCPCS codes of dependent 
services that we believe are always integral to the performance of the 
primary modality; therefore, we always package their costs into the 
costs of the separately paid primary services with which they are 
billed. Services assigned to status indicator ``N'' are unconditionally 
packaged.
    We assign status indicator ``Q1'' (STVX-Packaged Codes), ``Q2'' (T-
Packaged Codes), or ``Q3'' (Codes that may be paid through a composite 
APC) to each conditionally packaged HCPCS code. An STVX-packaged code 
describes a HCPCS code whose payment is packaged with one or more 
separately paid primary services with the status indicator of ``S,'' 
``T,'' ``V,'' or ``X'' furnished in the hospital outpatient encounter. 
A T-packaged code describes a code whose payment is only packaged with 
one or more separately paid surgical procedures with the status 
indicator of ``T'' are provided during the hospital outpatient 
encounter. STVX-packaged codes and T-packaged codes are paid separately 
in those uncommon cases when they do not meet their

[[Page 68272]]

respective criteria for packaged payment. STVX-packaged codes and T-
packaged codes are conditionally packaged. We refer readers to section 
XII.A.1. of this final rule with comment period and Addendum D1, which 
is available via the Internet on the CMS Web site with other Addenda, 
for a complete listing of status indicators and the meaning of each 
status indicator.
    Hospitals include HCPCS codes and charges for packaged services on 
their claims, and the estimated costs associated with those packaged 
services are then added to the costs of separately payable procedures 
on the same claims to establish prospective payment rates. We encourage 
hospitals to report all HCPCS codes that describe packaged services 
provided, unless the CPT Editorial Panel or CMS provides other 
guidance. The appropriateness of the OPPS payment rates depends on the 
quality and completeness of the claims data that hospitals submit for 
the services they furnish to Medicare beneficiaries.
    In addition to the packaged items and services listed in 42 CFR 
419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66610 through 66659), we adopted the packaging of payment for items and 
services in seven categories with the primary diagnostic or therapeutic 
modality to which we believe these items and services are typically 
ancillary and supportive. The seven categories are: (1) Guidance 
services; (2) image processing services; (3) intraoperative services; 
(4) imaging supervision and interpretation services; (5) diagnostic 
radiopharmaceuticals; (6) contrast media; and (7) observation services. 
We specifically chose these categories of HCPCS codes for packaging 
because we believe that the items and services described by the codes 
in these categories are typically ancillary and supportive to a primary 
diagnostic or therapeutic modality and, in those cases, are an integral 
part of the primary service they support. Packaging under the OPPS also 
includes composite APCs, which are described in section II.A.2.e. of 
this final rule with comment period.
    We recognize that decisions about packaging and bundling payment 
involve a balance between ensuring that payment is adequate to enable 
the hospital to provide quality care and establishing incentives for 
efficiency through larger units of payment. Therefore, in the CY 2013 
OPPS/ASC proposed rule (77 FR 45098 through 45101), we invited public 
comments regarding our packaging proposal for the CY 2013 OPPS.
b. Clarification of the Regulations at 42 CFR 419.2(b)
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45099), we proposed to 
clarify the regulatory language at 42 CFR 419.2(b) to make explicit 
that the OPPS payments for the included costs of the nonexclusive list 
of items and services covered under the OPPS referred to in this 
paragraph are packaged into the payments for the related procedures or 
services with which such items and services are provided. We stated 
that this proposed clarification is consistent with our interpretation 
and application of 42 CFR 419.2(b) since the inception of the OPPS. We 
invited public comments on this clarification.
    Comment: One commenter objected to the proposed clarification of 
the regulatory language at 42 CFR 419.2(b). The commenter expressed 
concern that the proposed changes to the regulatory language are 
ambiguous and may result in confusion for hospitals and contractors. 
The commenter believed that Medicare audit contractors will try to 
assert that all services furnished during a particular encounter, such 
as E/M visits, drug administration, X-rays, or other ancillary tests, 
are all related to the main procedure or service received. The 
commenter further stated that this may lead to payment denials or 
monies taken during audits and/or post-payment reviews based on the 
proposed clarification. Therefore, the commenter recommended that CMS 
abandon this proposal because the current regulatory language is clear 
and instructs all entities about CMS' packaging principles.
    Another commenter did not object to the proposed wording change 
from ``included costs'' to ``packaged costs'' because, the commenter 
stated, CMS did not propose to add or alter any of the examples of 
packaged items and services, and the language used already notes that 
the list provided is not an inclusive one. However, the commenter was 
concerned that the proposed addition of the phrase ``the payments for 
which are packaged into the payment for the related procedures or 
services'' introduces a new concept that may lead to a broad 
interpretation of the regulatory text. The commenter expressed concern 
that when audits of OPPS accounts occur, the proposed regulatory text 
may be used to broaden the packaging concept beyond accurate CPT coding 
by using a subjective interpretation of the term ``related''. 
Therefore, the commenter requested that CMS not add the phrase ``the 
payments for which are packaged into the payment for the related 
procedures or services''.
    Response: We disagree with the commenters' assertion that the 
proposed clarification of the regulatory text at 42 CFR 419.2(b) is 
ambiguous or confusing. We note our proposal simply clarifies our 
longstanding policy of packaging, which is a fundamental concept of the 
OPPS. Specifying that included costs are packaged under the OPPS and 
that the payment for these packaged costs is packaged into the payment 
of the related procedures or services is consistent with our 
longstanding policies related to packaging. In addition, we disagree 
with the commenter's statement that the proposed addition to 42 CFR 
419.2(b) of the phrase ``the payment for which are packaged into the 
payment for the related procedures or services'' introduces a new 
concept into the current regulation text.
    As we have repeatedly stated, since the inception of the OPPS, 
packaging payment for items and services that are typically ancillary 
and supportive to a primary service has been a fundamental part of the 
OPPS. The concept of packaging entails that the costs for packaged 
services that are billed with a status indicator of ``N'' are packaged 
into the costs of the separately paid primary service with which they 
are billed. This then means that no separate APC payment is made for 
the packaged service alone but payment is instead included in the 
payment for the service or procedure with which the packaged service 
has been billed.
    We believe that our clarification of the regulations at 42 CFR 
419.2(b) is consistent with the concept of packaging under the OPPS and 
does not deviate in any way from our current and longstanding policies 
regarding packaging under the OPPS.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, to clarify 42 CFR 
419.2(b) to make explicit that the OPPS payments for the included costs 
of the nonexclusive list of items and services covered under the OPPS 
referred to in this paragraph are packaged into the payments for the 
related procedures or services with which such items and services are 
provided.
c. Packaging Recommendations of the HOP Panel (``The Panel'') at Its 
February 2012 Meeting
    During its February 2012 meeting, the Panel made five 
recommendations related to packaging and to the function of the 
subcommittee. One additional recommendation that originated from

[[Page 68273]]

the APC Groups and Status Indicator (SI) Assignment Subcommittee about 
observation services is discussed in section II.A.2.e. of this final 
rule with comment period. The report of the February 2012 meeting of 
the Panel may be found on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present each of the Panel's five packaging recommendations 
and our responses to those recommendations.
    Panel Recommendation: CMS should delete HCPCS code G0259 (Injection 
procedure for sacroiliac joint; arthrography) and HCPCS code G0260 
(Injection procedure for sacroiliac joint; provision of anesthetic, 
steroid and/or other therapeutic agent, with or without arthrography), 
and instead use CPT code 27096 (Injection procedure for sacroiliac 
joint, anesthetic/steroid, with image guidance (fluoroscopy or CT) 
including arthrography, when performed) with a status indicator of 
``T,'' and assign CPT code 27096 to APC 0207 (Level III Nerve 
Injections).
    Response: In the CY 2013 OPPS/ASC proposed rule, we did not accept 
the Panel's recommendation to delete HCPCS code G0259 and G0260 and 
instead use CPT code 27096 with a status indicator of ``T'' and assign 
CPT code 27096 to APC 0207. For CY 2012, we assigned CPT code 27096 to 
status indicator ``B,'' meaning that this code is not payable under the 
OPPS. In order to receive payment for procedures performed on the 
sacroiliac joint with or without arthrography or with image guidance 
under the OPPS, hospitals must use either HCPCS code G0259, which is 
assigned to status indicator ``N'' for CY 2012, or HCPCS code G0260, 
which is assigned to status indicator ``T'' for CY 2012, as 
appropriate. CMS created HCPCS codes G0259 and G0260 to separate and 
distinguish the image guidance procedure from the therapeutic injection 
procedure for the sacroiliac joint. As stated above, guidance 
procedures are packaged under the OPPS because we believe that they are 
typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and are an integral part of the primary service 
they support.
    We believe that the existence of HCPCS codes G0259 and G0260 is 
necessary to assign appropriate packaged payment for the image guidance 
procedure, according to our established packaging policy, and separate 
payment for the therapeutic injection procedure. Therefore, we did not 
accept the Panel's recommendation and followed the previously 
established policy to continue to assign HCPCS code G0259 to status 
indicator ``N,'' HCPCS code G0260 to status indicator ``T,'' and CPT 
code 27096 to status indicator ``B'' for CY 2013.
    Comment: Several commenters disagreed with CMS' proposal to not 
accept the Panel's recommendation on HCPCS codes G0259 and G0260 and to 
continue to assign a status indicator of ``B'' for CPT code 27096. One 
commenter expressed concern that the continued use of HCPCS codes G0259 
and G0260 instead of the CPT code 27096 is administratively burdensome 
to hospitals because it does not allow standardized code reporting 
among all payers.
    Another commenter stated that there is no CPT code that would 
describe the radiological portion of the procedure to be reported in 
addition to HCPCS code G0259 because the AMA deleted CPT code 73054. As 
of January 1, 2012, the commenter stated that CPT code 27096 is always 
a complete procedure that includes the injection of a diagnostic or 
therapeutic agent and the associated imaging. The commenter recommended 
that CMS recognize CPT code 27096 and assign the appropriate APC code 
to this CPT code based on the CY 2011 claims data for HCPCS code G0259 
with CPT code 73542 and HCPCS code G0260 or modify the descriptor of 
HCPCS code G0259 to include the radiological portion of the procedure 
and assign the appropriate status indicator and APC for the complete 
procedure.
    One commenter stated that CPT codes 77003 (Fluoroscopic guidance 
and localization of needle or catheter tip for spine or paraspinous 
diagnostic or therapeutic injection procedures (epidural or 
subarachnoid)) and 77012 (Computed tomography guidance for needle 
placement (eg, biopsy, aspiration, injection, localization device), 
radiological supervision and interpretation) that are billed with HCPCS 
code G0260 have a NCCI edit with an indicator of ``1.'' Therefore, the 
commenter stated that CPT codes 77003 and 77012 cannot be reported with 
modifier ``59'' because the imaging guidance is not separate and 
distinct and it is instead part of the procedure. The commenter stated 
that providers cannot accurately report the cost of the imaging 
guidance (either fluoroscopy or CT) due to the CCI edits and the fact 
that the HCPCS code G0260 descriptor does not indicate if either 
fluoroscopy or CT imaging is bundled into the procedure code. 
Therefore, the commenter asked that CMS establish a new HCPCS code to 
describe the sacroiliac injection procedure performed with imaging 
(fluoroscopy or CT) or allow the reporting of CPT code 27096 and revise 
the status indicator from ``B'' to ``T.''
    Response: We continue to believe that assigning HCPCS codes G0259 
to status indicator ``N'' is necessary in order to designate 
appropriate packaged payment for the image guidance procedure, 
according to our established packaging policy, and separate payment for 
the therapeutic injection procedure. However, we will reevaluate the 
descriptors for HCPCS code G0259 and G0260 for CY 2014 in light of the 
commenter's concerns on the AMA's modification of the descriptor for 
CPT code 27096 in CY 2012 to include the arthrography services 
described by CPT code 73542.
    After consideration of the public comments we received, for CY 
2013, we are continuing to assign a status indicator of ``N'' to HCPCS 
code G0259, a status indicator of ``T'' to HCPCS code G0260, which is 
assigned to APC 0207 with a final CY 2013 geometric mean cost of 
approximately $582, and a status indicator of ``B'' to CPT code 27096.
    Panel Recommendation: CMS provide data to the APC Groups and SI 
Subcommittee on the following arthrography services, so that the 
Subcommittee can consider whether the SI for these services should be 
changed from ``N'' to ``S'':
     HCPCS code 21116 (Injection procedure for 
temporomandibular joint arthrography);
     HCPCS code 23350 (Injection procedure for shoulder 
arthrography or enhanced CT/MRI shoulder arthrography);
     HCPCS code 24220 (Injection procedure for elbow 
arthrography);
     HCPCS code 25246 (Injection procedure for wrist 
arthrography);
     HCPCS code 27093 (Injection procedure for hip 
arthrography; without anesthesia);
     HCPCS code 27095 (Injection procedure for hip 
arthrography; with anesthesia);
     HCPSC code 27096 (Injection procedure for sacroiliac 
joint, anesthetic/steroid with image guidance (fluoroscopy or CT) 
including arthrography when performed);
     HCPCS code 27370 (Injection procedure for knee 
arthrography); and
     HCPCS code 27648 (Injection procedure for ankle 
arthrography).
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we accepted 
the Panel's recommendation that CMS provide data to the APC Groups and 
SI Assignment Subcommittee on CPT codes 21116, 23350, 24220, 25246, 
27093, 27095, 27096, 27370, and 27648 at a future Panel meeting.

[[Page 68274]]

    We did not receive any public comments on this recommendation.
    Panel Recommendation: CMS change the status indicator for HCPCS 
code 19290 (Preoperative placement of needle localization wire, breast) 
from ``N'' to ``Q1'' and continue to monitor the frequency of the code 
when used in isolation.
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we agreed with 
the Panel that a status indicator of ``Q1'' is appropriate for CPT code 
19290. This status indicator will allow for separate payment when this 
procedure is performed alone or packaged payment when this procedure is 
performed with an associated surgical procedure. Therefore, as we 
proposed, we are accepting the Panel's recommendation and assigning CPT 
code 19290 to APC 0340 (Minor Ancillary Procedures) and status 
indicator ``Q1'' for the CY 2013 OPPS. APC 0340 has a final geometric 
mean cost of approximately $51 (as compared to approximately $50 
calculated for the proposed rule) for CY 2013.
    Comment: Several commenters supported CMS' proposal to reassign 
HCPCS code 19290 from ``N'' to ``Q1''. However, one commenter 
recommended that CMS review the APC assignments for HCPCS codes 19290 
and 19295 (Image guided placement, metallic localization clip, 
percutaneous, during breast biopsy/aspiration (list separately in 
addition to code for primary procedure) during the CY 2014 rulemaking 
cycle and propose a more appropriate and higher paying APC for these 
services.
    Response: We appreciate the commenters' support. For CY 2013, we 
are accepting the Panel's recommendation and finalizing our proposal to 
assign a status indicator of ``Q1'' to HCPCS code 19290, which is 
assigned to APC 0340 with a CY 2013 final payment rate of approximately 
$51. 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. We will continue to 
review, on an annual basis, the APC assignments for CPT codes 19290 and 
19295.
    Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., 
remain the chair of the APC Groups and SI Subcommittee.
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated 
that we accepted the Panel's recommendation that Judith Kelly, 
R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and SI 
Assignment Subcommittee.
    We did not receive any public comments on this recommendation. We 
appreciate the services of Ms. Kelly as chair of the Subcommittee for 
CY 2012.
    Panel Recommendation: The work of the APC Groups and SI Assignment 
Subcommittee continue.
    CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated 
that we accepted the Panel's recommendation that the work of the APC 
Groups and SI Assignment Subcommittee continue.
    We did not receive any public comments on this recommendation.
d. Packaging Recommendations of the HOP Panel (``The Panel'') at Its 
August 2012 Meeting
    During its August 2012 meeting, the Panel accepted the report of 
the Subcommittee for APC Groups and Status Indicator (SI) Assignments, 
heard several public presentations related to packaged services and APC 
grouping and status indicator assignments, and made two recommendations 
related to the function of the subcommittee. The subcommittee also made 
recommendations with regard to APC assignment of specific services that 
are discussed in section III.D. of this final rule with comment period. 
The report for the August 2012 meeting of the Panel may be found on the 
CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present the two recommendations related to the function of 
the subcommittee. Recommendations that evolved from the discussions of 
the Subcommittee on APC Groups and SI Assignments that are specific to 
the APC assignment of HCPCS codes and the removal of HCPCS codes from 
the inpatient list are discussed in section III. and IX., respectively, 
of this final rule with comment period.
    Panel Recommendation: The Panel recommends that Jacqueline Phillips 
be named chair of the APC Groups and SI Assignments Subcommittee.
    CMS Response: We accept the Panel's recommendation that Jacqueline 
Phillips be named chair of the APC Groups and SI Assignments 
Subcommittee. We thank Ms. Judith Kelly for her service as chair of the 
APC Groups and SI Assignments Subcommittee, and we welcome Ms. Phillips 
as chair of the APC Groups and SI Assignments Subcommittee.
    Panel Recommendation: The Panel recommends that the work of the APC 
Groups and SI Assignments Subcommittee continue.
    CMS Response: We are accepting the APC Panel's recommendation that 
the work of the APC Groups and SI Assignments Subcommittee continue.
e. Other Packaging Proposals and Policies for CY 2013
    The HCPCS codes that we proposed to be packaged either 
unconditionally (for which we continue to assign status indicator 
``N''), or conditionally (for which we continue to assign status 
indicator ``Q1'', ``Q2'', or ``Q3''), were displayed in Addendum B of 
the CY 2013 OPPS/ASC proposed rule. The supporting documents for the CY 
2013 OPPS/ASC proposed rule, including but not limited to Addendum B, 
are available at the CMS Webs site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To 
view the status indicators by HCPCS code in Addendum B, select ``CMS 
1589'' and then select the folder labeled ``2013 OPPS Proposed Rule 
Addenda'' or ``2013 OPPS Final Rule with Comment Period Addenda'' from 
the list of supporting files. Open the zipped file and select Addendum 
B, which is available as both an Excel file and a text file.
    Comment: Commenters stated that CMS' packaging policies would 
likely lead to less efficient use of resources, limited access to 
innovative treatment options, and greater instability in payment 
because the policies are based on several flawed assumptions. The 
commenters believed that, to the extent that hospitals control the 
array of services they provide, CMS' packaging policies assume that the 
same incentives apply to services furnished in HOPDs as to inpatient 
services. One commenter stated that, under the IPPS, hospitals have an 
incentive to provide care in an efficient manner to ensure the lowest 
cost for the patient's diagnosis. In contrast, in HOPDs, because 
Medicare payment is based on procedures rather than diagnoses, the 
commenter believed that hospitals have an incentive to provide the 
lowest cost item or service included in an APC. The commenter further 
believed that if that service does not fully address the patient's 
needs, the hospital would receive better payment by bringing the 
patient back for a second visit or admitting the patient for inpatient 
care than by providing a more costly option within the same APC.
    Moreover, the commenters believed that when an APC's payment rate 
is significantly less than the cost of a technology, hospitals have a 
strong disincentive to use that technology, even if it could reduce the 
costs of care at a later date. The commenters believed

[[Page 68275]]

that CMS' use of expanded packaging has the risk of encouraging 
hospitals to forego performing needed services and using new 
technologies that may be more resource intensive during one visit, but 
could save the patient future outpatient department visits or inpatient 
care.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74186), packaging payment for items and services 
that are ancillary to and dependent on the major procedure for which a 
payment rate is established is a fundamental concept of the OPPS, based 
in regulation in the definition of costs that are included in the 
national payment rate for a service (42 CFR 419.2(b)) and in place 
since the inception of the OPPS (65 FR 18447). We continue to believe 
that packaging creates incentives for hospitals and their practitioner 
partners to work together to establish appropriate protocols that 
eliminate unnecessary services where they exist and institutionalize 
approaches to providing necessary services more efficiently. With 
respect to new services or new applications of existing technology, we 
believe that packaging payment for ancillary and dependent services 
creates appropriate incentives for hospitals to consider whether a new 
service or a new technology offers a benefit that is sufficient to 
justify the cost of the new service or new technology. Whether this 
review results in reductions in services that are only marginally 
beneficial or influences hospitals' choices to not utilize certain 
technologies, we believe that these changes could improve, rather than 
harm, the quality of care for Medicare beneficiaries because every 
service furnished in a hospital carries some level of risk to the 
patient and the beneficiary would be spared the risk associated with 
the additional service or different technology. Moreover, we believe 
that hospitals strive to provide the best care they can to the patients 
they service so that when new technologies are proven to improve the 
quality of care, their utilization will increase appropriately, whether 
the payment for them is packaged or not. While we believe hospitals are 
committed to provide optimal care to their patients, we are aware that 
there are financial pressures on hospitals that might motivate some 
hospitals to split services among different hospital encounters in such 
a way as to maximize payments. While we do not expect that hospitals 
would routinely change the way they furnish services or the way they 
bill for services in order to maximize payment, we recognize that it 
would be possible and we consider that possibility as we annually 
review hospital claims data. We will continue to examine claims data 
for patterns of fragmented care, and if we find a pattern in which a 
hospital appears to be dividing care across multiple days, we will 
refer it for investigation to the QIO or to the Program Safeguard 
Contractor, as appropriate to the circumstances we find.
    Comment: One commenter stated that continued reporting by CMS on 
utilization of all packaged services and access to care will be 
essential to ensure that Medicare's payment policies do not restrict 
beneficiaries' access to necessary care. The commenter asked that CMS 
make annual reports to the HOP Panel on reporting of services subject 
to CMS' expanded packaging services.
    Response: Each year, we make available an extensive amount of OPPS 
data that can be used for any data analysis an interested party would 
care to perform. Specifically, we make available a considerable amount 
of data for public analysis each year through the supporting data files 
that are posted on the CMS Web site in association with the proposed 
and final rules. In addition, as we discuss in detail in section 
II.A.2. of this final rule with comment period, we make available the 
public use files of claims, including, for CY 2008 and later, 
supplemental line item cost data for every HCPCS code under the OPPS, 
and a detailed narrative description of our data process for the annual 
OPPS/ASC proposed and final rules that the public can use to perform 
any desired analyses. Therefore, stakeholders are able to examine and 
analyze these data to develop specific information to assess the impact 
and effect of packaging for the services of interest to them. This 
information is available to support public requests for changes to 
payments under the OPPS, whether with regard to separate payment for a 
packaged service or other issues. We understand that the OPPS is a 
complex payment system and that it may be difficult to determine the 
quantitative amount of packaged cost included in the cost for every 
independent service. However, stakeholders routinely provide us with 
meaningful analyses at a very detailed and service-specific level based 
on the claims data we make available. We routinely receive complex and 
detailed public comments, including extensive code-specific data 
analysis on packaged and separately paid codes, using the data from 
current and prior proposed and final rules.
    Furthermore, we are not required, nor do we intend, to make annual 
reports to the Panel regarding services that are subject to CMS' 
packaging policies. We note that the Panel did not recommend at either 
the February 2012 meeting or the August 2012 meeting that CMS present 
annual reports on services subject to CMS' packaging services.
    Comment: Commenters stated that CMS assumes that its packaging 
policies will allow it to continue to collect the data it needs to set 
appropriate, stable payment rates in the future. The commenters stated 
that CMS' past experience with packaging payment for ancillary items 
indicates that hospitals do not submit codes for services that do not 
directly affect calculations of future payment rates for that Medicare 
Severity-Diagnosis Related Group (MS-DRG). The commenters further 
stated that, under the IPPS, hospitals report only the data required to 
assign a case to the highest paying appropriate MS-DRG, even though 
other data might affect payment in the long term. The commenters stated 
that they saw no reason to believe that the current approach would have 
a different outcome unless CMS gives clear instruction to continue 
coding for all items and services provided and provides some incentive 
to do so. The commenters asked that CMS require complete and correct 
coding for packaged services.
    Response: We do not believe that there has been or will be a 
significant change in what hospitals report and charge for the 
outpatient service they furnish to Medicare beneficiaries and other 
patients as a result of our current packaging methodology. Medicare 
cost reporting standards specify that hospitals must impose the same 
charges for Medicare patients as for other patients. We are often told 
by hospitals that many private payers pay based on a percentage of 
charges and that, in accordance with Medicare cost reporting rules and 
generally accepted accounting principles, hospital chargemasters do not 
differentiate between the charges to Medicare patients and other 
patients. Therefore, we have no reason to believe that hospitals will 
stop reporting HCPCS codes and charges for packaged services they 
provide to Medicare beneficiaries. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68575), we strongly encourage 
hospitals to report a charge for each packaged service they furnish, 
either by billing the packaged HCPCS code and a charge for that service 
if separate reporting is consistent with CPT and CMS instructions, by 
increasing the charge

[[Page 68276]]

for the separately paid associated service to include the charge for 
the packaged service, or by reporting the charge for the packaged 
service with an appropriate revenue code but without a HCPCS code. Any 
of these means of charging for the packaged service will result in the 
cost of the packaged service being incorporated into the cost we 
estimate for the separately paid service. If a HCPCS code is not 
reported when a packaged service is provided, we acknowledge that it 
can be challenging to specifically track the utilization patterns and 
resource cost of the packaged service itself. However, we have no 
reason to believe that hospitals have not considered the cost of the 
packaged service in reporting charges for the independent, separately 
paid service. We expect that hospitals, as other prudent businesses, 
have a quality review process that ensures that they accurately and 
completely report the services they furnish, with appropriate charges 
for that service to Medicare and all other payers. We encourage 
hospitals to report on their claim for payment all HCPCS codes that 
describe packaged service that were furnished, unless the CPT Editorial 
Panel or CMS provides other guidance. To the extent that hospitals 
include separate charges for packaged services on their claims, the 
estimated costs of those packaged services are then added to the costs 
of separately paid procedures on the same claims and used in 
establishing payment rates for the separately paid services. It is 
impossible to know with certainty whether hospitals are failing to 
report HCPCS codes and charges for service for which the payment is 
packaged into payment for the independent service with which the 
packaged service is furnished. Moreover, if a hospital fails to report 
the HCPCS codes and charges for packaged services, the reason may be 
that the hospital has chosen to package the charge for the ancillary 
and dependent service into the charge for the service with which it is 
furnished. Although we prefer that hospitals report HCPCS codes and 
charges for all service they furnish, if the hospital's charge for the 
independent services also reflects the charge for all ancillary and 
supportive service it typically provides, the absence of HCPCS codes 
and separate charges would not result in inappropriately low cost for 
the independent service, although CMS would not know which specific 
ancillary and supportive services were being furnished. If a hospital 
is no longer providing a service, there may be many reasons that a 
hospital chooses not to provide a particular service or chooses to 
cease providing a particular service, including, but not limited to, 
because the hospital has determined that it is no longer cost effective 
for the hospital to furnish the service and that there may be other 
hospitals in the community that can furnish the service more 
efficiently.
    Comment: One commenter asked that CMS reinstate separate payment 
for radiation oncology guidance procedures because these services are 
vital to the safe provision of radiation therapy and unconditionally 
packaging payment for them may discourage hospitals from providing 
them.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74188), we recognize that radiation oncology 
guidance services, like most packaged services, are important to 
providing safe and high quality care to patients. However, we continue 
to believe that hospitals will invest in services that represent 
genuinely increased value to patient care. We will continue to pay 
separately for innovative technologies if a device meets the conditions 
for separate payment as a pass-through device or if a new procedure 
meets the criteria for payment as a new technology APC.
    Comment: One commenter expressed concern over a statement made in 
the proposed rule that indicated that CMS might propose to bundle 
payment for [services] that [it] now refers to as ``independent 
[services'']. The commenter stated that CMS did not provide any 
statutory authority that would allow it to move away from a fundamental 
OPPS policy, that only ``dependent services'' are potentially 
considered as part of a bundled reimbursement methodology. The 
commenter further stated that packaging payment for multiple services 
that are not interrelated presents no efficiency or resource management 
incentives, because, by definition, these services are not related, 
meaning there are no efficiencies to be gained and no overlap in 
resources expended.
    Response: In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we 
noted that we use the term ``independent service'' to refer to the 
HCPCS codes that represent the primary therapeutic or diagnostic 
modality into which we package payment for the dependent service. We 
also noted that, in future years, as we consider the development of 
larger payment groups that more broadly reflect services provided in an 
encounter or episode of care, it is possible that we might propose to 
bundle payment for a service that we now refer to as ``independent.'' 
We disagree with the commenter that we do not have the statutory 
authority to consider larger payment bundles that more broadly reflect 
services provided in an encounter or episode of care. Our statutory 
authority is defined in section 1833(t)(2)(B) of the Act, which allows 
the OPPS to establish groups of covered HOPD services, namely APC 
groups, and use them as the basic unit of payment.
    Furthermore, for CY 2008, we expanded packaging to services that 
were once considered independent services and items, such as nonpass-
through contrast agents and observation services. We now consider these 
services to be ancillary and supportive to a primary diagnostic or 
therapeutic modality and have assigned these services an 
unconditionally packaged status indicator of ``N.'' It follows then 
that items or services that are currently considered to be 
``independent'' services within this final rule with comment period may 
be packaged where appropriate in future years, after taking into 
consideration the clinical nature of the item or service and then 
determining whether or not that item or service is considered ancillary 
and supportive to a primary diagnostic or therapeutic modality.
    We note that we did not make any new proposals to develop 
additional payment bundles for CY 2013, but that we will likely do so 
in future rulemaking. For CY 2013, we proposed to continue to package 
the payment for items and services in seven categories with the primary 
diagnostic or therapeutic modality to which we believe that these items 
and services are typically ancillary and supportive. Because the 
commenter does not question the appropriateness of these seven 
categories of packaged payment given in the proposed rule nor does the 
commenter question the appropriateness of a specific APC assignment for 
a packaged HCPCS or CPT code, we cannot fully address the commenter's 
concerns about bundling multiple services that are not interrelated and 
that may or may not present efficiency or resource management 
incentives. We continue to believe that the seven categories of 
packaged services and items are appropriate to encourage hospital 
efficiency, flexibility, and ultimately cost containment.
    Comment: One commenter requested that CMS change the status 
indicator for HCPCS code L8604 (Injectable bulking agent, dextranomer/
hyaluronic acid copolymer implant, urinary tract, 1 ml, includes 
shipping and necessary

[[Page 68277]]

supplies) from ``N'' to ``A.'' The commenter argued that this would 
allow HCPCS code L8604 to be paid under a different fee schedule and 
would allow for access to the product SOLESTA[supreg] in the HOPD. The 
commenter also asked that CMS cover and pay for SOLESTA[supreg] in the 
same manner as other hyaluronic acid products and assign 
SOLESTA[supreg] a separate and unique HCPCS code.
    Response: HCPCS code L8604 describes several products that are 
implantable prosthetic devices. According to 42 CFR 419.2(b)(11), 
implantable prosthetic devices are packaged under the OPPS. Therefore, 
status indicator ``N'' is the correct status indicator for HCPCS code 
L8604. We also note that any coverage, reclassification, or HCPCS code 
change requests for SOLESTA[supreg] are outside the scope of this final 
rule with comment period. Such issues are addressed by processes 
outside the OPPS/ASC rule by either CMS' HCPCS Workgroup or CMS' 
Coverage and Analysis Group.
    Comment: One commenter requested that CMS assign HCPCS code J7665 
(Mannitol, administered through an inhaler, 5 mg) to a status indicator 
of ``K'' for CY 2013. The commenter stated that the product that is 
described by HCPCS code J7665 is a drug indicated for the assessment of 
bronchial hyperresponsiveness in individuals at least six years of age 
without clinically apparent asthma and that, consistent with its FDA 
labeling, the product that is described by HCPCS code J7665 can only be 
used in an institutional setting or a physician's office. The commenter 
argued that HCPCS code J7665 was incorrectly assigned a status 
indicator of ``N'' because this product is approved as a drug through 
the NDA process and should be paid under the OPPS as a separately paid 
drug as opposed to a supply under the OPPS.
    Response: We agree with the commenter that HCPCS code J7665 can be 
administered in the HOPD. However, we do not believe that the product 
described by HCPCS code J7665 is a separately payable drug as we have 
described here within this final rule with comment period, and is 
instead a supply with costs included in the payment under the OPPS as 
described in 42 CFR 419.2(b). Mannitol (HCPCS code J7665), when 
administered through an inhaler, is always used as a supply in 
bronchial challenge testing. Therefore, for CY 2013, we are assigning a 
status indicator of ``N'' to HCPCS code J7665.
    After consideration of the public comments we received, for CY 
2013, we are finalizing our proposed policy to continue to package 
payment for the services for which we proposed unconditional or 
conditional packaged payment in the proposed rule for the reasons set 
forth above.
f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals
(1) Existing Packaging Policies
    In the OPPS, we currently package five categories of drugs, 
biologicals, and radiopharmaceuticals (unless temporary pass-through 
status applies): (1) Those with per day costs at or below the packaging 
threshold; (2) diagnostic radiopharmaceuticals; (3) contrast agents; 
(4) anesthesia drugs; and (5) drugs treated as surgical supplies. 
Anesthesia drugs are discussed further in section II.A.3.c.(2) of this 
final rule with comment period. For detailed discussions of the 
established packaging policies for diagnostic radiopharmaceuticals and 
contrast agents, we refer readers to the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66765 through 66768). For further details on 
drugs treated as surgical supplies, we refer readers to the CY 2003 
OPPS final rule (67 FR 66767) and Chapter 15, Section 50.2 of the 
Medicare Benefit Policy Manual.
(2) Clarification of Packaging Policy for Anesthesia Drugs
    It has been longstanding OPPS policy to package ``anesthesia'' and 
``supplies and equipment for administering and monitoring anesthesia or 
sedation,'' as described in 42 CFR 419.2(b)(4) and (b)(5). As described 
above, items and services paid under the OPPS that are typically 
ancillary and supportive to a primary diagnostic or therapeutic 
modality and, in those cases, are considered dependent items and 
services are packaged into the payment of their accompanying 
independent primary service. In accordance with our current policy on 
packaging items and services, drugs that are used to produce anesthesia 
in all forms are ancillary and supportive to a primary diagnostic or 
therapeutic modality, and are included in our definition of 
``anesthesia'' as described in Sec.  419.2(b)(4) and (b)(5). However, 
we recognize that some anesthesia drugs may qualify for transitional 
pass-through status under section 1833(t)(6) of the Act. Therefore, in 
the CY 2013 OPPS/ASC proposed rule (77 FR45100), we proposed to clarify 
that our general policy is to package drugs used to produce anesthesia, 
and that those anesthesia drugs with pass-through status will be 
packaged upon the expiration of pass-through status. We invited public 
comment on our clarification of the existing packaging policies for 
anesthesia drugs under Sec.  419.2(b)(4) and (b)(5).
    Comment: Commenters objected to the proposed clarification of the 
OPPS policy on anesthesia and all future policies that expand the 
packaging of drugs, through the increase of the drug packaging 
threshold or otherwise. The commenters expressed their concern over the 
increase in packaging for drugs in general and urged CMS not to 
finalize this policy. The commenters also stated their concern that the 
CMS drug packaging polices used in the HOPD could encourage hospitals 
to under utilize critically important drugs and ultimately compromise 
beneficiary's access to care and undercut CMS' work to improve the 
quality of care. The commenters urged CMS not to finalize this 
proposal, to conduct a careful review to assess the effect of packaging 
on quality of care, and to forego any new packaging policies as a 
whole.
    One commenter expressed support for the clarification of this 
policy. The commenter further encouraged CMS to continue to monitor 
packaged drugs and biologicals to ensure they are appropriately paid.
    Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we 
proposed to clarify the existing policies related to nonpass-through 
and pass-through anesthesia drugs. It has been our longstanding policy 
to package anesthesia drugs, which are drugs that are used to produce 
anesthesia in all forms and are ancillary and supportive to a primary 
diagnostic or therapeutic modality, that are not on pass-through status 
as included costs under the OPPS, as described in 42 CFR 419.2(b)(4) 
and (b)(5). However, we also clarified in the proposed rule that 
anesthesia drugs are eligible for transitional pass-through status as a 
drug, as provided in section 1833(t)(6) of the Act. Therefore, we noted 
that we were not finalizing a new policy to package nonpass-through 
anesthesia drugs but were clarifying in our preamble language our 
currently existing policies.
    In addition, as we stated above, we continue to believe that 
packaging payment for items and services that are ancillary to and 
dependent on the major procedure for which a payment rate is 
established is a fundamental concept of the OPPS. We address additional 
comments on packaging for drugs, biologicals, diagnostic 
radiopharmaceuticals, and contrast agents below in section II.A.3.f. 
and section V.A. of this final rule with comment period.

[[Page 68278]]

    After consideration of the public comments we received, we are 
finalizing this proposed clarification for CY 2013. Anesthesia drugs 
that are used to produce anesthesia in all forms are ancillary and 
supportive to a primary diagnostic or therapeutic modality under 42 CFR 
419.2(b)(4) and (b)(5). Therefore, nonpass-through anesthesia drugs are 
packaged under the OPPS. New anesthesia drugs 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 payment for the procedures or 
services associated with the new anesthesia drug are eligible for 
transitional pass-through status as a drug or biological, as described 
in section 1833(t)(6) of the Act. We discuss OPPS transitional pass-
through payment for additional costs of drugs, biologicals, and 
radiopharmaceuticals in section V.A. of this final rule with comment 
period.
g. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast 
Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs and 
Devices)
    Prior to CY 2008, the methodology of calculating a product's 
estimated per day cost and comparing it to the annual OPPS drug 
packaging threshold was used to determine the packaging status of 
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for 
the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009, we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated 
surgical procedure on the claim, regardless of their per day cost (73 
FR 68633 through 68636). We refer to diagnostic radiopharmaceuticals 
and contrast agents collectively as ``policy-packaged'' drugs. We refer 
to implantable biologicals as ``devices'' because, in CY 2010, we 
finalized a policy to treat implantable biologicals as devices for OPPS 
payment purposes (74 FR 60471 through 60477).
    As set forth at Sec.  419.2(b), as a prospective payment system, 
the OPPS establishes a national payment rate, standardized for 
geographical wage differences, that includes operating and capital-
related costs that are directly related and integral to performing a 
procedure or furnishing a service on an outpatient basis, and in 
general, these costs include, but are not limited to, implantable 
prosthetics, implantable durable medical equipment, and medical and 
surgical supplies. Packaging costs into a single aggregate payment for 
a service, encounter, or episode-of-care is a fundamental principle 
that distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiency and also enables hospitals to manage 
their resources with maximum flexibility.
    Prior to CY 2008, we noted that the proportion of drugs, 
biologicals, and radiopharmaceuticals that were separately paid under 
the OPPS had increased in recent years, a pattern that we also observed 
for procedural services under the OPPS. Our final CY 2008 policy that 
packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, regardless of their per day 
costs, contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    As discussed in more detail in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645 through 68649), we presented several 
reasons supporting our initial policy to package payment of diagnostic 
radiopharmaceuticals and contrast agents into their associated 
procedures on a claim. Specifically, we stated that we believed 
packaging was appropriate because: (1) The statutorily required OPPS 
drug packaging threshold had expired; (2) diagnostic 
radiopharmaceuticals and contrast agents function effectively as 
supplies that enable the provision of an independent service, rather 
than serving themselves as a therapeutic modality; and (3) section 
1833(t)(14)(A)(iii) of the Act required that payment for specified 
covered outpatient drugs (SCODs) be set prospectively based on a 
measure of average hospital acquisition cost (76 FR 74307).
    Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we 
stated that we believe it is appropriate to continue to treat 
diagnostic radiopharmaceuticals and contrast agents differently from 
specified covered outpatient drugs (SCODs) for CY 2013. Therefore, we 
proposed to continue packaging payment for all contrast agents and 
diagnostic radiopharmaceuticals, collectively referred to as ``policy-
packaged'' drugs, regardless of their per day costs, for CY 2013. We 
also proposed to continue to package the payment for diagnostic 
radiopharmaceuticals into the payment for the associated nuclear 
medicine procedure and to package the payment for contrast agents into 
the payment for the associated echocardiography imaging procedure, 
regardless of whether the agent met the OPPS drug packaging threshold. 
We refer readers to the CY 2010 OPPS/ASC final rule with comment period 
for a detailed discussion of nuclear medicine and echocardiography 
services (74 FR 35269 through 35277).
    Comment: Commenters objected to CMS' proposal to package payment of 
all nonpass-through diagnostic radiopharmaceuticals and contrast agents 
in CY 2013. A number of commenters stated that diagnostic 
radiopharmaceuticals and contrast agents with per day costs over the 
proposed OPPS drug packaging threshold are defined as SCODs and, 
therefore, should be assigned separate APC payments. In particular, the 
commenters questioned CMS' authority to classify groups of drugs, such 
as diagnostic radiopharmaceuticals and contrast agents, and implement 
packaging and payment policies that do not reflect their status as 
SCODs. Several commenters disagreed with CMS' labeling of 
radiopharmaceuticals as supplies and stated instead that they should be 
treated as other SCODs. The commenters recommended that diagnostic 
radiopharmaceuticals should be subject to the same per day cost drug 
packaging threshold that applies to other drugs, in order to determine 
whether their payment would be packaged or made separately.
    One commenter supported CMS' continued packaging policy for 
diagnostic radiopharmaceuticals and contrast agents that do not have 
pass-through status. The commenter noted that diagnostic 
radiopharmaceuticals are supplies that are necessary to the provision 
of the service in which they are used and, like other supplies, payment 
for them should be part of the payment for the service.
    Response: As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66766), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60497), the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71949), and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74307), we continue to believe that diagnostic 
radiopharmaceuticals and contrast agents are different from other drugs

[[Page 68279]]

and biologicals for several reasons. We note that the statutorily 
required OPPS drug packaging threshold, as described in section 
1833(t)(16)(B) of the Act, has expired, and we continue to believe that 
diagnostic radiopharmaceuticals and contrast agents function 
effectively as supplies that enable the provision of an independent 
service and are always ancillary and supportive to an independent 
service, rather than themselves serving as the therapeutic modality. We 
packaged their payment in CYs 2008, 2009, 2010, 2011, and 2012 as 
ancillary and supportive services in order to provide incentives for 
greater efficiency and to provide hospitals with additional flexibility 
in managing their resources. In order for payment to be packaged, it is 
not necessary that all products be interchangeable in every case, and 
we recognized that, in some cases, hospitals may utilize higher cost 
products and, in some cases, lower cost products, taking into 
consideration the clinical needs of the patient and the efficient use 
of hospital resources. While we recognize this variability from case to 
case, on average under a prospective payment system, we expect payment 
to cover the costs for the services furnished. In the past, we have 
classified different groups of drugs for specific payment purposes, as 
evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 anti-
emetics and their exemption from the drug packaging threshold. We note 
that we treat diagnostic radiopharmaceuticals and contrast agents as 
``policy-packaged'' drugs because our policy is to package payment for 
all of the products in this category.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we also began packaging the payment for all nonpass-through 
implantable biologicals into payment for the associated surgical 
procedure because we consider these products to always be ancillary and 
supportive to an independent service, similar to implantable non-
biological devices that are always packaged. Therefore, we currently 
package payment of nonpass-through implantable biologicals, also known 
as devices that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) into the body. As we stated in 
the CY 2013 OPPS/ASC proposed (77 FR 45101), we continue to believe 
that payment should be packaged for nonpass-through implantable 
biologicals for CY 2013.
    We are continuing our CY 2009 policy for CY 2013 as discussed 
below, which packages payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals into 
the payment for their associated procedures. We also continue to 
believe that the line-item estimated cost for nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, or implantable 
biologicals in our claims data is a reasonable approximation of average 
acquisition and preparation and handling costs for nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals, respectively. As we discussed in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68645), we believe that hospitals 
have adapted to the CY 2006 coding changes for nonpass-through 
diagnostic radiopharmaceuticals and responded to our instructions to 
include charges for diagnostic radiopharmaceutical handling in their 
charges for the diagnostic radiopharmaceutical products. Further, 
because the standard OPPS packaging methodology packages the total 
estimated cost of each nonpass-through diagnostic radiopharmaceutical, 
contrast agent, or nonimplantable biological on each claim (including 
the full range of costs observed on the claims) with the cost of 
associated procedures for ratesetting, this packaging approach is 
consistent with considering the average cost for nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, or implantable 
biologicals, rather than the cost. In addition, as we noted in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68646), these 
drugs, biologicals, or diagnostic radiopharmaceuticals for which we 
have not established a separate APC and, therefore, for which payment 
would be packaged rather than separately provided under the OPPS are 
not considered to be SCODs. Similarly, drugs and biologicals with per 
day costs of less than the drug packaging threshold for CY 2013, which 
is discussed in section V.B. of this final rule with comment period, 
that are packaged and for which a separate APC has not been established 
also are not SCODs. This reading is consistent with our final packaging 
payment policy, as discussed in this section, whereby we package 
payment for nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals and provide payment for these 
products through payment for their associated procedures.
    Comment: Several commenters disagreed with the proposal to 
distinguish between diagnostic and therapeutic radiopharmaceuticals for 
payment purposes under the OPPS. Some commenters noted that CMS' 
identification of HCPCS code A0544 (Iodine I-131 tositumomab, 
diagnostic, per study dose) as a diagnostic radiopharmaceutical is 
inappropriate because this radiopharmaceutical functions as a 
dosimetric radiopharmaceutical and not as a diagnostic 
radiopharmaceutical. A few commenters explained that this particular 
radiopharmaceutical product is used as part of a therapeutic regimen 
and, therefore, should be considered therapeutic for OPPS payment 
purposes. Furthermore, many commenters urged CMS to classify dosimetric 
doses used in radiopharmaceutical procedures as therapeutic in nature, 
and allow for separate payment for that dosimetric dose.
    Response: As discussed above and in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60498), the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71949), and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74308), we classified each radiopharmaceutical 
into one of the two groups according to whether its long descriptor 
contained the term ``diagnostic'' or ``therapeutic.'' HCPCS code A9544 
contains the term ``diagnostic'' in its long code descriptor. 
Therefore, according to our established methodology, we continued to 
classify it as diagnostic for the purposes of CY 2012 OPPS payment. 
While we understand that this item is provided in conjunction with 
additional supplies, imaging tests, and therapeutic 
radiopharmaceuticals for patients already diagnosed with cancer, we 
continue to believe that the purpose of administering the product 
described by HCPCS code A9544 is diagnostic in nature. As we first 
stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66641), we continue to believe that the product described by HCPSC code 
A9544 is a diagnostic radiopharmaceutical. While it is not used to 
necessarily diagnose a general disease state, we understand that it is 
used to determine whether future therapeutic services would be 
beneficial to the patient and to determine how to proceed with therapy. 
We note that this is not different than the use of a laboratory test to 
guide therapy; the fact that the diagnostic test, a service which 
provides information, is used to guide therapy does not make it a 
therapeutic

[[Page 68280]]

service, on which its intent is to improve a patient's clinical 
condition. While a group of associated services may be considered a 
therapeutic regimen by some commenters, HCPCS code A9544 is provided in 
conjunction with a series of nuclear medicine imaging scans. Many 
nuclear medicine studies using diagnostic radiopharmaceuticals are 
provided to patients who already have an established diagnosis. We 
continue to consider HCPCS code A9544 to be diagnostic because this 
item is provided for the purpose of conducting a diagnostic imaging 
procedure and is used to identify the proposed dose of the therapeutic 
agent to be provided at a later time.
    Comment: Commenters recommended using the ASP methodology and the 
proposed statutory default rate of ASP+6 percent to make payment for 
nonpass-through diagnostic radiopharmaceuticals and contrast agents. 
The commenters noted that it would be inconsistent for CMS to treat 
diagnostic radiopharmaceuticals and contrast agents as ``drugs'' for 
pass-through payment purposes and provide payment for diagnostic 
radiopharmaceuticals and contrast agents that have pass-through status 
based on the ASP methodology, and, then, after the diagnostic 
radiopharmaceutical's or contrast agent's pass-through payment status 
expires, package the costs included in historical hospital claims data, 
rather than use the ASP methodology to pay for the product and treat 
the drug as a supply. A few commenters suggested that diagnostic 
radiopharmaceuticals could be paid separately as therapeutic 
radiopharmaceuticals are paid, which would allow manufacturer to 
voluntarily submit ASP data, and then default to the mean unit cost 
when ASP data are unavailable. Some commenters recommended that CMS use 
ASP data as a benchmark for determining costs for diagnostic 
radiopharmaceuticals that are packaged.
    One commenter stated that payment for diagnostic 
radiopharmaceuticals should not be paid at ASP+6 percent for the 
reasons commenters provided when CMS proposed to make payment at ASP+6 
percent in prior years. Specifically, the commenter noted that the ASP 
statute excludes reporting of the ASP for diagnostic 
radiopharmaceuticals and, therefore, such reporting would need to be 
voluntary. However, in terms of voluntary reporting of diagnostic 
radiopharmaceuticals, the commenter further noted that CMS could never 
be confident that it would receive reports from all manufacturers of 
any particular diagnostic radiopharmaceutical. Moreover, the commenter 
stated, high volume diagnostic radiopharmaceuticals are furnished using 
generators that hospitals use for up to 28 days to provide doses of 
diagnostic radiopharmaceuticals as needed and therefore the 
manufacturer, who would report the ASP under penalty of perjury, would 
never be able to certify the actual number of doses furnished with 
confidence. The commenter finally noted that packaging is consistent 
with the general principles of a prospective payment system, one goal 
of which is to encourage hospital cost containment.
    Response: As we stated above, the statutorily required OPPS drug 
packaging threshold has expired, and we continue to believe that 
nonpass-through diagnostic radiopharmaceuticals and contrast agents are 
always ancillary and supportive to an independent service, rather than 
services themselves as the therapeutic modality. We disagree with 
commenters who suggest that nonpass-through diagnostic 
radiopharmaceuticals and contrast agents should be paid under the ASP 
methodology, that nonpass-through diagnostic radiopharmaceuticals and 
contrast agents should be paid as pass-through drugs and biologicals, 
or that nonpass-through diagnostic radiopharmaceuticals should be paid 
similarly to therapeutic radiopharmaceuticals. We continue to believe 
that nonpass-through diagnostic radiopharmaceuticals, contrast agents, 
and implantable biologicals function effectively as supplies that 
enable the provision of an independent service. As we noted in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68646) and restate 
above, drugs, biologicals, or radiopharmaceuticals for which we have 
not established a separate APC will receive packaged payment under the 
OPPS, and are considered not to be SCODs. We continue to believe that 
the line-item estimated cost for nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals in 
our claims data is a reasonable approximation of average acquisition 
and preparation and handling costs for diagnostic radiopharmaceuticals, 
contrast agents, and implantable biologicals, respectively.
    Further, as we have stated above, we believe that packaging costs 
into a single aggregate payment for a service, encounter, or episode-
of-care is a fundamental principle that distinguishes a prospective 
payment system from a fee schedule. Our policy of packaging payment for 
nonpass-through diagnostic radiopharmaceuticals, contrast agents, and 
implantable biologicals 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. Paying separately for nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals, 
when each of these items is ancillary or supportive to an independent 
service, is contrary to this principle of a prospective payment system.
    Finally, we do not agree with the commenter's assertion that 
separate payment for diagnostic radiopharmaceuticals would result in 
more accurate payment for these products. When CMS discussed possible 
ASP-based payment for diagnostic radiopharmaceuticals in the CY 2006 
OPPS final rule with comment period (70 FR 68653 through 68657), 
numerous commenters advised CMS that diagnostic radiopharmaceuticals 
are formulated, distributed, compounded, and administered in unique 
distribution channels that preclude the determination of ASP relevant 
to a diagnostic radiopharmaceutical HCPCS codes. Further, commenters 
advised CMS that the manufacturer has no way to calculate the ASP of 
the end product patient dose and, consequently, could not supply CMS 
with accurate ASP data. In the intervening period between the CY 2006 
final rule with comment period and the present, diagnostic 
radiopharmaceutical use has become more widespread and its formulation 
more complex. Moreover, we believe that the phenomena described by 
commenters (including radiopharmaceutical manufacturers) in the comment 
period preceding the CY 2006 OPPS final rule with comment period, 
including the many preparatory and compounding steps between 
manufacturer and the patient's bedside, remain an impediment to 
manufacturers' calculations of accurate ASP and thus accurate payment 
for these products. Therefore, we do not believe that diagnostic 
radiopharmaceuticals (or contrast agents or implantable biologicals) 
should be paid separately under the OPPS such that manufactures 
voluntarily can submit ASP data and then default to mean unit cost when 
ASP data are unavailable. We believe they are appropriately packaged 
into a single

[[Page 68281]]

aggregate payment for the accompanying services.
    Comment: Commenters recommended that CMS modify the way that it 
applies the ``2 times'' rule for nuclear medicine APCs by including the 
cost of the packaged diagnostic radiopharmaceutical drugs in its 
analysis and not just the cost of services. The commenters argued that 
this is mandated by the statute, which provides that an APC group 
cannot be considered comparable with respect to the use of resources if 
the highest cost for an item or service in the APC group is more than 
two times greater than the lowest cost for an item or service within 
the same APC group. Therefore, the commenters believed that it is 
logical that as long as CMS views the packaged nuclear medicine service 
and the radiopharmaceutical as one unit for APC payment purposes, it 
should consider both components together in applying the 2 times rule 
and analysis to APC payment.
    Response: While the language in section 1833(t)(2) of the Act 
regarding the 2 times rule describes consideration of both items and 
services for purposes of identifying exceptions to the rule, it does so 
within the context of services that belong to an APC group. 
Unconditionally packaged items and services, being associated with the 
particular item or service being modeled for separate payment, would 
not individually belong to any APC group. However, these 
unconditionally packaged costs would be incorporated into the system 
through the separately paid items or services with which they appear on 
the claim, and would thus be factored into the ultimate consideration 
of the 2 times rule. Therefore, consideration of items and services 
within each APC only applies to the separately paid HCPCS and CPT codes 
assigned to each APC and would thus not include any discrete 
calculation for packaged costs with regards to the two times rule.
    Comment: One commenter recommended that CMS establish a threshold 
for radiopharmaceutical drugs that would trigger separate payment when 
the cost of the radiopharmaceutical is greater than the total APC 
payment or over another threshold value.
    Response: Consistent with the CY 2013 OPPS/ASC proposed rule, for 
this final rule with comment period, we continue to believe that 
diagnostic radiopharmaceuticals are ancillary and supportive to the 
nuclear medicine procedures in which they are used and that their costs 
should be packaged into the primary procedures with which they are 
associated. We do not believe it would be appropriate to set a cost 
threshold for packaging diagnostic radiopharmaceuticals because, 
regardless of their per day cost, they are always supportive of an 
independent procedure that is the basis for administration of the 
diagnostic radiopharmaceutical. We also do not believe that it is 
appropriate to consider alternate packaging criteria for nonpass-
through diagnostic radiopharmaceuticals because we continue to believe 
that, regardless of their per-day cost, these items are always 
supportive of an independent procedure that is the basis for 
administration of the diagnostic radiopharmaceutical. Therefore, our 
policy of packaging costs for these products into an associated APC 
continues to be the approach best suited for use in this prospective 
payment system.
    Further, we note that the OPPS, as a prospective payment system, 
already includes the costs associated with diagnostic 
radiopharmaceuticals into the APCs for which the product is ancillary 
and supportive. We believe that the cost associated with a given 
product at a given point in time is immaterial because the OPPS, as a 
prospective payment system with payments based on average costs 
associated with a covered procedure, already takes into account both 
higher and lower input costs associated with that procedure. We also 
note that the OPPS, like many of Medicare's prospective payment 
systems, has polices in place to provide hospitals with additional 
outlier payments for certain high-cost cases whose costs exceed certain 
thresholds. This system of outliers already provides hospitals (or, in 
the case of partial hospitalization services, community mental health 
centers) with additional reimbursement to offset costs that are high 
relative to the prospective payment amount, regardless of whether the 
costs are associated with diagnostic radiopharmaceuticals or another 
relatively high cost element in the patient's course of care.
    Comment: One commenter requested that CMS present additional, 
detailed information regarding how the agency ensures that the full 
cost of diagnostic radiopharmaceuticals are captured in the associated 
packaged APC procedural payments, including the validation methods used 
by the agency.
    Response: The data that CMS used to calculate, propose, and 
finalize APC assignments and rates, including costs associated with 
diagnostic radiopharmaceuticals, for the CY 2013 OPPS, are available 
for purchase under a CMS data use agreement through the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatinetPPS/index.html. This Web site includes information 
about purchasing the ``OPPS Limited Data Set,'' which now includes the 
additional variable previously available only in the OPPS Identifiable 
Data set, including ICD-9-CMS diagnosis codes and revenue code payment 
amounts.
    As we state above, we discuss in detail in section II.A.2. of this 
final rule with comment period the availability to the public of the 
use of files of claims, including, for CY 2008 and later, supplemental 
line item cost data for every HCPCS code under the OPPS, and a detailed 
narrative description of our data process for the annual OPPS/ASC 
proposed and final rules that the public can use to perform any desired 
analyses.
    We continue to believe that the cost of a diagnostic 
radiopharmaceutical is captured into the associated packaged APC 
procedural payment. We see no need at this time to provide further data 
analyses.
    For CY 2013, we proposed to make an additional payment of $10 for 
diagnostic radiopharmaceuticals that utilize the Tc-99m radioisotope 
produced by non-HEU methods (77 FR 45121). We proposed to base this 
payment on the best available estimations of the marginal costs 
associated with non-HEU radioisotope production, pursuant to our 
authority described in section 1833(t)(2)(E) of the Act which allows us 
to establish ``other adjustments as determined to be necessary to 
ensure equitable payments'' under the OPPS. We described this policy in 
further detail in section III.C.3. of the proposed rule.
    We received numerous comments on this proposal, including comments 
that suggested that separate payment for diagnostic 
radiopharmaceuticals is the most effective way to encourage hospital 
conversion from HEU to non-HEU sources that utilize Tc-99m. We have 
addressed these comments on the proposed payment for non-HEU sources 
that recommended separate payment for diagnostic radiopharmaceuticals 
above and in section III.C.3. of this final rule with comment period.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we began packaging the payment for all nonpass-through 
implantable biologicals into payment for the associated surgical 
procedure because we consider these products to always be ancillary and 
supportive to independent services, similar to implantable

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nonbiological devices that are always packaged. We continued to follow 
this policy in CY 2012 (76 FR 74306 through 74310). Specifically, we 
continue to package payment for nonpass-through implantable 
biologicals, also known as devices that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
body. In the CY 2013 OPPS/ASC proposed rule (77 FR45101), for CY 2013, 
we proposed to continue to apply the policies finalized in CY 2012, to 
package payment for nonpass-through implantable biologicals 
(``devices'') that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) into the body.
    Comment: One commenter requested that HCPCS code Q4130 (Strattice 
tm, per square centimeter) be assigned status indicator ``K'' for CY 
2013 because, the commenter argued, HCPCS code Q4130 is a skin 
substitute graft for chronic wounds and a surgical biological implant 
for breast reconstruction and hernia repair procedures. The commenter 
stated that assigning HCPCS code Q4130 to a status indicator of ``K'' 
would signify its use as a biological skin substitute graft for which 
separate payment is available.
    The commenter further noted that Transmittal 2418 of the Medicare 
Claims Processing Manual lists HCPCS code Q4130 in table 5 of the 
transmittal, along with other biologicals with ``dual'' use.
    Response: HCPCS code Q4130 was assigned a status indicator of ``N'' 
in the CY 2013 OPPS/ASC proposed rule, signifying that the product that 
is represented by this code is an implantable biological device. We 
continue to believe that the product described by HCPCS code Q4130 is 
an implantable biological device, as evidenced by language within the 
510(k) FDA clearance which lists the product described by HCPCS code 
Q4130 as a surgical mesh intended for the reinforcement of soft tissue 
repaired by sutures or suture anchors during tendon repair surgery 
including reinforcement of rotator cuff, patella, Achilles, biceps, 
quadriceps, or other tendons. Further indications of use include the 
repair of body wall defects which require the use of reinforcing or 
bridging material to obtain the desired surgical outcome. As we stated 
above, the payment for nonpass-through implantable biologicals, or 
implanted devices, is packaged into the payment for the primary 
procedure. Therefore, we are continuing to assign a status indicator of 
``N'' to HCPCS code Q4130 for CY 2013. Additionally, we are correcting 
the table within Transmittal 2418 which contains a list of skin 
substitutes only.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period expressed concern that Medicare contractors 
had been inadvertently making separate payment for nonpass-through 
biological implants as they process OPPS claims for breast 
reconstruction and hernia repair procedures. The commenter stated that 
these procedure claims included claims for biological implants, 
including HCPCS codes Q4100 through Q4130. The commenter noted that 
HCPCS code Q4116 (Alloderm, per square centimeter) in particular was 
paid separately on several occasions. Therefore, the commenter 
recommended that CMS take several steps to prevent further billing 
errors with respect to the OPPS payment policy for implantable 
biologicals.
    Response: For the April 2012 quarterly update, we installed logic 
changes in the I/OCE to allow for separate payment for separately 
payable skin substitute HCPCS codes that are coded with skin substitute 
procedure CPT codes only. We reminded hospitals that HCPCS codes 
describing skin substitutes should only be separately reported when 
used with one of the CPT codes describing the application of a skin 
substitute (CPT codes 15271 through 15278). Therefore, we have 
previously addressed the commenters' concerns.
    Under the OPPS, HCPCS codes that describe skin substitute products, 
with a separately payable status indicator of ``K'' or ``G'' that are 
billed with a skin substitute application procedure, will receive 
separate payment for both the skin substitute product and the 
procedure. Payment for skin substitute HCPCS codes that are billed with 
other procedures will be packaged into the payment for the 
corresponding procedure.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification, to continue to package 
payment for all nonpass-through diagnostic radiopharmaceuticals and 
contrast agents, and implantable biologicals that are surgically 
inserted or implanted into the body through a surgical incision or a 
natural orifice, regardless of their per day costs. Given the inherent 
function of diagnostic radiopharmaceuticals and contrast agents as 
ancillary and supportive to the performance of an independent procedure 
and the similar functions of implantable biologicals and nonbiological 
devices as integral to and supportive of the separately paid surgical 
procedures in which either may be used, we continue to view the 
packaging of payment for diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals as a logical expansion of packaging 
payment for drugs and biologicals. In addition, as we initially 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66768), we will continue to identify diagnostic radiopharmaceuticals 
specifically as those Level II HCPCS codes that include the term 
``diagnostic'' alone with a radiopharmaceutical in their long code 
descriptors, and therapeutic radiopharmaceuticals as those Level II 
HCPCS codes that include the term ``therapeutic'' along with a 
radiopharmaceuticals in their long code descriptors. We believe that 
the current descriptors accurately discriminate between those 
radiopharmaceuticals that are used to gather information and those 
which are intended to improve the patient's medical condition.
    In addition, any new biological lacking pass-through status that is 
surgically inserted or implanted through a surgical incision or natural 
orifice will be packaged in CY 2013.
    We refer reader to section III.D.1.f. of this final rule with 
comment period for a discussion of comments related to echocardiography 
services furnished with and without contrast. For more information on 
how we set CY 2013 payment rates for nuclear medicine procedures in 
which diagnostic radiopharmaceuticals are used an echocardiography 
services provided with and without contrast agents, we refer readers to 
the CY 2010 OPPS/ASC final rule with comment period for a detailed 
discussion of nuclear medicine and echocardiography services (74 FR 
35269 through 35277).
h. Summary of Proposals
    As we proposed, we are finalizing, for this final rule with comment 
period, the HCPCS codes that we unconditionally packaged (for which we 
continue to assign status indicator ``N''), or conditionally packaged 
(for which we continue to assign status indicators ``Q1,'' ``Q2,'' or 
``Q3''), and those codes are displayed in Addendum B of this final rule 
with comment period (which is available via the Internet on the CMS Web 
site). The supporting documents for this CY 2013 OPPS/ASC final rule 
with comment period, including, but not limited to, Addendum B, are 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To

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view the status indicators by HCPCS code in Addendum B, select ``CMS 
1589-FC'' and then select the folder labeled ``2013 OPPS Final Rule 
Addenda'' from the list of supporting files. Open the zipped file and 
select Addendum B, which is available as both an Excel file and a text 
file.
4. Calculation of OPPS Scaled Payment Weights
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45101), we proposed 
for CY 2013 to calculate the relative payment weights for each APC for 
CY 2013 shown in Addenda A and B to the proposed rule (which were 
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. In 
years prior to CY 2007, we standardized all the relative payment 
weights to APC 0601 (Mid-Level Clinic Visit) because mid-level clinic 
visits were among the most frequently performed services in the 
hospital outpatient setting. We assigned APC 0601 a relative payment 
weight of 1.00 and divided the median cost for each APC by the median 
cost for APC 0601 to derive the relative payment weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights for APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
clinic visit APCs. We selected APC 0606 as the base because APC 0606 
was the mid-level clinic visit APC (that is, Level 3 of five levels). 
For CY 2013, we proposed to base the relative payment weights on which 
OPPS payments will be made by using geometric mean costs, as described 
in section II.A.2.f. of the proposed rule. However, in an effort to 
maintain consistency in calculating unscaled weights that represent the 
cost of some of the most frequently provided services, we proposed to 
continue to use the cost of the mid-level clinic visit APC (APC 0606) 
in calculating unscaled weights. Following our general methodology for 
establishing relative payment weights derived from APC costs, but using 
the proposed CY 2013 geometric mean cost for APC 0606, for CY 2013, we 
proposed to assign APC 0606 a relative payment weight of 1.00 and to 
divide the geometric mean cost of each APC by the proposed geometric 
mean cost for APC 0606 to derive the proposed unscaled relative payment 
weight for each APC. We stated that the choice of the APC on which to 
base the proposed relative payment weights for all other APCs does not 
affect the payments made under the OPPS because we scale the weights 
for budget neutrality.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that the 
estimated aggregate weight under the OPPS for CY 2013 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 2012 scaled relative payment weights to 
the estimated aggregate weight using the CY 2013 unscaled relative 
payment weights. For CY 2012, we multiplied the CY 2012 scaled APC 
relative weight applicable to a service paid under the OPPS by the 
volume of that service from CY 2011 claims to calculate the total 
weight for each service. We then added together the total weight for 
each of these services in order to calculate an estimated aggregate 
weight for the year. For CY 2013, as we proposed, we performed the same 
process using the CY 2013 unscaled relative payment weights rather than 
scaled relative payment weights. We then calculated the weight scaler 
by dividing the CY 2012 estimated aggregate weight by the CY 2013 
estimated aggregate weight. The service-mix is the same in the current 
and prospective years because we use the same set of claims for service 
volume in calculating the aggregate weight for each year. For a 
detailed discussion of the weight scaler calculation, we refer readers 
to the OPPS claims accounting document available on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    As we proposed, in this final rule with comment period, we include 
estimated payments to CMHCs in our comparison of estimated unscaled 
weights in CY 2013 to estimated total weights in CY 2012 using CY 2011 
claims data, holding all other components of the payment system 
constant to isolate changes in total weight. Based on this comparison, 
we adjusted the unscaled relative payment weights for purposes of 
budget neutrality. The CY 2013 unscaled relative payment weights were 
adjusted by multiplying them by a weight scaler of 1.3596 to ensure 
that the CY 2013 relative payment weights are budget neutral.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act states that 
``Additional expenditures resulting from this paragraph shall not be 
taken into account in establishing the 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) was 
included in the budget neutrality calculations for the CY 2013 OPPS.
    We did not receive any public comments on the proposed methodology 
for calculating scaled weights based on the geometric mean costs for 
the CY 2013 OPPS. Therefore, for the reasons set forth in the proposed 
rule (77 FR 45101), we are finalizing our proposed methodology without 
modification, including updating of the budget neutrality scaler for 
this final rule with comment period as we proposed. Under this 
methodology, the final unscaled relative payment weights were adjusted 
by a weight scaler of 1.3596 for this final rule with comment period. 
The final scaled relative payment weights listed in Addenda A and B to 
this final rule with comment period (which are available via the 
Internet on the CMS Web site) incorporate the final recalibration 
adjustments discussed in sections II.A.1. and II.A.2. of this final 
rule with comment period.
    We noted in the proposed rule that we were providing additional 
information, in association with the proposed rule, so that the public 
could provide meaningful comment on our proposed policy to base the CY 
2013 OPPS relative payment weights on geometric mean costs. The scaled 
relative payment weights listed in Addenda A and B to this final rule 
with comment period (which are available via the Internet on the CMS 
Web site) incorporate the recalibration adjustments discussed in 
sections II.A.1. and II.A.2. of this final rule with comment period.

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 2013 IPPS/LTCH PPS 
final rule (77 FR 53414), consistent with current law,

[[Page 68284]]

based on IHS Global Insight, Inc.'s second quarter 2012 forecast of the 
FY 2013 market basket increase, the FY 2013 IPPS market basket update 
is 2.6 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) 
of the Act, as added by section 3401(i) of Pub. L. 111-148 and as 
amended by section 10319(g) of that law and further amended by section 
1105(e) of Public Law 111-152, provide adjustments to the OPD fee 
schedule increase factor for CY 2013.
    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 2013 IPPS/LTCH PPS proposed rule 
(77 FR 27975 through 27976), we discussed the calculation of the 
proposed MFP adjustment for FY 2013, which was 0.8 percentage point.
    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 data, if appropriate, to determine the CY 2013 market 
basket update and the MFP adjustment, components in calculating the OPD 
fee schedule increase factor under sections 1833(t)(3)(C)(iv) and (F) 
of the Act, in this CY 2013 OPPS/ASC final rule with comment period. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53414), we discussed the 
calculation of the final MFP adjustment for FY 2013, which is 0.7 
percentage point.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that for 
each of year 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 2013, section 
1833(t)(3)(G)(ii) of the Act provides a 0.1 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)(ii) of the Act, in the CY 2013 OPPS/ASC proposed rule 
(77 FR 45102), we proposed to apply a 0.1 percentage point reduction to 
the OPD fee schedule increase factor for CY 2013.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 for a year, and may result in payment rates under the OPPS for 
a year being less than such payment rates for the preceding year. As 
described in further detail below, using the final methodology and more 
recent data would result in an OPD fee schedule increase factor of 1.8 
percent for the CY 2013 OPPS (2.6 percent, which is the final estimate 
of the hospital inpatient market basket percentage increase, less the 
final 0.7 percentage point MFP adjustment, less the 0.1 percentage 
point additional adjustment).
    We note that 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. As a result, using the final methodology and more recent data, 
those hospitals failing to meet the Hospital OQR Program reporting 
requirements will receive an OPD fee schedule increase factor of -0.2 
(2.6 percent, which is the final estimate of the hospital inpatient 
market basket percentage increase, less the final 0.7 percentage point 
MFP adjustment, less the 0.1 percentage point additional adjustment, 
less 2.0 percentage points for the Hospital OQR Program reduction). For 
further discussion of the Hospital OQR Program, we refer readers to 
section XV.F. of this final rule with comment period.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45103), we proposed to 
amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to 
reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, 
for CY 2013, 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)(ii) 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 0.1 percentage point for CY 2013.
    Comment: Several commenters expressed support for the OPD fee 
schedule increase factor because they believed it would better align 
payment with hospital costs.
    Response: We appreciate the commenters' support.
    We did not receive any public comments on the proposed amendment to 
42 CFR 419.32(b)(1)(iv)(B) to add a new paragraph (4) to reflect the 
requirements in section 1833(t)(3)(F) of the Act. For the reasons 
discussed above, we are adjusting the OPD fee schedule increase factor 
and adopting as final the amendment to 42 CFR 419.32(b)(1)(iv)(B), as 
proposed.
    We did not receive any public comments on our proposed methodology 
for calculating the CY 2013 conversion factor. Therefore, we are 
finalizing our proposed methodology for calculating the budget 
neutrality adjustment factors, as described in the following 
discussion.
    As we proposed, to set the OPPS conversion factor for CY 2013, we 
are increasing the CY 2012 conversion factor of $70.016 by 1.8 percent. 
In accordance with section 1833(t)(9)(B) of the Act, we are further 
adjusting the conversion factor for CY 2013 to ensure that any 
revisions made to the updates for a revised wage index and rural 
adjustment are made on a budget neutral basis (77 FR 45103). We are 
calculating an overall budget neutrality factor of 0.9998 for wage 
index changes by comparing total estimated payments from our simulation 
model using the final FY 2013 IPPS wage indices to those payments using 
the current (FY 2012) IPPS wage indices, as adopted on a calendar year 
basis for the OPPS.
    For CY 2013, we did not propose to make a change to our rural 
adjustment policy, and as discussed in section II.E. of this final rule 
with comment period, we are not making any changes to the rural 
adjustment policy. Therefore, the budget neutrality factor for the 
rural adjustment is 1.0000.
    For CY 2013, we are finalizing our proposal 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. We are 
calculating a CY 2013 budget neutrality adjustment factor for the 
cancer hospital payment adjustment by comparing the estimated total CY 
2013 payments under section 1833(t) of the Act including the CY 2013 
cancer hospital payment adjustment to the estimated CY 2013 total 
payments using the CY 2012 final cancer hospital payment adjustment 
under sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The 
difference in the CY 2013 estimated payments as a result of applying 
the CY 2013 cancer hospital payment adjustment relative to the CY 2012 
final cancer hospital

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payment adjustment does not have a significant impact on the budget 
neutrality calculation. Therefore, we are applying a budget neutrality 
adjustment factor of 1.0000 to the conversion factor to ensure that the 
cancer hospital payment adjustment is budget neutral.
    For this final rule with comment period, we estimate that pass-
through spending for both drugs and biologicals and devices for CY 2013 
would equal approximately $74 million, which represents 0.15 percent of 
total projected CY 2013 OPPS spending. Therefore, the conversion factor 
is also adjusted by the difference between the 0.22 percent estimate of 
pass-through spending for CY 2012 and the 0.15 percent estimate of CY 
2013 pass-through spending, resulting in an adjustment for CY 2013 of -
0.07 percent. Finally, estimated payments for outliers remain at 1.0 
percent of total OPPS payments for CY 2013.
    The OPD fee schedule increase factor of 1.8 percent for CY 2013 
(that is, the estimate of the hospital inpatient market basket 
percentage increase of 2.6 percent less the 0.7 percentage point MFP 
adjustment and less the 0.1 percentage point required under section 
1833(t)(3)(F) of the Act), the required wage index budget neutrality 
adjustment of approximately 0.9998, the cancer hospital payment 
adjustment of 1.0000, and the adjustment of -0.07 percent of projected 
OPPS spending for the difference in the pass-through spending result in 
a conversion factor for CY 2013 of $71.313.
    As we stated in the proposed rule, hospitals that fail to meet the 
reporting requirements of the Hospital OQR Program will continue to be 
subject to a further reduction of 2.0 percentage points to the OPD fee 
schedule increase factor adjustment to the conversion factor that would 
be used to calculate the OPPS payment rates made for their services as 
required by section 1833(t)(17) of the Act. For a complete discussion 
of the Hospital OQR Program requirements and the payment reduction for 
hospitals that fail to meet those requirements, we refer readers to 
section XV.F. of this final rule with comment period. To calculate the 
CY 2013 reduced market basket conversion factor for those hospitals 
that fail to meet the requirements of the Hospital OQR Program for the 
full CY 2013 payment update, we are making all other adjustments 
discussed above, but using a reduced OPD fee schedule update factor of 
-0.2 percent (that is, the OPD fee schedule increase factor of 1.8 
percent further reduced by 2.0 percentage points as required by section 
1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital 
OQR requirements). This results in a reduced conversion factor for CY 
2013 of $69.887 for those hospitals that fail to meet the Hospital OQR 
requirements (a difference of -$1.426 in the conversion factor relative 
to those hospitals that met the Hospital OQR requirements).
    In summary, for CY 2013, we are using a final conversion factor of 
$71.313 in the calculation of the national unadjusted payment rates for 
those items and services for which payment rates are calculated using 
geometric mean costs. For further discussion regarding our final policy 
to base the CY 2013 OPPS relative payment weights on geometric mean 
costs, we refer readers to section II.A.2.f. of this final rule with 
comment period. We are finalizing our proposed amendment to Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2013 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are using a reduced 
conversion factor of $69.887 in the calculation of payments for 
hospitals that fail to comply with the Hospital OQR Program 
requirements to reflect the reduction to the OPD fee schedule increase 
factor that is required by section 1833(t)(17) of the Act.

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to account for geographic wage 
differences in a portion of the OPPS payment rate, which includes the 
copayment standardized amount and is attributable to labor and labor-
related costs. This portion of the OPPS payment rate is called the OPPS 
labor-related share. This adjustment must be made in a budget neutral 
manner and 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, as we proposed, we are not 
revising this policy for the CY 2013 OPPS. We refer readers to section 
II.H. of this final rule with comment period for a description and 
example of how the wage index for a particular hospital is used to 
determine the payment for the hospital.
    As discussed in section II.A.2.c. of this 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 2013 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 the copayment amount
    As published in the original OPPS April 7, 2000 final rule with 
comment period (65 FR 18545), the OPPS has consistently adopted the 
final fiscal year IPPS wage index as the calendar year wage index for 
adjusting the OPPS standard payment amounts for labor market 
differences. Thus, the wage index that applies to a particular 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 believed that using the IPPS wage index 
as the source of an adjustment factor for the OPPS is reasonable and 
logical, given the inseparable, subordinate 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 provisions affecting the wage 
index. These provisions were discussed in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74191). As discussed in that final rule 
with comment period, section 10324 of the Affordable Care Act requires 
a ``frontier State'' wage index floor of 1.00 in certain cases. For the 
CY 2013 OPPS, as we proposed, we are implementing this provision in the 
same manner as we did for CY 2012. That is, frontier State hospitals 
will receive a wage index of 1.00 if the otherwise applicable wage 
index (including reclassification, rural floor, and rural floor budget 
neutrality) is less than 1.00. Similar to our current policy for HOPDs 
that are affiliated with multicampus hospital systems, the HOPD will 
receive a wage index based on the geographic location of the specific 
inpatient hospital with which it is associated. Therefore, if the 
associated hospital is located in a frontier State, the wage index 
adjustment applicable for the hospital will also apply for the 
affiliated HOPD. We refer readers to the FY 2011 and FY 2012 IPPS/LTCH 
PPS final rules (75 FR 50160 through 50161 and 76 FR 51586, 
respectively) and the FY 2013 IPPS/

[[Page 68286]]

LTCH PPS final rule (77 FR 53369 through 53370) for a detailed 
discussion 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.
    In addition to the changes required by the Affordable Care Act, we 
note that the final FY 2013 IPPS wage indices 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 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 2013 IPPS/LTCH PPS final rule (77 FR 53365 
through 53374) for a detailed discussion of all changes to the FY 2013 
IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS 
final rule with comment period (69 FR 65842 through 65844) and 
subsequent OPPS rules for a detailed discussion of the history of these 
wage index adjustments as applied under the OPPS.
    Section 102 of the Medicare and Medicaid Extender Act extended, 
through FY 2011, section 508 reclassifications as well as certain 
special exceptions. The most recent extension of these special wage 
indices was included in section 302 of the Temporary Payroll Tax Cut 
Continuation Act of 2011 (Pub. L. 112-78), as amended by section 3001 
of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 
112-96). These legislative provisions extended certain section 508 
reclassifications and special exception wage indices for a 6-month 
period during FY 2012, from October 1, 2011 through March 31, 2012. We 
implemented this extension in a notice (CMS-1442-N) published in the 
Federal Register on April 20, 2012 (77 FR 23722). As we did for CY 
2010, we revised wage index values for certain special exception 
hospitals from January 1, 2012 through June 30, 2012, under the OPPS, 
in order to give these hospitals the special exception wage indices 
under the OPPS for the same time period as under the IPPS. In addition, 
because the OPPS pays on a calendar year basis, the end date under the 
OPPS for certain nonsection 508 and nonspecial exception providers to 
receive special wage indices was June 30, 2012, instead of March 31, 
2012, so that these providers also received a full 6 months of payment 
under the revised wage index comparable to the IPPS. However, section 
508 reclassifications and special exceptions have not been reauthorized 
since their expiration under Pub. L. 112-96 and, therefore, are no 
longer applicable.
    For purposes of the OPPS, as we proposed, we are continuing our 
policy in CY 2013 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 Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). 
We note that, because non-IPPS hospitals cannot reclassify, they are 
eligible for the out-migration wage adjustment. Table 4J listed in the 
FY 2013 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 hospitals that will receive the 
adjustment for FY 2013. We note that, beginning with FY 2012, under the 
IPPS, an eligible hospital that waives its Lugar status in order to 
receive the out-migration adjustment has effectively waived its deemed 
urban status and, thus, is rural for all purposes under the IPPS, 
including being considered rural for the disproportionate share 
hospital (DSH) payment adjustment, effective for the fiscal year in 
which the hospital receives the out-migration adjustment. We refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53371) for a 
more detailed discussion on the Lugar redesignation waiver for the out-
migration adjustment). As we have done in prior years, we are including 
Table 4J from the FY 2013 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 2013 OPPS. Addendum L is available via the Internet on the 
CMS Web site.
    In response to concerns frequently expressed by providers and other 
relevant parties that the current wage index system does not 
effectively reflect the true variation in labor costs for a large 
cross-section of hospitals, two studies were undertaken by the 
Department. First, section 3137(b) of the Affordable Care Act required 
the Secretary to submit to Congress a report that includes a plan to 
comprehensively reform the Medicare wage index applied under section 
1886(d) of the Act. In developing the plan, the Secretary was directed 
to take into consideration the goals for reforming the wage index that 
were set forth by the Medicare Payment Advisory Commission (MedPAC) in 
its June 2007 report entitled ``Report to Congress: Promoting Greater 
Efficiency in Medicare'' and to ``consult with relevant affected 
parties.'' Second, the Secretary commissioned the Institute of Medicine 
(IOM) to ``evaluate hospital and physician geographic payment 
adjustments, the validity of the adjustment factors, measures and 
methodologies used in those factors, and sources of data used in those 
factors.'' Reports on both of these studies for geographic adjustment 
to hospital payments recently have been released. For summaries of the 
studies, their findings, and recommendations on reforming the wage 
index system, we refer readers to section IX.B. of the preamble of the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53660 through 53664).
    Comment: Several commenters expressed disappointment that CMS did 
not set forth a proposal in the CY 2013 OPPS/ASC proposed rule to begin 
reform of the wage index process and simply proposed to continue 
adopting the IPPS fiscal year wage indexes. Several commenters 
encouraged CMS to expedite wage index reform to create a more equitable 
system that adequately pays hospitals for care provided to Medicare 
beneficiaries. A few commenters supported the continuation of the 
current wage index system; one commenter suggested that, as more 
comprehensive reforms continue to be developed, they encompass the 
goals of minimizing volatility, discouraging manipulation of the 
system, and limiting adverse effects on high wage area markets.
    Response: In the CY 2012 OPPS/ASC proposed rule, we solicited 
comment on possible alternative wage index systems under the OPPS (76 
FR 42212 through 42213). However, in the CY 2012 OPPS/ASC final rule 
with comment period, we stated our belief that maintaining the current 
policy of adopting the fiscal year IPPS wage index and adopting it in 
the OPPS on a calendar year basis would continue to be appropriate, 
given our longstanding use of the fiscal year IPPS wage index in the 
OPPS on a calendar year basis (76 FR 74192) and the broader wage index 
reform currently under development and consideration (76 FR 74193). In 
the CY 2013 OPPS/ASC proposed rule, we proposed that continuing to use 
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 (77 FR 45105). As discussed above, 
the FY 2013 IPPS/LTCH PPS final rule contains a discussion of a MedPAC 
report and an IOM study focused on potential models for wage

[[Page 68287]]

index reform (77 FR 53660 through 53664).
    After consideration of the public comments we received, we are 
finalizing our policy to adopt the FY 2013 IPPS wage index for the CY 
2013 OPPS in its entirety, including the rural floor, geographic 
reclassifications, and all other wage index adjustments. As stated 
earlier in this section, we continue to believe that using the IPPS 
wage index as the source of an adjustment factor for the OPPS is 
reasonable and logical, given the inseparable, subordinate status of 
the HOPD within the hospital overall. Therefore, we are using the final 
FY 2013 IPPS wage indices for calculating OPPS payments in CY 2013. 
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 2013 IPPS wage 
indices referenced in this discussion of the wage index. We refer 
readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the final FY 2013 
IPPS wage index tables.

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. 
Medicare contractors cannot calculate a CCR for some hospitals because 
there is no cost report available. For these hospitals, CMS uses the 
statewide average default CCRs to determine the payments mentioned 
above until a hospital's Medicare contractor is able to calculate the 
hospital's actual CCR from its most recently submitted Medicare cost 
report. These hospitals include, but are not limited to, hospitals that 
are new, have not accepted assignment of an existing hospital's 
provider agreement, and have not yet submitted a cost report. CMS also 
uses the statewide average default CCRs to determine payments for 
hospitals that appear to have a biased CCR (that is, the CCR falls 
outside the predetermined ceiling threshold for a valid CCR) or for 
hospitals 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). We discuss our policy for using default 
CCRs, including setting the ceiling threshold for a valid CCR, in the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 
68599) in the context of our adoption of an outlier reconciliation 
policy for cost reports beginning on or after January 1, 2009.
    For CY 2013, 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 2013 OPPS relative payment 
weights. Table 12 published in the proposed rule (77 FR 45106) listed 
the proposed CY 2013 default urban and rural CCRs by State and compared 
them to last year's 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.
    Comment: One commenter expressed concern that Florida has the 
lowest CCR in the United States for both rural and urban areas. The 
commenter suggested that the statewide average default CCRs for Florida 
are ``significantly skewed'' due to cost report information submitted 
by hospitals in the Miami area and recommended that CMS evaluate the 
data used to calculate the CCRs in order to validate this assumption.
    Response: As detailed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66680 through 66682), we use only valid CCRs to 
calculate the default ratios. That is, we remove the CCRs for all-
inclusive hospitals and CAHs, we identify and remove any obvious error 
CCRs, and we trim any outliers. The Florida statewide average default 
CCRs have been very stable over the last several years. Contrary to the 
commenter's belief that we use statewide average default CCRs to 
estimate the costs (from charges on claims) that are used to calculate 
the OPPS relative weights, Medicare contractors use statewide average 
default CCRs to determine outlier payments, payments for pass-through 
devices, and monthly interim transitional corridor payments for 
hospitals with no available cost report.
    After consideration of the public comment we received on our CY 
2013 proposal, we are finalizing our proposal 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 CY 2013 OPPS relative weights. We used this 
methodology to calculate the statewide average default CCRs listed in 
Table 8 below.
    For this CY 2013 OPPS/ASC final rule with comment period, 
approximately 62 percent of the submitted cost reports utilized in the 
default ratio calculations represented data for cost reporting periods 
ending in CY 2010, and approximately 38 percent were for cost reporting 
periods ending in CY 2009. 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 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 2012 and CY 2013 are modest and the few 
significant changes are associated with areas that have a small number 
of hospitals.
    Table 8 below lists the finalized statewide average default CCRs 
for OPPS services furnished on or after January 1, 2013.
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BILLING CODE 4120-01-C

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes
    The OPPS was implemented in CY 2000 under the Balanced Budget Act 
of 1997 (BBA) (Pub. L. 105-33). The Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made 
major changes in the hospital OPPS, including adding a new paragraph 
(7) to section 1833(t) of the Act, effective as if included in the 
enactment of the BBA. Section 1833(t)(7) of the Act sets forth that 
every provider was eligible to receive an additional payment adjustment 
(called either transitional corridor payments or transitional 
outpatient payments (TOPs)) if the payments it received for covered OPD 
services under the OPPS were less than the payments it would have 
received for the same services under the prior reasonable cost-based 
system (referred to as the pre-BBA amount), and that the TOPs were 
temporary payments for most providers and intended to ease their 
transition from the prior reasonable cost-based payment system to the 
OPPS system. There are two types

[[Page 68291]]

of hospitals excepted from the policy described above, cancer hospitals 
and children's hospitals. Specifically, such a hospital could receive 
TOPs to the extent its PPS amount was less than its pre-BBA amount in 
the applicable year. Section 1833(t)(7)(D)(i) of the Act originally 
provided for TOPs to all hospitals for covered OPD services furnished 
before January 1, 2004. However, section 411 of Public Law 108-173 (the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003) 
amended section 1833(t)(7)(D)(i) of the Act to extend these payments 
through December 31, 2005, for rural hospitals with 100 or fewer beds. 
Section 411 also extended the TOPs to sole community hospitals (SCHs) 
located in rural areas for services furnished during the period that 
began with the provider's first cost reporting period beginning on or 
after January 1, 2004, and ending on December 31, 2005. Accordingly, 
the authority for making TOPs under section 1833(t)(7)(D)(i) of the 
Act, as amended by section 411 of Public Law 108-173, for rural 
hospitals having 100 or fewer beds and SCHs located in rural areas 
expired on December 31, 2005.
    Section 5105 of Public Law 109-171 (the Deficit Reduction Act of 
2005) extended the TOPs for covered OPD services furnished on or after 
January 1, 2006, and before January 1, 2009, for rural hospitals having 
100 or fewer beds that are not SCHs. Section 5105 of Public Law 109-171 
also reduced the TOPs to rural hospitals from 100 percent of the 
difference between the provider's OPPS payments and the pre-BBA amount. 
This provision provided that, in cases in which the OPPS payment was 
less than the provider's pre-BBA amount, the amount of payment would be 
increased by 95 percent of the amount of the difference between the two 
amounts for CY 2006, by 90 percent of the amount of that difference for 
CY 2007, and by 85 percent of the amount of that difference for CY 
2008.
    For CY 2006, we implemented section 5105 of Public Law 109-171 
through Transmittal 877, issued on February 24, 2006. In Transmittal 
877, we did not specifically address whether TOPs applied to essential 
access community hospitals (EACHs), which are considered to be SCHs 
under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, by law, 
EACHs are treated as SCHs. In the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 68010), we stated that EACHs were not eligible 
for TOPs under Public Law 109-171. However, we stated they were 
eligible for the adjustment for rural SCHs authorized under section 411 
of Public Law 108-173. In the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68010 and 68228), we updated Sec.  419.70(d) of our 
regulations to reflect the requirements of Public Law 109-171.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated 
that, effective for services provided on or after January 1, 2009, 
rural hospitals with 100 or fewer beds that are not SCHs would no 
longer be eligible for TOPs, in accordance with section 5105 of Public 
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 
proposed rule, section 147 of Public Law 110-275 (the Medicare 
Improvements for Patients and Providers Act of 2008) amended section 
1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural 
hospitals with 100 beds or fewer for 1 year, for services provided 
before January 1, 2010. Section 147 of Public Law 110-275 also extended 
TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD 
services provided on or after January 1, 2009, and before January 1, 
2010. In accordance with section 147 of Public Law 110-275, when the 
OPPS payment is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payment amounts for CY 2009.
    For CY 2009, we revised our regulations at Sec. Sec.  419.70(d)(2) 
and (d)(4) and added paragraph (d)(5) to incorporate the provisions of 
section 147 of Public Law 110-275. In addition, we made other technical 
changes to Sec.  419.70(d)(2) to more precisely capture our existing 
policy and to correct an inaccurate cross-reference. We also made 
technical corrections to the cross-references in paragraphs (e), (g), 
and (i) of Sec.  419.70.
    For CY 2010, we made a technical correction to the heading of Sec.  
419.70(d)(5) to correctly identify the policy as described in the 
subsequent regulation text. The paragraph heading now indicates that 
the adjustment applies to small SCHs, rather than to rural SCHs.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60425), we stated that, effective for services provided on or after 
January 1, 2010, rural hospitals and SCHs (including EACHs) having 100 
or fewer beds would no longer be eligible for TOPs, in accordance with 
section 147 of Public Law 110-275. However, subsequent to the issuance 
of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) 
of the Affordable Care Act (Pub. L. 111-148) amended section 
1833(t)(7)(D)(i)(III) of the Act by extending the period of TOPs to 
rural hospitals that are not SCHs with 100 beds or fewer for 1 year, 
for services provided before January 1, 2011. Section 3121(a) of the 
Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act 
and extended the period of TOPs to SCHs (including EACHs) for 1 year, 
for services provided before January 1, 2011, and section 3121(b) of 
the Affordable Care Act removed the 100-bed limitation applicable to 
such SCHs for covered OPD services furnished on or after January 1, 
2010, and before January 1, 2011. In accordance with section 3121 of 
the Affordable Care Act, when the OPPS payment is less than the 
provider's pre-BBA amount, the amount of payment is increased by 85 
percent of the amount of the difference between the two payment amounts 
for CY 2010. Accordingly, in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71882), we updated Sec.  419.70(d) of the 
regulations to reflect the self-implementing TOPs extensions and 
amendments described in section 3121 of the Affordable Care Act.
    Section 108 of the Medicare and Medicaid Extenders Act of 2010 
(MMEA) (Pub. L. 111-309) extended for 1 year the hold harmless 
provision for a rural hospital with 100 or fewer beds that is not an 
SCH (as defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, 
for such a hospital, for services furnished before January 1, 2012, 
when the PPS amount is less than the provider's pre-BBA amount, the 
amount of payment to the hospital is increased by 85 percent of the 
amount of the difference between the two payments. In addition, section 
108 of the MMEA also extended for 1 year the hold harmless provision 
for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act 
(including EACHs) and the removal of the 100-bed limit applicable to 
such SCHs for covered OPD services furnished on or after January 1, 
2010, and before January 1, 2012. Therefore, for such hospitals, for 
services furnished before January 1, 2012, when the PPS amount is less 
than the provider's pre-BBA amount, the amount of payment to the 
hospital is increased by 85 percent of the amount of the difference 
between the two payments. Effective for services provided on or after 
January 1, 2012, a rural hospital with 100 or fewer beds that is not an 
SCH and an SCH (including EACHs) are no longer eligible for TOPs, in 
accordance with section 108 of the MMEA. In the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74199), we revised our

[[Page 68292]]

regulations Sec.  419.70(d) to conform the regulation text to the self-
implementing provisions of section 108 of the MMEA described above.
    Subsequent to the issuance of the CY 2012 OPPS/ASC final rule with 
comment period, section 308 of the Temporary Payroll Tax Cut 
Continuation Act of CY 2011 (Pub. L. 112-78), as amended by section 
3002 of the Middle Class Tax Relief and Jobs Creation Act (Pub. L. 112-
96), extended through December 31, 2012, the hold harmless provision 
for a rural hospital with 100 or fewer beds that is not an SCH (as 
defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, for such 
a hospital, for services furnished before January 1, 2013, when the PPS 
amount is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payments.
    Section 308 of Public Law 112-78 also extended through February 29, 
2012, the hold harmless provision for an SCH (as defined in section 
1886(d)(5)(D)(iii) of the Act), including an EACH, without the bed size 
limitation. Therefore, for such hospitals, for services furnished 
before March 1, 2012, when the PPS amount is less than the provider's 
pre-BBA amount, the amount of payment is increased by 85 percent of the 
amount of the difference between the two payments. However, section 
3002 of Public Law 112-96 extended through December 31, 2012, the hold 
harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) 
of the Act), including an EACH, that has no more than 100 beds. 
Therefore, for such hospitals, for services furnished before January 1, 
2013, when the PPS amount is less than the provider's pre-BBA amount, 
the amount of payment is increased by 85 percent of the amount of the 
difference between the two payments. Accordingly, as we proposed in the 
CY 2013 OPPS/ASC proposed rule (77 FR 45108), we are revising Sec.  
419.70(d) of the regulations to reflect the TOPs extensions and 
amendments described in section 308 of Public Law 112-78 and section 
3002 of Public Law 112-96.
    Effective for services provided on or after March 1, 2012, SCHs 
(including EACHs) with greater than 100 beds are no longer eligible for 
TOPs, in accordance with section 308 of Public Law 112-78. Effective 
for services provided on or after January 1, 2013, a rural hospital 
with 100 or fewer beds that is not an SCH and an SCH (including an 
EACH) are no longer eligible for TOPs, in accordance with section 3002 
of Public Law 112-96.
2. 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 Public Law 108-173. Section 411 gave 
the Secretary the authority to make an adjustment to OPPS payments for 
rural hospitals, effective January 1, 2006, if justified by a study of 
the difference in costs by APC between hospitals in rural 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 CY 2007, we became aware that we did not specifically address 
whether the adjustment applies to EACHs, which are considered to be 
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the 
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010 and 68227), for purposes of 
receiving this rural adjustment, we revised Sec.  419.43(g) to clarify 
that EACHs are also eligible to receive the rural SCH adjustment, 
assuming these entities otherwise meet the rural adjustment criteria. 
Currently, three hospitals are classified as EACHs, and as of CY 1998, 
under section 4201(c) of Public Law 105-33, a hospital can no longer 
become newly classified as an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating 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 2012. 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.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45109), we proposed to 
continue for CY 2013 our policy of a budget neutral 7.1 percent payment 
adjustment for rural SCHs, including EACHs, for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, devices paid under the pass-through payment policy, and 
items paid at charges reduced to costs. We indicated in the proposed 
rule that we intend to reassess the 7.1 percent adjustment in the 
future by examining differences between urban hospitals' costs and 
rural hospitals' costs using updated claims data, cost reports, and 
provider information.
    Comment: Several commenters expressed support for the proposed 
continuation of the 7.1 percent rural SCH adjustment. A few commenters 
also suggested that the rural SCH adjustment also apply to urban SCHs. 
One commenter suggested that the 7.1 percent payment adjustment also be 
applied to MDHs, given that their inpatient classification was set to 
expire in October 2012.
    Response: We agree that it is appropriate to continue the 7.1 
percent adjustment for rural SCHs (including EACHs) as we proposed for 
CY 2013. We note that the rural SCH adjustment was developed under the 
authority described in section 1833(t)(13) of the Act, which applies 
specifically to rural hospitals. Although commenters have suggested 
that the rural SCH adjustment also apply to urban SCHs, the study 
authorized under section 1833(t)(13)(A) of the Act specifically focuses 
on APC costs incurred by rural hospitals, as they exceed those costs 
incurred by hospitals in urban areas. Moreover, the Secretary's 
authority to make an adjustment based on that study was with respect to 
a determination that costs incurred by rural hospitals exceed those 
costs incurred by urban hospitals and to reflect those higher costs. 
Therefore, the authority to make any such adjustment was limited to 
reflect the higher costs incurred by such applicable rural hospitals. 
Although the MDH classification is currently set to expire, we note 
that the definition of a MDH at 1886(d)(5)(G)(iv)(III) of the Act 
specifically excludes sole community hospitals, to which the rural 
adjustment applies. Further, as we discussed in the CY 2006 OPPS final 
rule, our analysis of urban SCHs as well as rural MDHs did not support 
the application of a

[[Page 68293]]

rural adjustment (70 FR 68560 through 68561).
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to apply the 7.1 
percent payment adjustment to rural SCHs, including EACHs, for all 
services and procedures paid under the OPPS in CY 2013, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs. We 
continue to believe that the adjustment is appropriate for application 
in CY 2013.

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), Medicare has paid cancer hospitals 
identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals) 
under the OPPS for covered outpatient hospital services. There are 11 
cancer hospitals that meet the classification criteria in section 
1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted 
from payment under the IPPS. With the Medicare, Medicaid and SCHIP 
Balanced Budget Refinement Act of 1999, Congress created section 
1833(t)(7) of the Act, ``Transitional Adjustment to Limit Decline in 
Payment,'' to serve as a permanent payment floor by limiting cancer 
hospitals' potential losses under the OPPS. Through 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 TOPs to ensure that they do not receive a payment that 
is lower under the OPPS than the payment they would have received 
before implementation of the OPPS, as set forth in section 
1833(t)(7)(F) of the Act. The ``pre-BBA'' payment amount is an amount 
equal to the product of the reasonable cost of the hospital for covered 
outpatient services for the portions of the hospital's cost reporting 
period (or periods) occurring in the current year and the base payment-
to-cost ratio (PCR) for the hospital. The ``pre-BBA'' amount, including 
the determination of the base PCR, are defined at 42 CFR 419.70(f). 
TOPs are calculated on Worksheet E, Part B, of the Hospital and 
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act 
exempts TOPs from budget neutrality calculations.
    Section 3138 of the Affordable Care Act 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 the costs incurred by other 
hospitals furnishing services under section 1833(t) of the Act, as 
determined appropriate by the Secretary. In addition, section 3138 of 
the Affordable Care Act requires the Secretary to take into 
consideration the cost of drugs and biologicals incurred by such 
hospitals when studying cancer hospital costliness. Further, section 
3138 of the Affordable Care Act provides that if the Secretary 
determines that cancer hospitals' costs with respect to APC groups are 
determined to be greater than the costs of other hospitals furnishing 
services under section 1833(t) of the Act, the Secretary shall provide 
an appropriate adjustment under section 1833(t)(2)(E) of the Act to 
reflect these higher costs. After conducting the study required by 
section 3138, we determined in 2012 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 our findings that costs incurred by cancer hospitals were 
greater than the costs incurred by other OPPS hospitals, we finalized a 
policy to provide a payment adjustment to the 11 specified cancer 
hospitals that reflects the 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 each of the 11 cancer hospitals so that each cancer 
hospital's final PCR for services provided in a given calendar year is 
equal to the weighted average PCR (which we refer to as the ``target 
PCR'') for other hospitals paid under the OPPS. The target PCR is set 
in advance of the calendar year and is calculated using the most recent 
submitted or settled cost report data that are available at the time of 
final rulemaking for the calendar year. The amount of the payment 
adjustment is 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 CY 2012, the target PCR for purposes of the 
cancer hospital payment adjustment is 0.91.
2. Payment Adjustment for Certain Cancer Hospitals for CY 2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to 
continue our policy to provide additional payments to cancer hospitals 
so that each cancer hospital's final PCR is equal to the weighted 
average PCR (or ``target PCR'') for the other OPPS hospitals using the 
most recent submitted or settled cost report data that were available 
at the time of the proposed rule. To calculate the proposed CY 2013 
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 2013 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 
estimated that, on average, the OPPS payments to other hospitals 
furnishing services under the OPPS were approximately 91 percent of 
reasonable cost (weighted average PCR of 0.91). Based on these data, we 
proposed a target PCR of 0.91 that would be used to determine the CY 
2013 cancer hospital payment adjustment that would be paid at cost 
report settlement. 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 proposed target PCR equal to 0.91 for each cancer hospital.
    Comment: Some commenters suggested that the PCR is only one 
component of the adjustment needed to account for the differences in 
providing cancer care. The commenters suggested that CMS utilize a 
methodology that they stated would ensure that the 11 cancer hospitals' 
losses (on a per unit PCR basis) equal the losses (on a per unit PCR 
basis) of the other PPS hospitals. The commenters provided details of 
this ``equivalent loss per unit'' methodology which they indicate would 
result in a target PCR equal to 0.94 for CY 2013.
    Response: Section 3138 of the Affordable Care Act provides that if 
the Secretary determines under section 1833(t)(18)(A) of the Act that 
costs

[[Page 68294]]

incurred by cancer hospitals exceed those costs of other hospitals 
furnishing services under section 1833(t), the Secretary shall provide 
for an appropriate adjustment under section 1833(t)(2)(E) of the Act, 
to reflect the higher costs. Because the statute requires that we 
provide a cancer hospital payment adjustment to reflect the higher 
costs, not losses, incurred at cancer hospitals, we believe that it 
would be inappropriate to revise our cancer hospital payment adjustment 
policy so that the target PCR is calculated based on the cancer 
hospitals' losses per unit PCR compared to the other OPPS hospitals' 
losses per unit PCR.
    Comment: Commenters stated that CMS should not recalculate the 
target PCR annually because the cancer hospitals require payment 
stability and predictability in order to provide services to Medicare 
beneficiaries.
    Response: We believe that annual recalculation of the target PCR 
will provide a timely assessment of the changes in OPPS payments 
relative to costs and, therefore, will enable us to provide payment 
adjustments to cancer hospitals that are accurate and equitable. In 
addition, it is unlikely that the target PCR (the weighted average PCR 
for the other OPPS hospitals) would fluctuate significantly from year 
to year. The target PCR is 0.91 for purposes of the CY 2012 cancer 
hospital payment adjustment and remained at 0.91 when recalculated for 
the CY 2013 OPPS/ASC proposed rule and this final rule with comment 
period. In addition to the apparent stability of the target PCR, 
because the target PCR is set in advance of each calendar year, cancer 
hospitals can easily predict the amount of their hospital-specific 
payment adjustment associated with the target PCR for the following 
year and budget accordingly.
    Comment: Commenters stated that CMS must make the cancer hospital 
payment adjustment effective for services furnished on or after January 
1, 2011, in order to comply with section 3138 of the Affordable Care 
Act.
    Response: As explained in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71886 through 71887), we did not finalize the 
proposed cancer hospital adjustment for CY 2011 for a variety of 
reasons, including, ultimately, a determination that further study and 
deliberation of the issues were necessary. The obligation to provide a 
cancer hospital payment adjustment is triggered only insofar as the 
Secretary determines under section 1833(t)(18)(A) of the Act that costs 
incurred by hospitals described in section 1886(d)(1)(B)(v) of the Act 
exceed those costs incurred by other hospitals furnishing services 
under that subsection. Several commenters on the CY 2011 OPPS/ASC 
proposed rule raised concerns about the agency's study of costliness 
conducted under section 1833(t)(18)(A) of the Act; for example, one 
commenter suggested that the CMS analysis was inadequate to conclude 
that costs are higher in cancer hospitals and that an adjustment was 
warranted. Given the uncertainty surrounding these issues, public 
comments arguing against implementing a cancer hospital payment 
adjustment for CY 2011, and our determination that further study and 
deliberation were necessary, we decided to not finalize a cancer 
hospital payment adjustment for CY 2011. We note that, because the 
cancer hospital payment adjustment is budget neutral, the lack of a 
cancer hospital payment adjustment for CY 2011 also meant that other 
payments were not reduced for CY 2011 to offset the increased payments 
from the adjustment.
    Comment: One commenter noted that, although CMS indicated the 
estimated percent by which each cancer hospital's OPPS payments would 
be increased under the cancer hospital payment adjustment policy in the 
CY 2012 OPPS/ASC proposed and final rules, CMS did not include this 
information in the CY 2013 OPPS/ASC proposed rule. The commenter 
requested that CMS include this information in the CY 2013 OPPS/ASC 
final rule with comment period.
    Response: We agree with the commenter that it would be informative 
to provide the estimated percentage increase in CY 2013 OPPS payments 
to each cancer hospital due to the cancer hospital payment adjustment 
policy. Therefore, we are including that information in the last column 
of Table 9 below.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue our policy to provide additional 
payments to cancer hospitals so that each cancer hospital's final PCR 
is equal to the weighted average PCR for the other OPPS hospitals using 
the most recent submitted or settled cost report data that were 
available at the time of this final rule with comment period. To 
calculate the final CY 2013 target PCR, we used the same extract of 
cost report data from HCRIS, as discussed in section II.A. of this 
final rule with comment period, used to estimate costs for the CY 2013 
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 2011 claims data that we used to model 
the impact of the final CY 2013 APC relative weights (4,026 hospitals) 
because it is appropriate to use the same set of hospitals that we are 
using to calibrate the modeled CY 2013 OPPS. The cost report data for 
the hospitals in this dataset were from cost report periods with fiscal 
year ends ranging from 2010 to 2011. We then removed the cost report 
data of the 48 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 182 hospitals because the 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 an analytic file of 3,796 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 91 percent of reasonable cost 
(weighted average PCR of 0.91). Based on these data, we will use a 
target PCR of 0.91 to determine the CY 2013 cancer hospital payment 
adjustment to be paid at cost report settlement. Therefore, the payment 
amount associated with the cancer hospital payment adjustment to be 
determined at cost report settlement will be the additional payment 
needed to result in a PCR equal to 0.91 for each cancer hospital.
    Table 9 below indicates the estimated percentage increase in OPPS 
payments to each cancer hospital for CY 2013 due to the cancer hospital 
payment adjustment policy. The actual amount of the CY 2013 cancer 
hospital payment adjustment for each cancer hospital will be determined 
at cost report settlement and will depend on each hospital's CY 2013 
payments and costs. 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 will be assessed 
as usual after all payments, including the cancer hospital payment 
adjustment, have been made for a cost reporting period.

[[Page 68295]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.019

G. Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. In CY 2011, the outlier threshold was determined to be 
met when the cost of furnishing a service or procedure by a hospital 
exceeds 1.75 times the APC payment amount and exceeds the APC payment 
rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar 
threshold in CY 2005, in addition to the traditional multiple 
threshold, in order to better target outlier payments to those high-
cost and complex procedures where a very costly service could present a 
hospital with significant financial loss. If the cost of a service 
meets both of these conditions, the multiple threshold and the fixed-
dollar threshold, the outlier payment is calculated as 50 percent of 
the amount by which the cost of furnishing the service exceeds 1.75 
times the APC payment rate. Before CY 2009, this outlier payment had 
historically been considered a final payment by longstanding OPPS 
policy. However, we implemented a reconciliation process similar to the 
IPPS outlier reconciliation process for cost reports with cost 
reporting periods beginning on or after January 1, 2009, in our CY 2009 
OPPS/ASC final rule with comment period (73 FR 68594 through 68599).
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. Our current estimate of 
total outlier payments as a percent of total CY 2011 OPPS payment, 
using available CY 2011 claims and the revised OPPS expenditure 
estimate for the 2012 Trustee's Report, is approximately 1.2 percent of 
the total aggregated OPPS payments. Therefore, for CY 2011, we estimate 
that we paid 0.2 percent above the CY 2011 outlier target of 1.0 
percent of total aggregated OPPS payments.
    As explained in the CY 2012 OPPS/ASC final rule with comment period 
(77 FR 74207 through 74209), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2012. The outlier thresholds were set so 
that estimated CY 2012 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2011 claims data and CY 2012 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2012 will be approximately 
0.9 percent of the total CY 2012 OPPS payments. The difference between 
1.0 percent and 0.9 percent is reflected in the regulatory impact 
analysis in section XXII. of this final rule with comment period. We 
note that we provide estimated CY 2013 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. Proposed Outlier Calculation
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to 
continue for CY 2013 our policy of estimating outlier payments to be 
1.0 percent of the estimated aggregate total payments under the OPPS 
for outlier payments. We proposed that a portion of that 1.0 percent, 
an amount equal to 0.12 percent of outlier payments (or 0.0012 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

[[Page 68296]]

threshold as a proportion of total estimated OPPS outlier payments. As 
discussed in section VIII.C. of the CY 2013 OPPS/ASC proposed rule, for 
CMHCs, we proposed to continue our longstanding policy that if a CMHC's 
cost for partial hospitalization services, paid under either APC 0172 
(Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 
(Level II Partial Hospitalization (4 or more services) for CMHCs), 
exceeds 3.40 times the payment rate for APC 0173, the outlier payment 
would be calculated as 50 percent of the amount by which the cost 
exceeds 3.40 times the APC 0173 payment rate. For further discussion of 
CMHC outlier payments, we refer readers to section VIII.C. of this 
final rule with comment period.
    To ensure that the estimated CY 2013 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 the cost of furnishing a 
service or procedure by a hospital exceeds 1.75 times the APC payment 
amount and exceeds the APC payment rate plus a $2,400 fixed-dollar 
threshold.
    We proposed to calculate the fixed-dollar threshold using largely 
the same methodology as we did in CYs 2011 and 2012 (75 FR 71887 
through 71889 and 76 FR 74207 through 74209). For purposes of 
estimating outlier payments for the proposed rule, we used the 
hospital-specific overall ancillary CCRs available in the April 2012 
update to the Outpatient Provider-Specific File (OPSF). The OPSF 
contains provider-specific data, such as the most current CCR, which 
are maintained by the Medicare contractors and used by the OPPS Pricer 
to pay claims. The claims that we use to model each OPPS update lag by 
2 years.
    In order to estimate the CY 2013 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2011 claims using the 
same inflation factor of 1.1406 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2013 IPPS/LTCH PPS proposed 
rule (77 FR 28142). We used an inflation factor of 1.0680 to estimate 
CY 2012 charges from the CY 2011 charges reported on CY 2011 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). 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 in the CY 2013 OPPS/ASC 
proposed rule to apply the same CCR inflation adjustment factor that we 
applied for the FY 2013 IPPS outlier calculation to the CCRs used to 
simulate the CY 2013 OPPS outlier payments to determine the fixed-
dollar threshold. Specifically, for CY 2013, we proposed to apply an 
adjustment factor of 0.9790 to the CCRs that were in the April 2012 
OPSF to trend them forward from CY 2012 to CY 2013. The methodology for 
calculating this proposed adjustment was discussed in the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 28142 through 28144). We note that, due 
to the issue described in the IPPS proposed rule correction notice 
published on June 11, 2012, the operating and capital CCR inflation 
factors were reversed (77 FR 34326). In estimating the proposed CY 2013 
OPPS fixed-dollar outlier threshold, we applied the corrected CCR 
inflation factor.
    Therefore, to model hospital outlier payments for the proposed 
rule, we applied the overall CCRs from the April 2012 OPSF file after 
adjustment (using the proposed CCR inflation adjustment factor of 
0.9790 to approximate CY 2013 CCRs) to charges on CY 2011 claims that 
were adjusted (using the charge inflation factor of 1.1406 to 
approximate CY 2013 charges). We simulated aggregated CY 2013 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 2013 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $2,400, combined 
with the multiple threshold of 1.75 times the APC payment rate, would 
allocate 1.0 percent of aggregated total OPPS payments to outlier 
payments. We proposed to continue to make an outlier payment that 
equals 50 percent of the amount by which the cost of furnishing the 
service exceeds 1.75 times the APC payment amount when both the 1.75 
multiple threshold and the proposed fixed-dollar threshold of $2,400 
were met. For CMHCs, we proposed that, if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 or APC 0173, 
exceeds 3.40 times the payment rate for APC 0173, the outlier payment 
would be calculated as 50 percent of the amount by which the cost 
exceeds 3.40 times the APC 0173 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
1833(t)(17)(B) of the Act, incur a 2.0 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 XV. of this final rule with 
comment period.
    Comment: Several commenters expressed concern with respect to the 
relative increase in the proposed CY 2013 OPPS fixed-dollar outlier 
threshold of $2,400. The commenters believed that the increase in the 
fixed-dollar threshold would bring about a drastic reduction in outlier 
payments as well as the ability to furnish services to beneficiaries. 
Commenters also suggested CMS to reconsider the fixed-dollar threshold 
value, confirm that the data used to develop the threshold were 
accurate, and provide data to support the increase in the threshold. 
Commenters also suggested alternative fixed-dollar threshold setting 
methodologies such as a 3-year transition to the threshold or a 
calculation based on prior year estimated percent OPPS outlier 
spending.
    Response: As indicated above, 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

[[Page 68297]]

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 commenters have expressed concern based on 
the assumption that OPPS outlier payments made under an increased 
fixed-dollar threshold would decrease, we note that the threshold may 
increase or decrease from year to year, to maintain the 1.0 percent 
outlier spending target. While we described issues related to the 
charge and CCR inflation factors in the CY 2013 OPPS/ASC proposed rule, 
there were no other errors in the methodology (77 FR 45111). The 
methodology for determining the OPPS fixed-dollar threshold is 
described in this section, the LDS files used to model the threshold 
that are available for public purchase, and a detailed claims 
accounting document that is available online, which all support the 
determination of the fixed-dollar threshold. We do not believe that a 
transitional methodology to determine the outlier threshold or a 
methodology that takes into account prior spending is appropriate 
because the relationship between a hospital's costs and the APC payment 
rates changes each year.
3. Final Outlier Calculation
    Consistent with historical practice, we use updated data for this 
final rule with comment period for our outlier calculation. For CY 
2013, we are applying the overall CCRs from the July 2012 OPSF with a 
CCR adjustment factor of 0.9880 to approximate CY 2013 CCRs to charges 
on the final CY 2011 claims that were adjusted to approximate CY 2013 
charges (using the final 2-year charge inflation factor of 1.0894). 
These are the same CCR adjustment and charge inflation factors that 
were used to set the IPPS fixed-dollar threshold for the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53695 through 53696). We simulated 
aggregated CY 2013 hospital outlier payments using these costs for 
several different fixed-dollar thresholds, holding the 1.75 multiple 
threshold constant and assuming that outlier payment would continue to 
be made at 50 percent of the amount by which the cost of furnishing the 
service would exceed 1.75 times the APC payment amount, until the total 
outlier payments equaled 1.0 percent of aggregated estimated total CY 
2013 OPPS payments. We estimate that a fixed-dollar threshold of 
$2,025, combined with the multiple threshold of 1.75 times the APC 
payment rate, will allocate 1.0 percent of estimated aggregated total 
OPPS payments to outlier payments.
    In summary, for CY 2013, we will continue to make an outlier 
payment that equals 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount when 
both the 1.75 multiple threshold and the final fixed-dollar threshold 
of $2,025 are met. For CMHCs, if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 or APC 0173, 
exceeds 3.40 times the payment rate for APC 0173, the outlier payment 
is calculated as 50 percent of the amount by which the cost exceeds 
3.40 times the APC 0173 payment rate. We estimate that this threshold 
will allocate 0.12 percent of outlier payments to CMHCs for PHP outlier 
payments.
4. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 
68599), we adopted as final policy a process to reconcile hospital or 
CMHC outlier payments at cost report settlement for services furnished 
during cost reporting periods beginning in CY 2009. OPPS outlier 
reconciliation more fully ensures accurate outlier payments for those 
facilities that have CCRs that fluctuate significantly relative to the 
CCRs of other facilities, and that receive a significant amount of 
outlier payments (73 FR 68598). As under the IPPS, we do not adjust the 
fixed-dollar threshold or the amount of total OPPS payments set aside 
for outlier payments for reconciliation activity because such action 
would be contrary to the prospective nature of the system. Our outlier 
threshold calculation assumes that overall ancillary CCRs accurately 
estimate hospital costs based on the information available to us at the 
time we set the prospective fixed-dollar outlier threshold. For these 
reasons, and as we have previously discussed in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68596), and as we proposed for CY 
2013, we are not incorporating any assumptions about the effects of 
reconciliation into our calculation of the OPPS fixed-dollar outlier 
threshold in this final rule with comment period.

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 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 2013 scaled weight for the 
APC by the CY 2013 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 XV. of this final rule with 
comment period.
    We demonstrate in the steps below how to determine the APC payments 
that will be made in a calendar year under the OPPS to a hospital 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: ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as defined 
in Addendum D1 to this final rule with comment period), in a 
circumstance in 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,

[[Page 68298]]

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 did not receive any public comments on the proposed calculation 
of an adjusted Medicare payment. Therefore, we are finalizing the 
calculation of an adjusted Medicare payment, where appropriate, in the 
manner described as follows. 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 2013 OPPS fee schedule increase factor of 1.8 
percent.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
national unadjusted payment rate. Since the initial implementation of 
the OPPS, we have used 60 percent to represent our estimate of that 
portion of costs attributable, on average, to labor. We refer readers 
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 
through 18497) for a detailed discussion of how we derived this 
percentage. We confirmed that this labor-related share for hospital 
outpatient services is appropriate during our regression analysis for 
the payment adjustment for rural hospitals in the CY 2006 OPPS final 
rule with comment period (70 FR 68553).
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.
    X is the labor-related portion of the national unadjusted payment 
rate.

X = .60 * (national unadjusted payment rate)
    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. The wage index values assigned to each area reflect the 
geographic statistical areas (which are based upon OMB standards) to 
which hospitals are assigned for FY 2013 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 Public Law 98-21. We note that the 
reclassifications of hospitals under section 508 of Public Law 108-173, 
as extended by sections 3137 and 10317 of the Affordable Care Act, 
expired on September 30, 2010. Section 102 of the Medicare and Medicaid 
Extenders Act of 2010 extended section 508 and certain additional 
special exception hospital reclassifications from October 1, 2010 
through September 30, 2011. Section 302 of the Temporary Payroll Tax 
Cut Continuation Act of 2011 (Pub. L. 112-78) as amended by section 
3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. 
L. 112-96) extended section 508 and certain additional special 
exception hospital reclassifications from October 1, 2011 through March 
31, 2012. Therefore, these reclassifications will not apply to the CY 
2013 OPPS. (For further discussion of the changes to the FY 2013 IPPS 
wage indices, as applied to the CY 2013 OPPS, we refer readers to 
section II.C. of this final rule with comment period). We proposed to 
continue to apply a wage index floor of 1.00 to frontier States, in 
accordance with section 10324 of the Affordable Care Act.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this 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 
2013 IPPS and listed as Table 4J in the FY 2013 IPPS/LTCH PPS final 
rule 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).
    X a = .60 * (national unadjusted payment rate) * applicable wage 
index.
    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted payment rate 
for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.
    Y is the nonlabor-related portion of the national unadjusted 
payment rate.

Y = .40 * (national unadjusted payment rate)
Adjusted Medicare Payment = Y + X a
    Step 6. If a provider is an SCH, 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.
    The formula below is a mathematical representation of Step 6 and 
applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 
1.071
    We have provided examples below of the calculation of both the 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 35644. 
This provider bills one service that is assigned to APC 0019

[[Page 68299]]

(Level I Excision/Biopsy). The CY 2013 full national unadjusted payment 
rate for APC 0019 is $336.38. The reduced national unadjusted payment 
rate for a hospital that fails to meet the Hospital OQR Program 
requirements is $329.65. This reduced rate is calculated by multiplying 
the reporting ratio of 0.980 by the full unadjusted payment rate for 
APC 0019.
    The FY 2013 wage index for a provider located in CBSA 35644 in New 
York is 1.2971. The labor-related portion of the full national 
unadjusted payment is $261.79 (.60 * $336.38 * 1.2971). The labor-
related portion of the reduced national unadjusted payment is $256.55 
(.60 * $329.65 * 1.2971). The nonlabor-related portion of the full 
national unadjusted payment is $134.55 (.40 * $336.38). The nonlabor-
related portion of the reduced national unadjusted payment is $131.86 
(.40 * $329.65). The sum of the labor-related and nonlabor-related 
portions of the full national adjusted payment is $396.34 ($261.79 + 
$134.55). The sum of the reduced national adjusted payment is $388.41 
($256.55 + $131.86).

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 to 
the amount of the inpatient deductible.
    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 colonscopies, 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 2013 OPPS/ASC proposed rule (77 FR 45113), 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 national unadjusted copayment amounts for services payable under 
the OPPS that will be effective January 1, 2013, 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). As discussed in section XV. of this 
final rule with comment period, for CY 2013, the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
equals 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 APC 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. The CY 2013 proposed policy to base APC relative weights on 
geometric mean costs would also affect the APC payment rates and, 
through them, the corresponding beneficiary copayments. However, as 
described in the CY 2004 OPPS/ASC 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). For a more detailed discussion of the final policy to 
base the APC relative payment weights on geometric mean costs, we refer 
readers to section II.A.2.f. of this final rule with comment period.
    We did not receive any public comments regarding the proposed 
methodology for calculating copayments for CY 2013. Therefore, for the 
reasons set forth in the proposed rule (77 FR 45113), we are finalizing 
our CY 2013 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 APC 0019, $67.28 is 20 percent of the full national 
unadjusted payment rate of $336.38. For APCs with only a minimum 
unadjusted copayment in Addenda A and B of 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 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

[[Page 68300]]

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 
will be effective January 1, 2013, 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 2013 OPD fee schedule increase 
factor discussed in section II.B. of this final rule with comment 
period.
    Also, as noted above, section 1833(t)(8)(C)(i) of the Act limits 
the amount of beneficiary copayment that may be collected to the amount 
of the inpatient deductible.

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. This quarterly process offers hospitals access to codes 
that may more accurately describe items or services furnished and/or 
provides payment or more accurate payment for these items or services 
in a timelier manner than if CMS waited for the annual rulemaking 
process. We solicit public comments on these new codes and finalize our 
proposals related to these codes through our annual rulemaking process. 
As we proposed in the CY 2013 OPPS/ASC proposed (77 FR 45114), in Table 
10 below (Table 13 of the proposed rule), we summarize our process for 
updating codes through our OPPS quarterly update CRs, seeking public 
comments, and finalizing their treatment under the OPPS. We note that 
because the payment rates associated with codes effective July 1 were 
not available to us in time for incorporation into the Addenda of the 
proposed rule, the Level II HCPCS codes and the Category III CPT codes 
implemented through the July 2012 OPPS quarterly update CR were not 
included in Addendum B of the proposed rule (which is available via the 
Internet on the CMS Web site), while those codes based upon the April 
2012 OPPS quarterly update were included in Addendum B. Nevertheless, 
we requested public comments on the codes included in the July 2012 
OPPS quarterly update and included these codes in the preamble of the 
proposed rule.
BILLING CODE 4120-01-P

[[Page 68301]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.020

    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 2013 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this CY 2013 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2012 
OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2012. We also sought public 
comments in the CY 2012 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2011. These new codes, 
with an effective date of October 1, 2011, or January 1, 2012, 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 2012 OPPS/ASC final rule with 
comment period to indicate that we were assigning them an interim 
payment status and an APC and payment rate, if applicable, which were 
subject to public comment following publication of the CY 2012 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 
2013 OPPS/ASC final rule with comment period.
    We received comments on several new codes that were assigned to 
comment indicator ``NI'' in Addendum B of the CY 2012 OPPS/ASC final 
rule with comment period. We respond to those comments in sections 
II.A., III.D., V.B., and IX of this final rule with comment period. 
Table 11 below lists the long descriptors for the CPT codes that were 
assigned to comment indicator ``NI'' for which we received public 
comments to the CY 2012 OPPS/ASC final rule with comment period and the 
specific sections where the comments are addressed.

[[Page 68302]]

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[[Page 68303]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.022


[[Page 68304]]


[GRAPHIC] [TIFF OMITTED] TR15NO12.023

BILLING CODE 4120-01-C
1. Treatment of New CY 2012 Level II HCPCS and CPT Codes Effective 
April 1, 2012 and July 1, 2012 for Which We Solicited Public Comments 
in the CY 2013 OPPS/ASC Proposed Rule
    Through the April 2012 OPPS quarterly update CR (Transmittal 2418, 
Change Request 7748, dated March 2, 2012) and the July 2012 OPPS 
quarterly update CR (Transmittal 2483, Change Request 7847, dated June 
8, 2012), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2012, we made 
effective 13 new Level II HCPCS codes and 7 Category III CPT codes. 
Specifically, 5 new Level II HCPCS codes were effective for the April 
2012 update and another 8 new Level II HCPCS codes were effective for 
the July 2012 update for a total of 13. Seven new Category III CPT 
codes were effective for the July 2012 update. Of the 13 new Level II 
HCPCS codes, we recognized for separate payment 11 of these codes, and 
of the 7 new Category III CPT codes, we recognized for separate payment 
all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS 
and Category III CPT codes that are recognized for separate payment for 
CY 2013.
    Through the April 2012 OPPS quarterly update CR, we allowed 
separate payment for each of the five new Level II HCPCS codes. 
Specifically, as displayed in Table 12 below, we provided separate 
payment for HCPCS codes C9288, C9289, C9290, C9291 and C9733.

[[Page 68305]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.024

    In the CY 2013 OPPS/ASC proposed rule (77 FR 45115), we solicited 
public comments on the proposed status indicators and APC assignments 
for Level II HCPCS codes C9288, C9289, C9290, C9291, and C9733, which 
were listed in Table 14 of the proposed rule (77 FR 45115) and now 
appear in Tables 12 and 13 of this final rule with comment period.
    We did not receive any public comments on the proposed APC 
assignments and status indicators for HCPCS codes C9288, C9289, C9290, 
and C9291. However, we received several public comments on HCPCS code 
C9733, which are addressed in section III.D.7.a. of this final rule 
with comment period.
    For CY 2013, the HCPCS Workgroup replaced HCPCS codes C9288, C9289, 
and C9291 (which was replaced with HCPCS code Q2046, effective July 1, 
2012) with permanent HCPCS J-codes. Table 13 below list the replacement 
HCPCS J-codes for the temporary HCPCS C-codes. Consistent with our 
general policy of using permanent HCPCS codes rather than using 
temporary HCPCS codes for the reporting of drugs under the OPPS in 
order to streamline coding, we are showing the replacement HCPCS codes 
C9288, C9289, and C9291/Q2046, effective January 1, 2013, in Table 13.
    In this final rule with comment period, we are assigning the Level 
II HCPCS codes listed in Table 13 below to the specific APCs and status 
indicators for CY 2013.
[GRAPHIC] [TIFF OMITTED] TR15NO12.025


[[Page 68306]]


    For CY 2013, we note that we are not making any changes to the 
status indicators and APC assignments for HCPCS code C9290 and C9733. 
That is, HCPCS code C9290 will continue its pass-through status and 
will also continue to be assigned to APC 9290 for CY 2013. Similarly, 
HCPCS code C9733 will continue to be assigned to status indicator 
``Q2'' and also will continue to be assigned to APC 0397 for CY 2013.
    Furthermore, because HCPCS code J9019 describes the same drug and 
the same dosage currently designated by HCPCS code C9289, this drug 
will continue its pass-through status in CY 2013. Therefore, we are 
assigning HCPCS code J9019 to the same status indicator and APC as its 
predecessor HCPCS code, as shown in Table 13.
    However, we note that the replacement code for HCPCS code C9291, 
which was replaced with HCPCS code Q2046 effective July 1, 2012, did 
not describe the same dosage descriptor, and consequently, the 
replacement HCPCS code was assigned a new APC number. Specifically, 
HCPCS code Q2046, which has a dosage descriptor of 1 mg, was assigned 
to APC 1420 effective July 1, 2012. Because the predecessor HCPCS code 
C9291 was assigned to pass-through status, HCPCS code Q2046 also was 
assigned to pass-through status for CY 2013. Similarly, the replacement 
code for HCPCS code C9288 does not describe the same dosage descriptor, 
and, consequently, its replacement HCPCS code J0716 was assigned a new 
APC. Specifically, HCPCS code C9288 has a dosage descriptor of 1 vial; 
however, its replacement HCPCS code J0716 has a dosage descriptor of 
``up to 120 milligrams.'' Therefore, effective January 1, 2013, HCPCS 
codes J0716 is assigned to APC 1431, a different APC, to maintain data 
consistency for future rulemaking. Because the predecessor HCPCS code 
C9288 was assigned to pass-through status, HCPCS code J0716 will 
continue to be assigned status indicator ``G'' for CY 2013.
    As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45115 
through 45116), through the July 2012 OPPS quarterly update CR, which 
included HCPCS codes that were made effective July 1, 2012, we allowed 
separate payment for 6 of the 8 new Level II HCPCS codes. Specifically, 
as displayed in Table 14 below (also Table 14 of the proposed rule), we 
provided separate OPPS payment for HCPCS codes C9368, C9369, Q2045, 
Q2046, Q2048, and Q2049.
[GRAPHIC] [TIFF OMITTED] TR15NO12.026

    We note that three of the Level II HCPCS Q-codes that were made 
effective July 1, 2012, were previously described by HCPCS J-codes or 
C-codes that were separately payable under the hospital OPPS. First, 
HCPCS code Q2045 replaced HCPCS code J1680 (Injection, human fibrinogen 
concentrate, 100 mg), beginning July 1, 2012. HCPCS code J1680 was 
assigned to status indicator ``K'' (Nonpass-through drugs and 
nonimplantable biologicals, including therapeutic radiopharmaceuticals; 
paid under OPPS; separate APC payment) on

[[Page 68307]]

January 1, 2012. However, because HCPCS code J1680 was replaced by 
HCPCS code Q2045 effective July 1, 2012, we changed its status 
indicator to ``E'' (Not Payable by Medicare) effective July 1, 2012. 
Because HCPCS code Q2045 describes the same drug as HCPCS code J1680, 
we continued its separate payment status and assigned it to status 
indicator ``K'' effective July 1, 2012. However, because the dosage 
descriptor for HCPCS code Q2045 is not the same as HCPCS code J1680, we 
assigned HCPCS code Q2045 to a new APC to maintain data consistency for 
future rulemaking. Specifically, HCPCS code Q2045 was assigned to APC 
1414 effective July 1, 2012.
    Second, HCPCS code Q2046 replaced HCPCS code C9291 effective July 
1, 2012. HCPCS code C9291 was assigned pass-through status when it was 
effective April 1, 2012. Because HCPCS code Q2046 describes the same 
product as HCPCS code C9291, we continued its pass-through status and 
assigned HCPCS code Q2046 to status indicator ``G'' as well as assigned 
it to the same APC, specifically APC 9291, effective July 1, 2012. 
HCPCS code C9291 was deleted on June 30, 2012.
    Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, 
doxorubicin hydrochloride, all lipid formulations, 10 mg) with new 
HCPCS code Q2048, effective July 1, 2012. Consequently, the status 
indicator for HCPCS code J9001 was changed to ``E'' (Not Payable by 
Medicare) effective July 1, 2012. Because HCPCS code Q2048 describes 
the same drug as HCPCS code J9001, we continued its separate payment 
status and assigned HCPCS code Q2048 to status indicator ``K'' 
effective July 1, 2012. In addition, because, HCPCS code Q2049 is 
similar to HCPCS code Q2048, we assigned HCPCS code Q2049 to status 
indicator ``K'' effective July 1, 2012.
    Of the 15 HCPCS codes that were effective July 1, 2012, we did not 
recognize for separate OPPS payment two HCPCS codes because they are 
both paid under a payment system other than OPPS. Specifically, HCPCS 
code Q2047 was assigned to status indicator ``A'' (Not paid under OPPS; 
paid by fiscal intermediaries/MACs under a fee schedule or payment 
system other than OPPS), and HCPCS code Q2034 was assigned to status 
indicator ``L'' (Not paid under OPPS; paid at reasonable cost).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we solicited 
public comments on the proposed status indicators and APC assignments 
for the HCPCS codes that were listed in Table 15 of the proposed rule 
and now appear in Table 14 and 15 of this final rule with comment 
period.
    We did not receive any other public comments on the new Level II 
HCPCS codes that were implemented in July 2012. We are adopting as 
final, without modification, our proposal to assign the Level II HCPCS 
codes listed in Table 15 to the APCs and status indicators as proposed 
for CY 2013.
    Table 15 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2012, with their final status 
indicators and APC assignments for CY 2013.
[GRAPHIC] [TIFF OMITTED] TR15NO12.027

    We note that the HCPCS Workgroup replaced HCPCS codes C9368, C9369, 
Q2045, Q2046, Q2047, and Q2048 with HCPCS codes Q4132, Q4133, J7178, 
J0178, J0890, and J9002, respectively, effective January 1, 2013. 
Because

[[Page 68308]]

HCPCS codes Q4132, Q4133, and J0178 describe the same products 
currently designated by HCPCS codes C9368, C9369, and Q2046, 
respectively, these products will continue their pass-through status in 
CY 2013. Therefore, we are assigning HCPCS codes Q4132, Q4133 and J0178 
to the same status indicators and APCs as their predecessor HCPCS 
codes, which share the same dosage descriptors, as shown in Table 15. 
We note that because HCPCS codes Q2045 and Q2048 are assigned to status 
indicator ``K'' (Nonpass-Through Drugs; Paid under OPPS; Separate APC 
payment), their replacement HCPCS codes J7178 and J9002, which share 
the same code descriptors as their predecessor codes, also will 
continue their nonpass-through status and APC assignments in CY 2013.
    Finally, HCPCS code Q2047 will be replaced with HCPCS code J0890 
effective January 1, 2013. Because HCPCS code J0890 describes the same 
product currently designated by HCPCS code Q2047, this product will 
continue to be assigned to the same status indicator as its predecessor 
HCPCS code, as shown in Table 15.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we proposed to 
continue our established policy of recognizing Category I CPT vaccine 
codes for which FDA approval is imminent and Category III CPT codes 
that the AMA releases in January of each year for implementation in 
July through the OPPS quarterly update process. Under the OPPS, 
Category I CPT vaccine codes and Category III CPT codes that are 
released on the AMA Web site in January are made effective in July of 
the same year through the July quarterly update CR, consistent with the 
AMA's implementation date for the codes. For the July 2012 update, 
there were no new Category I CPT vaccine codes. Through the July 2012 
OPPS quarterly update CR (Transmittal 2483, Change Request 7847, dated 
June 8, 2012), we allowed separate OPPS payment for all seven new 
Category III CPT codes effective July 1, 2012. Specifically, as 
displayed in Table 16 of the proposed rule and in Table 16 below, we 
allowed separate payment for Category III CPT codes 0302T, 0303T, 
0304T, 0305T, 0306T, 0307T, and 0308T.
    We received one public comment on one of the Category III CPT codes 
that were implemented in July 2012, specifically on CPT code 0304T, 
which is addressed in section II.A.2.d.(1) of this final rule with 
comment period. Table 16 below lists the Category III CPT codes that 
were implemented in July 2012, along with their final status indicators 
and APC assignments, for CY 2013. The final payment rates for these 
codes can be found in Addendum B to this CY 2013 OPPS/ASC final rule 
with comment period (which is available via the Internet on the CMS Web 
site).
BILLING CODE 4120-01-P

[[Page 68309]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.028

BILLING CODE 4120-01-C
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45114 through 45117), 
we solicited public comments on the CY 2013 proposed status indicators 
and the proposed APC assignments and payment rates for the Level II 
HCPCS codes and the Category III CPT codes that were effective April 1, 
2012, and July 1, 2012, through the respective OPPS quarterly update 
CRs. These codes were listed in Tables 14, 15, and 16 of the proposed 
rule. We proposed to finalize their status indicators and their APC 
assignments and payment rates, if applicable, in this CY 2013 OPPS/ASC 
final rule with comment period. Because the new Category III CPT and 
Level II HCPCS codes that become effective for July are not available 
to us in time for incorporation into the Addenda to the OPPS/ASC 
proposed rule, our policy is to include the codes, their proposed 
status indicators,

[[Page 68310]]

proposed APCs (where applicable), and proposed payment rates (where 
applicable) in the preamble of the proposed rule but not in the Addenda 
to the proposed rule. These codes were listed in Tables 15 and 16, 
respectively, of the proposed rule. We proposed to incorporate these 
codes into Addendum B to this CY 2013 OPPS/ASC final rule with comment 
period, which is consistent with our annual OPPS update policy. The 
Level II HCPCS codes implemented or modified through the April 2012 
OPPS update CR and displayed in Table 14 were included in Addendum B to 
the proposed rule (which was available via the Internet on the CMS Web 
site), where their proposed CY 2013 payment rates were also shown.
    We did not receive any additional public comments on this process. 
The final status indicators, APC assignments, and payment rates if 
applicable, for the Level II HCPCS codes and the Category III CPT codes 
that were implemented or modified through the April 2012 or July 2012 
OPPS update CR are found in Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site).
2. Process for New Level II HCPCS Codes That Will Be Effective October 
1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective 
January 1, 2013 for Which We Are Soliciting Public Comments in This CY 
2013 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and III CPT codes and new Level II HCPCS codes that are 
effective January 1 in the final rule with comment period updating the 
OPPS for the following calendar year. These codes are released to the 
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites 
(for CPT codes), and also through the January OPPS quarterly update 
CRs. In the past, we also have released new Level II HCPCS codes that 
are effective October 1 through the October OPPS quarterly update CRs 
and incorporated these new codes in the final rule with comment period 
updating the OPPS for the following calendar year. For CY 2013, these 
codes are flagged with comment indicator ``NI'' in Addendum B to the 
OPPS/ASC final rule with comment period to indicate that we are 
assigning them an interim payment status which is subject to public 
comment. In addition, the CPT and Level II HCPCS codes that will be 
effective January 1, 2013, are flagged with comment indicator ``NI'' in 
Addendum B to the OPPS/ASC final rule with comment period. 
Specifically, the status indicator and the APC assignment and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the final rule with comment 
period, and we respond to these comments in the OPPS/ASC final rule 
with comment period for the next calendar year's OPPS/ASC update. In 
the CY 2013 OPPS/ASC proposed rule (77 FR 45117 through 45118), we 
proposed to continue this process for CY 2013. Specifically, for CY 
2013, we proposed to include in Addendum B to this CY 2013 OPPS/ASC 
final rule with comment period the new Category I and III CPT codes 
effective January 1, 2013 (including the Category III CPT codes that 
were released by the AMA in July 2012) that would be incorporated in 
the January 2013 OPPS quarterly update CR and the new Level II HCPCS 
codes, effective October 1, 2012, or January 1, 2013, that would be 
released by CMS in its October 2012 and January 2013 OPPS quarterly 
update CRs. As proposed, in this final rule with comment period, the 
October 1, 2012 and January 1, 2013 codes are flagged with comment 
indicator ``NI'' in Addendum B to this CY 2013 OPPS/ASC final rule with 
comment period to indicate that we have assigned them an interim OPPS 
payment status for CY 2013. As proposed, in this final rule with 
comment period, their status indicators and their APC assignments and 
payment rates, if applicable, are open to public comment and will be 
finalized in the CY 2014 OPPS/ASC final rule with comment period.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing our proposal to flag new Level II HCPCS codes that 
become effective October 1, 2012, and new CPT and Level II HCPCS codes 
that become effective January 1, 2013 with comment indicator ``NI'' in 
Addendum B to this CY 2013 OPPS/ASC final rule with comment period to 
indicate that these codes have been assigned an interim OPPS payment 
status for CY 2013. In addition, because these codes have been assigned 
to comment indicator ``NI,'' their status indicators and their APC 
assignments and payment rates, if applicable, are open to public 
comment and will be finalized in the CY 2014 OPPS/ASC final rule with 
comment period.

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 
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 have also developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to, and supportive of, performing the main independent 
procedures or furnishing the services. Therefore, we do not make 
separate payment for these packaged items or services. For example, 
packaged items and services include:
    (a) Use of an operating, treatment, or procedure room;
    (b) Use of a recovery room;
    (c) Observation services;
    (d) Anesthesia;
    (e) Medical/surgical supplies;
    (f) Pharmaceuticals (other than those for which separate payment 
may be allowed under the provisions discussed in section V. of the 
proposed rule and this final rule with comment period);
    (g) Incidental services such as venipuncture;
    (h) Guidance services, image processing services, intraoperative 
services, imaging, supervision and interpretation services, diagnostic 
radiopharmaceuticals, and contrast media.
    Further discussion of packaged services is included in section 
II.A.3. of this final rule with comment period.
    In CY 2008, we implemented composite APCs to provide a single 
payment for groups of services that are

[[Page 68311]]

typically performed together during a single clinical encounter and 
that result in the provision of a complete service (72 FR 66650 through 
66652). Under CY 2012 OPPS policy, we provide composite APC payment for 
certain extended assessment and management services, low dose rate 
(LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and 
ablation, mental health services, multiple imaging services, and 
cardiac resynchronization therapy services. Further discussion of 
composite APCs is included in section II.A.2.e. 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. Each 
APC weight represents the hospital cost of the services included in 
that APC, relative to the hospital cost of the services included in APC 
0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to 
APC 0606 because it is the middle level hospital clinic visit APC (the 
Level 3 hospital clinic visit CPT code out of five levels), and because 
middle level hospital clinic visits are among the most frequently 
furnished services in the hospital outpatient setting.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
on a recurring basis occurring no less than annually, and revise the 
groups, the relative payment weights, and the wage and other 
adjustments to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review (and advise the Secretary concerning) the clinical integrity of 
the APC groups and the relative payment weights (the HOP Panel 
recommendations for specific services for the CY 2013 OPPS and our 
responses to them are discussed in the relevant specific sections 
throughout this final rule with comment period).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest cost for an item or service in the group is more than 2 times 
greater than the lowest cost for an item or service within the same 
group (referred to as the ``2 times rule''). In the CY 2013 OPPS/ASC 
proposed rule (77 FR 45118), for CY 2013, we proposed to use the cost 
of the item or service in implementing this provision, as discussed in 
section II.A.2.f. of this final rule with comment period. 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).
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 cost of the highest cost item or service within an 
APC group is more than 2 times greater than the cost of the lowest cost 
item or service within that same group. In making this determination, 
we consider only those HCPCS codes that are significant based on the 
number of claims. 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 cost to be 
significant (75 FR 71832). 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 100 million single procedure or single session 
claims we use for establishing costs. Similarly, a HCPCS code for which 
there are fewer than 99 single bills and which comprises less than 2 
percent of the single major claims within an APC will have a negligible 
impact on the APC cost. In the CY 2013 OPPS/ASC proposed rule (77 FR 
45118), 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 CY 2013.
    In the CY 2013 OPPS/ASC proposed rule, we identified APCs with 2 
times rule violations but for which we proposed changes to their HCPCS 
codes' APC assignments in Addendum B to the proposed rule. We note that 
Addendum B did not appear in the printed version of the Federal 
Register as part of the CY 2013 OPPS/ASC proposed rule. Rather, it was 
published and made available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 
times rule violation or to improve clinical and resource homogeneity, 
we proposed to reassign the codes to APCs that contain services that 
are similar with regard to both their clinical and resource 
characteristics. We also proposed to rename existing APCs or create new 
clinical APCs to accommodate proposed HCPCS code reassignments. In many 
cases, the proposed HCPCS code reassignments and associated APC 
reconfigurations for CY 2013 included in the proposed rule were related 
to changes in costs of services that were observed in the CY 2011 
claims data newly available for CY 2013 ratesetting. We also proposed 
changes to the status indicators for some codes that were not 
specifically and separately discussed in the proposed rule. In these 
cases, we proposed to change the status indicators for some codes 
because we believe that another status indicator would more accurately 
describe their payment status from an OPPS perspective based on the 
policies that we proposed for CY 2013. Addendum B of the CY 2013 OPPS/
ASC proposed rule identified with a comment indicator ``CH'' those 
HCPCS codes for which we proposed a change to the APC assignment or 
status indicator as assigned in the April 2012 Addendum B Update 
(available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B of this final rule with comment 
period (available via the Internet on the CMS Web site) identifies with 
the ``CH'' comment indicator the final CY 2013 changes compared to the 
codes' status as reflected in the October 2012 Addendum B update.
3. Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. Taking into account the APC changes 
that we proposed for CY 2013, we reviewed all the APCs to determine 
which APCs would not satisfy the 2 times rule. Then we used the 
following criteria to decide whether to propose exceptions to the 2 
times rule for affected APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting utilization;

[[Page 68312]]

     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    For a detailed discussion of these criteria, we refer readers to 
the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 
18458).
    Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 APCs that 
we proposed to exempt from the 2 times rule for CY 2013 based on the 
criteria cited above and based on claims data processed from January 1, 
2011, through December 31, 2011.
    We note that, for cases in which a recommendation by the HOP Panel 
appears to result in or allow a violation of the 2 times rule, we 
generally accept the Panel's recommendation because those 
recommendations are based on explicit consideration of resource use, 
clinical homogeneity, site of service, and the quality of the claims 
data used to determine the APC payment rates.
    For the CY 2013 OPPS/ASC proposed rule, we based the listed 
exceptions to the 2 times rule on claims data for dates of service 
between January 1, 2011, and December 31, 2011, that were processed 
before January 1, 2011. For this final rule with comment period, we 
used claims data for dates of service between January 1, 2011, and 
December 31, 2011, that were processed on or before June 30, 2012 and 
updated CCRs, if available. Thus, after considering the public comments 
we received on the CY 2013 OPPS/ASC proposed rule and making changes to 
APC assignments based on those comments, we analyzed the CY 2011 claims 
data used for this final rule with comment period to identify the APCs 
with 2 times rule violations. Based on the final CY 2011 claims data, 
we found that there are 19 APCs with 2 times rule violations, a 
cumulative decrease of 2 APCs compared to the proposed rule. We applied 
the criteria as described earlier to identify the APCs that are 
exceptions to the 2 times rule for CY 2013, and identified two 
additional APCs that meet the criteria for exception to the 2 times 
rule for this final rule with comment period:
     APC 0148 (Level I Anal/Rectal Procedures)
     APC 0254 (Level V ENT Procedures)
    In addition, we also determined that four APCs no longer violated 
the 2 times rule:
     APC 0128 (Echocardiogram with Contrast)
     APC 0173 (Level II Partial Hospitalization (4 or more 
services) for CMHCs)
     APC 0604 (Level 1 Hospital Clinic Visits)
     APC 0655 (Insertion/Replacement/Conversion of a Permanent 
Dual Chamber Pacemaker or Pacing)
    As discussed in section III.D.1.f. of this final rule with comment 
period, because of concerns raised regarding the 2 times rule violation 
for echocardiography services, and after further analysis of our claims 
data, we deleted APC 0128 and replaced it with two new APCs to correct 
the 2 times rule violation. Specifically, APC 0128 has been replaced 
with APC 0177 (Level I Echocardiogram with Contrast) and APC 0178 
(Level II Echocardiogram with Contrast). We have not included in this 
count those APCs where a 2 times rule violation is not a relevant 
concept, such as APC 0375 (Ancillary Outpatient Services when Patient 
Expires), with an APC cost set based on multiple procedure claims; 
therefore, we have identified only final APCs, including those with 
criteria-based costs, such as device-dependent APCs, with 2 times rule 
violations.
    Comment: Several commenters urged CMS to reassign HCPCS G0379 
(Direct admission of patient for hospital observation care) from APC 
0604 (Level 1 Hospital Clinic Visits) to APC 0608 (Level 5 Hospital 
Clinic Visits). In particular, the commenters requested that CMS assign 
HCPCS G0379 to the same APC as CPT code 99205 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 5)) when the Composite APC 8002 (Level I Extended Assessment & 
Management Composite) criteria are not met. The commenters indicated 
that the reassignment of HCPCS code G0379 to APC 0608 would be 
appropriate because it would resolve the 2 times rule violation in APC 
0604 and also align the resources with a high-level hospital visit when 
the criteria for Composite APC 8002 are not met. The commenters 
suggested that continuing to assign HCPCS code G0379 to APC 0604 would 
result in continued underpayments to HOPDs when the services and claims 
processing requirements for APC 8002 are not met for a direct referral. 
The commenters further added that this same issue was discussed during 
the February 2012 HOP Panel meeting, and that after the discussion, the 
Panel recommended that CMS reassign HCPCS code G0379 from APC 0604 to 
an appropriate APC. The commenters urged CMS to accept the Panel's 
recommendation.
    Response: Based on the recommendation of the HOP Panel at its 
February 2012 meeting, we reviewed our claims data for HCPCS code 
G0379. Our analyses revealed that the level of hospital resources used 
to provide HCPCS code G0379 is about the same as for CPT code 99205. In 
particular, our claims data show similar geometric mean costs for HCPCS 
code G0379 and CPT code 99205. Specifically, our claims data show a 
geometric mean cost of approximately $181 for HCPCS code G0379 based on 
2,368 single claims (out of 3,975 total claims), and a geometric mean 
cost of approximately $179 based on 95,017 single claims (out of 
104,246 total claims) for CPT code 99205. Based on our review of the 
claims data associated with HCPCS code G0379 and CPT code 99025, we 
agree with the commenters that the reassignment of HCPCS code G0379 to 
APC 0608 is appropriate. Because APC assignments are made based on 
consideration of both hospital resources and clinical homogeneity, we 
believe this reassignment improves the clinical homogeneity of APC 0608 
and appropriately aligns the resource costs of HCPCS code G0379 to 
those procedures assigned to APC 0608.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal with modification to reassign HCPCS 
code G0379 from APC 0604 to APC 0608, which has a final CY 2013 
geometric mean cost of approximately $181.
    Comment: One commenter indicated that APC 0623 violates the 2 times 
rule and requested that CMS review the costs associated with CPT code 
36260 (Insertion of implantable intra-arterial infusion pump (eg, for 
chemotherapy of liver)) and reassign the CPT code to a more appropriate 
APC.
    Response: Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 
APCs that violated the 2 times rule for CY 2013. APC 0623 does not 
appear in Table 17 and assignment of CPT code 36260 to APC 0623 does 
not violate the 2 times rule. As stated above, in determining whether a 
2 times rule violation exist in an APC, we consider only those HCPCS 
codes that are significant based on the number of claims. 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 cost to be significant (75 FR 71832). 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 
100 million single procedure or single session claims we

[[Page 68313]]

use for establishing costs. Similarly, a HCPCS code for which there are 
fewer than 99 single bills and which comprises less than 2 percent of 
the single major claims within an APC will have a negligible impact on 
the APC cost. For this CY 2013 OPPS/ASC final rule with comment period, 
there are only 3 single claims for CPT code 36260 (each of the 3 total 
claims). Because CPT code 36260 does not represent a significant HCPCS 
code based on the number of claims, it does not violate the 2 times 
rule.
    After consideration of the public comments we received and our 
review of the CY 2011 costs from hospital claims and cost report data 
available for this final rule with comment period, we are finalizing 
our proposals with some modifications. Specifically, we are finalizing 
our exemption of 17 of the original APCs (that appeared in Table 17 of 
the CY 2013 OPPS/ASC proposed rule with comment period and also appears 
in Table 17 below) from the 2 times rule for CY 2013. We are removing 
four APCs that no longer violated the 2 times rule and decreasing the 
number of APC exceptions from 21 to 19 APCs, as described previously in 
this section. Our final list of 19 APCs exempted from the 2 times rule 
for CY 2013 is displayed in Table 17 below.
[GRAPHIC] [TIFF OMITTED] TR15NO12.029

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.
    We note that the cost bands for New Technology APCs range from $0 
to $50 in increments of $10, from $50 to $100 in increments of $50, 
from $100 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

[[Page 68314]]

example, payment for New Technology APC 1507 (New Technology--Level VII 
($500--$600)) is made at $550. Currently, there are 82 New Technology 
APCs, ranging from the lowest cost band assigned to APC 1491 (New 
Technology--Level IA ($0--$10)) through the highest cost band assigned 
to APC 1574 (New Technology--Level XXXVII ($9,500--$10,000). In CY 2004 
(68 FR 63416), we last restructured the New Technology APCs to make the 
cost intervals more consistent across payment levels and refined the 
cost bands for these APCs to retain two parallel sets of New Technology 
APCs, one set with a status indicator of ``S'' (Significant Procedure, 
Not Discounted When Multiple) and the other set with a status indicator 
of ``T'' (Significant Procedure, Multiple Reduction Applies). These 
current New Technology APC configurations allow us to price new 
technology services more appropriately and consistently.
    Every year we receive many requests for higher payment amounts 
under our New Technology APCs for specific procedures 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 in cost-efficient settings, and we believe that 
our 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 our 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. Medicare does not, and we believe 
should not, assume responsibility for more than its share of the costs 
of procedures based on projected utilization for Medicare beneficiaries 
and does not set its payment rates based on initial projections of low 
utilization for services that require expensive capital equipment. For 
the OPPS, we rely on hospitals to make informed business decisions 
regarding the acquisition of high cost capital equipment, taking into 
consideration their knowledge about their entire patient base (Medicare 
beneficiaries included) and an understanding of Medicare's and other 
payers' payment policies.
    We note that, in a budget neutral environment, payments may not 
fully cover hospitals' costs in a particular circumstance, including 
those for the purchase and maintenance of capital equipment. We rely on 
hospitals to make their decisions regarding the acquisition of high 
cost equipment with the understanding that the Medicare program must be 
careful to establish its initial payment rates, including those made 
through New Technology APCs, for new services that lack hospital claims 
data based on realistic utilization projections for all such services 
delivered in cost-efficient hospital outpatient settings. As the OPPS 
acquires claims data regarding hospital costs associated with new 
procedures, we regularly examine the claims data and any available new 
information regarding the clinical aspects of new procedures to confirm 
that our OPPS payments remain appropriate for procedures as they 
transition into mainstream medical practice.
2. Movement of Procedures From New Technology APCs to Clinical APCs
    As we explained in the November 30, 2001 final rule (66 FR 59902), 
we generally keep a procedure in the New Technology APC to which it is 
initially assigned until we have collected sufficient data to enable us 
to move the procedure to a clinically appropriate APC. However, in 
cases where we find that our original New Technology APC assignment was 
based on inaccurate or inadequate information (although it was the best 
information available at the time), or where the New Technology APCs 
are restructured, we may, based on more recent resource utilization 
information (including claims data) or the availability of refined New 
Technology APC cost bands, reassign the procedure or service to a 
different New Technology APC that most appropriately reflects its cost.
    Consistent with our current policy, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45120), for CY 2013, we proposed to retain 
services within New Technology APC groups until we gather sufficient 
claims data to enable us to assign the service to a clinically 
appropriate APC. The flexibility associated with this policy allows us 
to move a service from a New Technology APC in less than 2 years if 
sufficient 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 collected. Table 18 of the proposed rule listed the HCPCS codes 
and associated status indicators that we proposed to reassign from a 
New Technology APC to a clinically appropriate APC or to a different 
New Technology APC for CY 2013.
    In the CY 2013 OPPS/ASC proposed rule, we noted that currently, in 
CY 2012, there are three procedures described by HCPCS G-codes 
receiving payment through a New Technology APC(77 FR 45121). 
Specifically, HCPCS code G0417 (Surgical pathology, gross and 
microscopic examination for prostate needle saturation biopsy sampling, 
21-40 specimens) is assigned to New Technology APC 1505 (New 
Technology--Level V ($300-$400)); HCPCS code G0418 (Surgical pathology, 
gross and microscopic examination for prostate needle saturation biopsy 
sampling, 41-60 specimens) is assigned to New Technology APC 1506 (New 
Technology--Level VI ($400-$500)); and HCPCS code G0419 (Surgical 
pathology, gross and microscopic examination for prostate needle 
saturation biopsy sampling, greater than 60 specimens) is assigned to 
New Technology APC 1508 (New Technology--Level VIII ($600-$700)). These 
HCPCS codes have been assigned to New Technology APCs since CY 2009.
    Analysis of the hospital outpatient data for claims submitted in 
CYs 2009, 2010, and 2011 indicate that prostate needle saturation 
biopsy procedures are rarely performed on Medicare beneficiaries. For 
OPPS claims submitted from CY 2009 through CY 2011, our final rule 
claims data show very minimal claims for HCPCS code G0417, G0418, and 
G0419, as shown in Table 18.

[[Page 68315]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.030

    Given the continued lack of cost data for these HCPCS codes, we 
proposed to reassign these procedures to an APC that is appropriate 
from a clinical standpoint (77 FR 45121). Specifically, we proposed to 
reassign HCPCS G-codes G0417, G0418, and G0419 to clinical APC 0661 
(Level V Pathology), with a proposed APC payment rate of approximately 
$160 for CY 2013. We stated that we believe that all three procedures, 
as described by HCPCS codes G0417, G0418, and G0419, are comparable 
clinically to other pathology services currently assigned to APC 0661 
and likely require similar resources. Table 18 of the proposed rule 
listed the HCPCS G-codes and associated status indicators that we 
proposed to reassign from New Technology APCs 1505, 1506, and 1508 to 
APC 0661 for CY 2013.
    We did not receive any public comments on the APC reassignments for 
HCPCS codes G0417, G0418, and G0419. Therefore, for the reasons set 
forth above, we are finalizing our proposal, without modification, to 
assign these codes to APC 0661. We note that APC 0661 is the same APC 
to which the other HCPCS G-code for prostate needle saturation biopsy 
procedure, G0416 (Surgical pathology, gross and microscopic examination 
for prostate needle saturation biopsy sampling, 1-20 specimens), is 
assigned. In addition, for the CY 2013 update, we are revising the long 
descriptor for HCPCS code G0416 to read ``Surgical pathology gross and 
microscopic examination for prostate needle saturation biopsy sampling 
10-20 specimens'' effective January 1, 2013. The final CY 2013 
geometric mean cost for APC 0661 is approximately $162.
    Table 19 below lists the HCPCS codes and associated status 
indicators that we are reassigning from a New Technology APC to a 
different New Technology APC for CY 2013. The final CY 2013 payment 
rates for HCPCS codes G0417, G0418, and G0419 can be found in Addendum 
B of this final rule with comment period (which is available via the 
Internet on the CMS Web site).
[GRAPHIC] [TIFF OMITTED] TR15NO12.031


[[Page 68316]]


3. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly 
Enriched Uranium Sources
a. Background
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the elderly 
(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 Administration has established an agenda 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 within a 5-year time period. 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.
    Full Cost Recovery, which is routinely considered in CMS payment 
under Medicare, is the accounting practice used by producers and 
suppliers to describe the recovery of all contributing costs. Unlike 
legacy sources that often benefit from government subsidized 
multifunction facilities, the cost of these alternative methods will be 
increased over the cost of medical radioisotopes produced using HEU 
because hospitals' payments to producers and suppliers will have to 
cover capital expense (such as, for example, the cost of building new 
reactors, particle accelerators, or other very long-term investments), 
as well as all other new industry-specific ancillary costs (such as, 
for example, the cost of long-term storage of radioactive waste). 
Hospitals that use medical radioisotopes that are produced from non-HEU 
sources can expect producers and suppliers to pass on to them the full 
impact of these costs.
    In the short term, some hospitals will be able to depend on low 
cost legacy producers using aging subsidized reactors while other 
hospitals will be forced to absorb the full cost of non-HEU alternative 
sources. Over several years, we believe that these cost differentials 
will promote increased regional shortages and create larger cost 
differentials and greater cost variations among hospitals. As a result, 
we believe this change in supply source will create a significant 
payment inequity among hospitals resulting from factors that are 
outside of normal market forces.
b. Payment Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45121 through 45123), 
we proposed to exercise our authority to establish ``other adjustments 
as determined to be necessary to ensure equitable payments'' under the 
OPPS in accordance with section 1833(t)(2)(E) of the Act. We stated 
that we do not believe that we can ensure equitable payments to 
hospitals over the next 4 to 5 years in the absence of an adjustment to 
account for the significant payment inequities created by factors that 
will likely arise due to the change in supply source for the 
radioisotope used commonly in modern medical imaging procedures. We 
proposed to provide an adjustment for the marginal cost for 
radioisotopes produced from non-HEU sources over the costs for 
radioisotopes produced by HEU sources. We stated that we believe such 
an adjustment would ensure equitable payments in light of the 
Administration's HEU agenda, market influences, cost differentials, and 
cost variations that will create significant payment inequities among 
hospitals.
    For CY 2013, we proposed to make an additional payment of $10, 
which is an amount based on the best available estimations of the 
incremental costs associated with non-HEU Tc-99m production as 
calculated using the Full Cost Recovery accounting methodology. We 
proposed to establish a new HCPCS code, QXXXX (Tc-99m from non-HEU 
source, full cost recovery add-on, per dose), to describe the Tc-99m 
radioisotope produced by non-HEU methods and used in a diagnostic 
procedure. Under the proposal, hospitals would be able to report this 
HCPCS Q-code 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 as coming from non-HEU sources and have been 
priced using a Full Cost Recovery accounting methodology. The HCPCS Q-
code would be used to pay hospitals for the additional (incremental) 
cost of using Tc-99m from a non-HEU source.
    Under the proposal, hospitals would not be required to make a 
separate certification of the non-HEU source on the claim; the 
inclusion of the new HCPCS code QXXXX on the claim would indicate that 
the hospital has met the conditions of the service definition as it 
does for any billed service. However, in the event of an audit, we 
stated that hospitals would be expected to be able to produce 
documentation that the individual dose delivered to the patient was 
completely produced from a non-HEU source. We proposed three ways in 
which hospitals could accomplish this.
    First, the hospital could produce documentation such as invoices or 
patient dose labels or tracking sheets that indicated that the 
patient's dose was completely produced from non-HEU sources and priced 
based on Full Cost Recovery. In this first case, the supplier would be 
expected to be able to trace a specific dose of Tc-99m to a completely 
non-HEU batch. Current pharmacy recordkeeping is generally able to 
trace all components of radiopharmaceuticals back to their source 
production batches. A hospital would not be compliant with the HCPCS Q-
code definition if the documentation indicated the supplier produced a 
mixed batch and labeled a fraction of the doses equal to the non-HEU 
fraction in the batch.
    Second, a hospital could produce documentation that the entire 
batch of Tc-99m doses derives from non-HEU sources for a specified 
period of time, for example, the time that a single non-HEU based 
generator is in use. This approach would obviate the need for specific 
dose tracking from a claims audit perspective, although that 
information is typically required for other purposes. An attestation 
from the generator supplier would be sufficient evidence for the 
hospital, as would invoices that show that all doses of Tc-99m during a 
specified period came from inherently non-HEU alternative sources.
    Third, if the industry was to implement labeling of generators and/
or doses with labels attesting to 100 percent non-HEU sources priced 
based on Full Cost Recovery, documentation of labeled isotope usage 
using either the specific dose approach or the 100 percent hospital 
usage approach could provide evidence of hospital compliance. The 
hospital would be required to retain appropriate documentation within 
the hospital (including pharmacy) records but would not need to keep 
any specific documentation within the individual medical record. Also, 
we would consider a dose to be priced based on Full Cost Recovery when 
the supplier could attest that the supply chain adheres to usual 
industry practices to account for Full Cost Recovery, specifically 
including the capital cost of sustainable production and the 
environmental cost of waste management.
    To reduce the administrative overhead for hospitals, we proposed 
not

[[Page 68317]]

to require hospitals to separately track additional costs for Tc-99m 
doses from non-HEU sources, but to include the cost of the radioisotope 
in the cost of the diagnostic radiopharmaceutical as usual, reporting 
only a token $1 charge for the HCPCS code QXXXX line. Under the 
proposal, we would continue to calculate the total costs of 
radionuclide scans using claims data, and would periodically 
recalculate the estimated incremental cost of Tc-99m from non-HEU 
sources based on Full Cost Recovery, using models relying on the best 
available industry reports and projections, and would adjust the 
payment for HCPCS code QXXXX accordingly, reducing the payment for the 
scans by the amount of cost paid through HCPCS code QXXXX payment. We 
stated that we believe this proposal allows us to continuously 
compensate for unanticipated changes in Tc-99m cost attributable to new 
non-HEU supply sources while avoiding a double payment for the 
increased cost.
    Comment: The vast majority of commenters conceptually agreed with 
CMS' proposed payment policy. However, the commenters differed in 
opinion on how CMS should implement a proposal to encourage hospitals 
to switch from Tc-99m derived from HEU sources to Tc-99m derived from 
non-HEU sources.
    Many commenters disagreed specifically with CMS' proposal to make 
an additional payment of $10 per dose for Tc-99m radioisotopes produced 
by non-HEU methods, used in a diagnostic procedure. These commenters 
agreed that an additional payment is necessary in order to ensure that 
hospitals are fully paid for the additional costs incurred for the use 
of non-HEU Tc-99m radioisotopes, but the commenters argued that the 
additional $10 payment is insufficient and inadequate to incentivize 
hospitals to change their current practices and transition purchases of 
Tc-99m to non-HEU sources. The commenters suggested that CMS instead 
adjust or increase the payment amount to more adequately cover any 
additional costs to providers.
    One commenter asked that CMS conduct a study of the actual costs at 
a time when non-HEU Tc-99m is actually available to hospitals, and 
propose an adjustment that will better reflect both the marginal 
additional costs of the non-HEU sources and the administrative and 
compliance burden on hospitals.
    Another commenter recommended that CMS establish HCPCS code QXXXX 
(Tc-99m from non-HEU sources, full cost recovery add-on, per dose) and 
make an interim payment of $10 per unit for CY 2013 and CY 2014. The 
commenter further suggested that, beginning in CY 2015, CMS calculate 
the cost of the service described by the recommended code based on the 
standard CMS payment methodology because the calculations will be based 
on charges for services furnished in CY 2013, and for CY 2015 and years 
following, CMS will have estimated costs on which to base the 
additional payment for the HCPCS Q-code. In addition, the commenter 
recommended that CMS carefully track the phase-out of the HEU sources 
and eliminate HCPCS code QXXXX once HEU is phased out of the market in 
the United States.
    Overall, most of the commenters encouraged CMS to continue to work 
with pertinent stakeholders and providers in the industry on this 
issue.
    Response: We agree with the commenters that $10 is not a large 
incentive payment to promote a conversion to non-HEU sources of Tc-99m. 
However, we are concerned that many commenters have mischaracterized 
this payment. We did not create an additional payment to promote the 
Administration's initiative to eliminate domestic reliance on legacy 
production processes producing Tc-99m from HEU, as that is outside the 
scope of the OPPS. Rather, the industry has conveyed to us that this 
conversion to non-HEU sources will occur in response to U.S. strategic 
policy, but that cost considerations have created barriers to that 
movement. One of the cost considerations is the fact that non-HEU 
sourced Mo-99, the Tc-99m precursor, is expected to cost more than 
current sources from legacy reactors, and this increased cost will 
adversely impact hospitals. In evaluating that concern, we determined 
that there is, in fact, a probability not only that costs will increase 
but that those costs will not be passed on uniformly as the industry 
converts. Therefore, we used our authority to ensure payment equity 
among hospitals by proposing to create this additional payment to 
address the incremental cost of obtaining Tc-99m from the new sources 
of supply. Although commenters have opined that a larger payment would 
be a better incentive to support non-HEU conversion, the purpose for 
the additional payment is limited to mitigating any adverse impact of 
existing payment policy and is based on the authority set forth at 
section 1833(t)(2)(E) of the Act.
    Most of the comments raising concerns about the inadequacy of the 
additional payment suggested that we did not account for the 
administrative costs involved in implementing this additional payment 
at the hospital level, at the radiopharmacy level, and at the level of 
the generator manufacturer. However, we note that previous discussions 
with the industry indicated that the actual costs of conversion, 
distinct from the administrative costs of billing, are confined to the 
producer (reactor) and the processor and are passed down through the 
supply chain from there. In our own analysis, we concurred with that 
finding and calculated a payment that would readily cover the 
additional cost of this change in supply as it is passed down the 
supply chain. We do not believe that it promotes efficiency to add 
administrative markup to this increased cost of a supply, especially 
given that we believe that the administrative cost of adding a new 
service into the billing system should be small at the hospital and the 
pharmacy levels. Moreover, due to the small absolute difference in cost 
between non-HEU and HEU sourced Tc-99m, we do not believe that 
significant inequities would exist in hospital costs until a 
significant amount of more expensive non-HEU Mo-99 enters the system, 
at which point any administrative cost would be spread over a large 
number of claims.
    Finally, we agree with commenters who stated that this additional 
payment should be updated as better data become available. We stated in 
the proposed rule that we intend to look at the amount of the add-on 
payment and potentially update it as better economic information 
becomes available. Although we did not limit ourselves to the 
methodology beyond a commitment to use the best available data, we also 
did not propose using our usual OPPS methodologies to update the 
payment. We had specifically advised hospitals that separate reporting 
of the cost of Tc-99m from non-HEU sources was not required for several 
reasons. First, a particular generator manufacturer could elect to 
provide HEU and non-HEU generators at the same averaged cost, a method 
that would enable the client hospitals to defray any overall cost 
increase as non-HEU generators became randomly available. Because there 
could still be an incremental cost differential incurred by doing 
business with that manufacturer as compared with a purely non-HEU 
manufacturer, our normal OPPS methods would show no incremental cost 
and thus could not be used to mitigate a payment inequity. Second, we 
noted that separate reporting of the costs of the two sources or the 
calculation and reporting of a cost differential would significantly 
increase the administrative burden on hospitals,

[[Page 68318]]

a burden of which we have been particularly mindful.
    Comment: Several commenters asked that CMS provide separate payment 
for all diagnostic radiopharmaceuticals, regardless of their per day 
cost, as this policy would support conversion to non-HEU sources. A few 
commenters recommended that CMS unpackage all radiopharmaceuticals that 
meet the annual packaging threshold. They also suggested that CMS 
unpackage all radiopharmaceuticals that use Tc-99m, regardless of their 
per day cost. One commenter suggested that the proposed add-on payment 
of $10 be made in addition to separate payment for the diagnostic 
radiopharmaceutical.
    The commenters emphasized their concern over increased costs of 
conversion to 100 percent non-HEU for radioisotopes. One commenter 
argued that separate payment would provide a direct, measurable 
incentive to the entire radiopharmaceutical market supply chain to 
support the efforts to convert from HEU to non-HEU sources. 
Additionally, the commenter stated that separate payment would allow 
CMS to obtain accurate hospital cost data on the cost of both HEU and 
non-HEU radiopharmaceuticals.
    Response: We have already discussed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66765 through 66768) the reasons why 
the agency has determined that it is appropriate to package payment for 
a diagnostic radiopharmaceutical into the payment for the nuclear 
medicine scan, and we have finalized this policy again in section 
II.A.3.f. of this final rule with comment period. However, specifically 
from the standpoint of this add-on payment to ensure equitable payments 
to hospitals, a separate payment for the diagnostic radiopharmaceutical 
would not unpackage the cost of the radioisotope from the much larger 
cost of the drug component, nor would it differentiate between HEU and 
non-HEU sources. Therefore, unpackaging the cost of the diagnostic 
radiopharmaceutical would not create a differential payment to ensure 
payment equity amongst hospitals.
    Comment: Several commenters were concerned with CMS' proposal that 
Tc-99m doses be derived 100 percent from non-HEU sources in order to 
receive the additional $10 payment. A few commenters stated that it 
would be impossible to accurately predict the percentage of Tc-99m 
doses that will be comprised 100 percent from non-HEU sources. Other 
commenters expressed concern over the significant costs that will be 
incurred for segregating 100 percent non-HEU sources, especially in the 
radiopharmacy.
    Response: We agree with the commenters that it will be impossible 
to accurately predict the percentage of Tc-99m doses that will be 
comprised of 100 percent of non-HEU sourced material, but that is 
because it will be impossible to predict the percentage of non-HEU Tc-
99m available to manufacturers at any point in time. This presumption 
is one of the reasons that led us to the conclusion that payment for 
doses where 100 percent comes from non-HEU sources was the only 
reasonable option. We do not need to predict the amount of non-HEU Mo-
99 available to the industry to establish a blend; instead, the HCPCS 
Q-code can be used whenever and wherever enough non-HEU Tc-99m is 
available to be kept separate down to the level of the generator or 
patient dose. Multiple codes to reflect different blends are not 
needed, and we do not need to create smaller payments for blends that 
reflect smaller amounts of non-HEU material. Because payment must be 
driven by cost, a 20-percent blend would be limited to 20 percent of 
the $10 cost or $2, and hospitals are already concerned that the $10 
additional payment is a small payment when they consider it against the 
effort involved in making tracking and billing changes.
    However, we do not believe that any costs created by changes in 
radiopharmacy procedures will be significant in the charges passed on 
to hospitals. We do understand that there may be some instances in 
which a radiopharmacy will have both a non-HEU and an HEU generator, 
and the pharmacy will need to determine whether it wants to keep those 
sources separate or blend them and eschew labeling of a non-HEU source. 
We also understand that this may be a larger issue at the generator 
manufacturer level, especially very early in the conversion when non-
HEU Mo-99 is scarce. On the other hand, when non-HEU Mo-99 is scarce, 
the incremental cost of higher priced non-HEU Mo-99 is small and the 
blending of small amounts of non-HEU Mo-99 will not create payment 
inequities among hospitals. We expect that as conversion progresses and 
more non-HEU Mo-99 enters the supply chain, manufacturing processes may 
evolve. Ultimately, there is no requirement to use this HCPCS Q-code or 
label non-HEU based Mo-99; the payment exists as a tool if it is 
necessary to reduce payment inequities that might occur as a 
consequence of industry conversion to non-HEU based Mo-99.
    One of the concerns about reporting doses derived from 100 percent 
non-HEU sources had to do with compliance concerns if, in the process 
of switching between an HEU and a non-HEU run, the manufacturer or 
pharmacy did not add in an extra step of flushing lines to ensure that 
cross-contamination did not occur. Our understanding is that using 
different sources for consecutive manufacturing runs would not create 
source contamination of more than 1 or 2 percent based on usual 
manufacturing processes. We note that it is not our intent to introduce 
unnecessary inefficiencies solely to support payment, and in this case 
we can confirm that production steps, such as cleaning lines, should be 
driven by FDA manufacturing requirements, not by payment 
artificialities. We believe that manufacturing steps that do not risk 
reducing the non-HEU sourced Mo-99 or Tc-99m to less than 95 percent of 
the generator, elution or dose (that is, do not risk reducing the 
content of the dose supplied to the patient to less than 95 percent 
non-HEU sourced Tc-99m) are consistent with a product that is 
completely derived from a non-HEU source. Therefore, we are modifying 
our proposal to state that any dose of Tc-99m that can be traced to a 
Mo-99 supply containing no more than 5 percent HEU sourced Mo-99 shall 
be considered to be completely derived from non-HEU sources for the 
purposes of this final rule with comment period, this additional 
payment, and any compliance practices that support it. It is our 
understanding that the normal manufacturing records will still support 
processes that created the non-HEU supply.
    Comment: One commenter expressed concern regarding the 
administrative and financial burden that hospitals may incur upon 
adoption of this proposed policy. The commenter stated that these 
burdens may exceed the marginal additional cost of moving to non-HEU 
sources. The commenter believed that the proposed policy would result 
in additional administration and documentation burdens which include 
the following additional expenses: expenses for developing and 
maintaining policies to track, certify, and document HEU versus non-HEU 
sources in order to use the newly required HCPCS Q-code; new compliance 
program checks and monitoring to ensure the appropriate codes are used 
and documentation is maintained should an audit be conducted; 
additional personnel time and resources to create and maintain line 
items on the hospital charge master for non-HEU versus HEU codes and 
charges; and additional resources to

[[Page 68319]]

develop nuclear medicine department information technology 
infrastructure, as well as billing policies for documentation and use 
of the new HCPCS Q-code.
    Another commenter also believed that this proposal would create a 
significant burden on hospitals by requiring them to obtain, document, 
and track information from the supplier and thereby create an 
unnecessary level of complexity for hospitals that could result in code 
errors and omissions on claims. The commenter urged CMS not to finalize 
this proposal.
    Response: We do not believe that this additional payment will 
result in a significant administrative burden to hospitals. We note 
that most hospitals have computerized inventory and billing systems 
that are able to track low-cost items such as needles and aspirins. We 
have reiterated in our response to public comments in this final rule 
with comment period that we expect hospitals requesting this additional 
payment to be able to track a dose that has been labeled or claimed as 
``non-HEU sourced'' and do not expect hospitals to audit the validity 
of such claims made by their suppliers. We also note that the cost of 
adding a new code to the hospital chargemaster is not large, and that a 
hospital is not being subject to a significant payment inequity if the 
cost of adding a new code to the chargemaster actually exceeds the 
added cost of non-HEU sourced Tc99m to the hospital. Hospitals that are 
not experiencing high volumes of significantly increased costs are not 
obligated to use this additional payment as its use is entirely 
optional.
    Comment: One commenter asked that CMS confirm in this final rule 
with comment period that hospitals will not be required to audit or 
otherwise independently verify manufacturer or radiopharmacy 
documentation that a dose/injection meets the standard of non-HEU 
priced at Full Cost Recovery.
    A few commenters expressed concern regarding the compliance and 
liability burden that adopting this policy may place on hospitals. 
These commenters stated that hospitals may be uncomfortable attesting 
that the supplies they receive are from non-HEU sources when there is 
no reliable guarantee that the products are from non-HEU sources. 
Further, the commenters stated that they believe that the term 
``attesting'' in the ASP model is significantly different from what 
they believe is the original intent of this proposal. Therefore, the 
commenters suggested that CMS clarify the adequate documentation 
necessary to confirm that the provider obtained a dose that is 100 
percent from non-HEU sources.
    Response: We are aware that providers must exert considerable 
effort to conscientiously perform their compliance responsibilities 
over such a vast health care system, and we specifically attempted to 
offer examples of acceptable compliance steps to alleviate that burden 
in this instance. We acknowledge that the end product used by hospitals 
is effectively homogenous, and there is no practical way for a hospital 
to prove chemically that a supply purported to be derived from a non-
HEU source truly meets those requirements. On the other hand, the 
radiopharmaceutical industry is a heavily regulated industry closely 
monitored by the Food and Drug Administration, and it is our 
understanding that if a supplier indicates that a source is non-HEU, 
manufacturing records will be able to confirm that. We are confident 
that claims by suppliers as to the source of the Tc-99m used can be 
satisfactorily audited through usual manufacturing processes without 
creating additional requirements for hospitals. We do not expect 
hospitals to assay doses of drugs to ensure that they received what the 
invoice claimed, and we do not expect any chemical or physical 
verification here. It was our intent in the proposed rule to indicate 
that providers are expected to exercise due diligence, and to ensure 
that their claims are supported by internal records of some type, but 
that facilities could accept any tracking mechanism by a supplier 
(invoice, label, contract, among others) regarding a non-HEU source as 
satisfactory proof for the purposes of the facility.
    We also note that any use of the word ``attestation'' in the 
proposed rule was meant only to indicate a formal statement by one 
party to assure another party of the source and composition. We further 
note that these were examples in the proposed rule rather than 
requirements.
    Comment: Several commenters asked that CMS publish the methodology 
and data used to establish the additional payment amount of $10 for Tc-
99m derived from non-HEU sources.
    Response: There are two data sources on which we relied. First, the 
Organization for Economic Cooperation and Development--Nuclear Energy 
Agency (OECD-NEA) has published several economic analyses of the world 
market for Tc-99m, which are pertinent for the United States because, 
at present, our entire supply comes from foreign sources. Although some 
members of the industry have opined that these data are not accurate 
because the data include little information from U.S. suppliers, the 
fact remains that there is currently no supply available domestically. 
Thus, while the data we used may not reflect all of the unique market 
forces present in the domestic market, this data source provides the 
best estimation of the costs of non-HEU sources compared to HEU sources 
because the manufacturing steps are primarily performed overseas and 
therefore reflect the global market. Nonetheless, as an additional data 
source, we invited industry entities to submit additional information 
regarding their manufacturing and supply costs, production levels, and 
prices. However, given that the industry is small with limited numbers 
of competitors at each level of the supply chain, most American 
companies were reluctant to provide information and were insistent on 
confidentiality (as protected by FOIA Exemption 4) to safeguard the 
sensitive (business competitive) information that they did share. 
Therefore, we accepted supplemental information from the industry and 
pledged to maintain its confidentiality, and consequently are unable to 
provide details of the additional information. We can disclose our 
methodology and refer readers to the OECD-NEA models that form the 
basis of our model, noting that the supplemental information submitted 
to date has not significantly altered the conclusions drawn by the 
OECD-NEA.
    To estimate costs, we tracked costs through the entire supply 
chain, using a building block approach to add the cost of each step 
onto the steps that occurred before it. Because the OECD-NEA provided 
ranges rather than point estimations, we used an averaging approach to 
factor in the possible low cost, the possible high cost, and the most 
likely ``expected'' cost. This is a common estimation technique used in 
business when significant uncertainty exists. By avoiding optimistic 
assumptions, we were able to model a payment that reflects not only the 
likely costs but ones that would also be adequate to cover unexpected 
costs in one or more of the manufacturing steps.
    In response to the request to provide as much detail about our 
methodology as possible, we are detailing that methodology here. We 
used a supply chain model to accumulate costs through the Tc-99m supply 
chain based on--
    (Unit Cost of Supply/Production Efficiency) + Unit Production Cost 
+ ((Fixed Production Costs + Overhead)/Units Produced) = Unit 
Production Cost = Downstream Unit Cost of Supply.
    In tracking units (efficiency), we allowed for product loss during 
production and for product loss as a

[[Page 68320]]

function of time (decay). We applied this model across a supply chain 
that consisted of--
    Irradiator/Producer > Processor > Generator Manufacturer > Nuclear 
Pharmacy > Hospital > Patient.
    Using a Program Evaluation and Review Technique (PERT) 3-point 
estimation applied to costs, we based the upper and lower bounds on the 
OECD-NEA economic models for Full Cost Recovery (2011) and non-HEU 
Conversion (2012), given that U.S. supply is based on the global 
market. We then varied the expected value to model a range of outcomes. 
Finally we calculated the incremental cost of process changes by 
subtracting current costs. Almost all of the incremental costs of 
switching to non-HEU sources occur in the irradiation and the 
processing steps, with very little impact on generator assembly, 
generator elution, or the preparation of the patient dose. We noted 
that any artificial costs of tracking during conversion would not be 
reflected in the final post-conversion costs of supply. Due to the wide 
variation in cost projections, we rounded up to the nearest $5 as most 
of the estimators could not be regarded as sufficiently precise to 
justify a more precise value until actual cost data become available. 
This methodology resulted in a projection that fully accounts for the 
cost of conversion in almost all probable scenarios and that also 
accounts for or significantly offsets the costs of Full Cost Recovery 
under most combinations of assumptions. Therefore, the $10 value can be 
expected to offset any payment inequities under most likely 
combinations of cost changes within the Tc-99m supply chain.
    Comment: One commenter stated that suppliers of Mo-99 are currently 
working toward full conversion to non-HEU sources by 2015. However, the 
commenter stated that it is estimated that only 10 percent of the Tc-
99m doses used in the United States could be produced from 100 percent 
non-HEU sources in 2013. The commenter further believed that the 
proposed policy will cause a substantial increase in material costs, 
require duplicative effort in the preparation of radiopharmaceutical 
doses, add additional administrative costs, increase the costs for non-
HEU products, and create a disincentive for hospitals that cannot 
purchase non-HEU products as they would be unwilling to pay higher 
prices for their nuclear pharmaceutical products when they are not 
receiving any additional benefits.
    The commenter instead suggested that these impacts can be reduced 
by establishing a threshold amount of Mo-99 that must be used by a 
generator manufacturer for CY 2013, based on information provided by 
the OECD-NEA and other pertinent stakeholders. The commenter stated 
that this amount could then be adjusted upward in later years. The 
commenter further explained that, in order for a technetium generator 
to be considered ``compliant'' with the requirements for the additional 
payment, the manufacturer of that generator would need to certify to 
providers that it used at least the established threshold amount of 
non-HEU sourced Mo-99 in the production of its generators for CY 2013 
and for subsequent quarters. In turn, the hospitals that purchased the 
Tc-99m doses prepared by complaint manufactures would receive separate 
payment during that specific period. The commenter stated that this 
approach would require a downward adjustment to the proposed $10 
additional payment to reflect the lower amount of non-HEU Mo-99.
    Response: We acknowledge the desirability of a simplified payment 
for non-HEU sourced material in the generators, and agree that the 
proposed blended payment would be much easier to implement. However, we 
note that we do not have the authority to create that type of payment. 
Within the OPPS, we depend on reported costs, as calculated from claims 
and cost report information, to set prospective payments. Our authority 
to deviate from this system in this instance is based on the authority 
of the Secretary to adjust payments if necessary to ensure payment 
equity among hospitals. A payment adjustment based on industry-wide 
thresholds would not create a payment differential among those 
hospitals with predominantly higher cost non-HEU sources and those 
hospitals with predominantly lower cost HEU sources. However, although 
we lack the authority to create a special payment to cover rising costs 
at the industry or manufacturer level, we note that the normal OPPS 
payment mechanism does exactly that: as costs rise, those costs will be 
passed on globally to hospitals and reflected in their charges adjusted 
to costs and, therefore, ultimately reflected in the prospective 
payments calculated by our usual methodology. This add-on payment 
merely ensures equitable payments to hospitals through the transition 
where non-HEU sources are not uniformly distributed, while our 
established OPPS mechanisms will ensure that the total costs of new 
sources are incorporated into final payments year by year. We also have 
previously stated that we believe that costly changes in manufacturing 
solely to facilitate a transitional payment are not likely to occur, 
and that instead the payment can be expected to trigger small 
administrative changes. We expect that expensive changes in industry 
processes will not be driven by an interim payment but will occur only 
when those changes will continue to be necessary or desirable after the 
transition is complete.
    Comment: A few commenters suggested that CMS, at a minimum, allow a 
payment adjustment for lower percentages (less than 100 percent) of 
non-HEU sources and institute a multiyear phase-in period. One 
commenter suggested that CMS establish a ``threshold quotient'' of non-
HEU content in Tc-99m radiopharmaceuticals during CY 2013 and allow 
partial payment of the $10 additional payment amount. The commenter 
explained that this would require CMS to accept a given percentage 
amount of non-HEU source content and pay a corresponding percentage of 
the proposed $10 additional payment amount. The commenter gave the 
example of a payment of $1.50 for Tc-99m sources that contain 15 
percent non-HEU, as $1.50 is 15 percent of the $10 proposed additional 
payment amount. The commenter also suggested that CMS could further 
promote the conversion to 100 percent non-HEU sources by adopting 
industry-wide targets for conversion, which would include conversion to 
25 percent in CY 2013, 50 percent in CY 2014, 75 percent in CY 2015, 
and 100 percent in CY 2016.
    Another commenter suggested that a 10-percent industry threshold 
program be considered for CY 2013 in lieu of the 100 percent non-HEU 
sources proposed requirement. The commenter stated that a payment of no 
less than $10 could be given for non-HEU documented doses and that this 
would be more reflective of the short-term non-HEU Mo-99 supply.
    Response: As noted above, our authority to establish this 
additional payment is based on the necessity to ensure equitable 
payments to hospitals, an authority that does not allow us to develop 
payments to promote the conversion of the industry to non-HEU sources. 
Therefore, our ability to create industry-wide payments is limited. We 
considered using one or more thresholds ranging from 10 percent to 80 
percent to pay for blended sources that were not derived entirely from 
non-HEU sourced Mo-99, but determined that to be impractical for 
several reasons. First, the use of multiple codes to describe different 
mixtures of HEU and non-HEU

[[Page 68321]]

sourced Mo-99 is immeasurably more complex than a simple single all or 
nothing coding choice, and many commenters were concerned about the 
complexity of even our proposed coding schema. Second, any blend of HEU 
and non-HEU sourced material will, as mentioned by the commenters, have 
reduced additional costs in proportion to the percentage of the blend. 
Because many commenters were concerned that $10 was small compared to 
the administrative effort they believed might be involved, we did not 
believe that a significantly smaller payment would be acceptable to 
that level of the supply chain.
    Comment: Several commenters suggested that CMS extend the $10 
additional payment for non-HEU sources for at least 5 years. The 
commenters stated that this period of time will be required to convert 
fully to non-HEU sources. Another commenter requested clarification of 
the proposed implementation date and methodology for calculating the 
total costs of radionuclide scans using claims data and the periodic 
recalculation of the estimated marginal cost of non-HEU Full Cost 
Recovery sources using models relying on the best available industry 
reports and projections, resulting in an adjustment in the payment of 
the proposed HCPCS code QXXXX accordingly, reducing the payment for the 
scans by the amount of cost paid through the HCPCS code QXXXX payment.
    Response: Although we typically propose only the payments for the 
subsequent calendar year except in the case of adjustments that need to 
be phased in over multiple years, we did state our current expectations 
of the state of the industry and our expectations of a probable need 
for this additional payment over multiple years. We stated that our 
current expectation is that the transition to non-HEU sourced Mo-99 
will be completed within 4 to 5 years. Therefore, we expect there may 
be a need to make differential payments for a period of 4 to 5 years. 
We will reassess, and propose, on an annual basis, whether such an 
adjustment under section 1833(t)(2)(E) of the Act continues to be 
necessary and whether any changes to the adjustment are needed. Again, 
our current expectation is that this additional payment will be needed 
for the duration of the industry's conversion to alternative methods to 
producing Tc-99m without HEU, which is expected to be completed within 
4 to 5 years.
    With respect to the request for clarification regarding future 
adjustments of this proposed payment, we note that the payment is being 
applied in addition to the standard procedure payment amount for 
nuclear medicine scans, including the diagnostic radioisotope and 
pharmaceutical, that is paid based on reported costs. As more non-HEU 
sourced Mo-99 is used, the costs reported by hospitals will contain 
costs associated with non-HEU conversion. Because the HCPCS code QXXXX 
is the indicator of non-HEU Mo-99 use and is also the vehicle for the 
additional payment, the rate at which extra payments are made will 
exactly follow the rate at which non-HEU sources are reported with 
their attendant additional costs. Therefore, even as we increase the 
payment for the nuclear medicine scan with radioisotope in the future 
due to increasing radioisotope costs, we expect to offset (reduce) the 
payment by the amount of the non-HEU add-on payment to avoid paying 
twice for non-HEU costs. This approach has the effect of using the add-
on payment to make an additional payment for the cost of non-HEU 
sourced Mo-99 in the year that the cost appears, rather than waiting 18 
months until the cost is reflected in the claims data. Consistent with 
our OPPS methods, though, we will still be basing the final payments 
for the nuclear medicine scans on the aggregate costs of the scan and 
its radioisotopes and pharmaceuticals as reported by hospitals. For 
example, suppose that 20 percent of hospitals in CY 2013 report non-HEU 
Tc-99m usage billed with HCPCS code QXXXX. The OPPS payment for the 
scan with its diagnostic radioisotope will still reflect 100 percent of 
the reported CY 2011 costs. The $10 from HCPCS code QXXXX will 
represent additional money because the higher cost non-HEU Tc-99m was 
not reflected in the CY 2011 cost data. However, when we set the rates 
for CY 2015, those 20 percent of the hospitals who used non-HEU Tc-99m 
in CY 2013 will have reported higher costs for scans in the CY 2013 
claims data because they had an additional cost from the non-HEU Tc-99m 
that they used. To eliminate a double payment, we will need to make an 
adjustment, such as removing the total dollars paid by HCPCS code QXXXX 
in CY 2013 (that is, the estimated additional cost of the non-HEU 
sourced isotope in those 20 percent of the claims) from the total 
reported procedure dollars in CY 2013 before setting the base procedure 
rate for CY 2015. We note that this offset does not reduce the payment 
for the scan below its current level; it only keeps the payment from 
going up as the cost of the radioisotope rises, because the increased 
cost of the radioisotope is being paid separately using HCPCS code 
QXXXX. In fact, in CY 2015, the utilization of non-HEU sourced Tc-99m 
should have continued to climb well beyond 20 percent. As in CY 2013, 
the dollars associated with increased utilization, that is, HCPCS code 
QXXXX billing in excess of the 20 percent, will again represent 
additional money over the total costs reflected in the CY 2013 claims.
    Comment: A few commenters suggested that CMS alter the description 
of the proposed HCPCS code QXXXX by adding the word ``study'' into the 
descriptor in order to make this definition more consistent with the 
arcana of the radiopharmaceutical industry. The commenters stated that 
the descriptor for the HCPCS Q-code therefore would be HCPCS code QXXXX 
(Tc-99m from non-HEU source, full cost recovery add-on, per study 
dose). The commenters stated that it would be logical to add the word 
``study'' because several nuclear cardiology procedures could require 
multiple Tc-99m doses administered alone with one CPT procedure code. 
Thus, they believed that providers would purchase one to three study 
doses. The commenters further suggested that CMS clarify in this final 
rule with comment period that the add-on payment would apply to each 
per study dose of the complete service as described by the CPT 
procedure code. Therefore, the commenters stated, providers would be 
able to bill the HCPCS Q-code with multiple units and be paid $10 per 
the number of study doses provided during the procedure described by 
the CPT code, as appropriate.
    Response: We acknowledge that it was our intent that this 
additional payment would be applied per study dose, such as the dose 
for the study performed at rest and the dose for the study performed 
with exercise. Therefore, we accept these recommendations and are 
modifying the proposed HCPCS definition to include the word ``study'' 
as follows: HCPCS code Q9969 (Tc-99m from non-highly enriched uranium 
source, full cost recovery add-on, per study dose).
    Comment: Several commenters requested that CMS clarify the proposal 
which requires a reduction to the payment for the scans by the amount 
of cost paid through the proposed HCPCS code QXXXX. The commenters were 
not sure whether the payment offset would be applied uniformly to all 
hospitals or only to those hospitals reporting non-HEU source doses. 
The commenters further requested that no reduction in

[[Page 68322]]

payment for nuclear scans by made as a result of the additional $10 
payment amount.
    Response: Although commenters were not making this comment in the 
context of budget neutrality, the considerations that caused us to 
create a payment offset were driven by precisely that statutory 
constraint. As discussed above, because hospitals will not be required 
to separately report costs for non-HEU radioisotopes, all increased 
costs will be reported as part of the charges for the nuclear scans. To 
preserve budget neutrality, an additional payment in one place must be 
accompanied by an offset somewhere else. To prevent double payment for 
the radioisotope, this offset will have to come from the payment for 
nuclear scans. Because all hospitals use the same codes for scans, and 
because parallel families of codes for scans using HEU and non-HEU 
sourced Tc-99m were not feasible, the offset will be applied to all 
hospitals. However, this offset will not occur until the claims data 
show non-HEU payments, at which time reported charges will presumably 
also reflect these increases in radioisotope costs. Thus, under the 
current expectations, if 10 percent of CY 2013 claims for a given 
nuclear scan show a $10 non-HEU add-on payment, $1 (10 percent of $10) 
will be offset in CY 2015 from the nuclear scan payment. However, if 
the 10 percent of hospitals claiming the $10 add-on payment also had 
$10 in increased costs, the calculated cost of a scan using CY 2013 
data will have increased by $1 (10 percent of $10). The payment for CY 
2015 would therefore increase by $1 because of the new costs in the 
claims data, and that new $1 will then be removed (offset) to go 
exclusively to the hospitals that are actually using the non-HEU 
sourced Tc-99m and are carrying the added cost. Therefore, we note that 
we are not reducing payments to all hospitals to offset the cost of 
this payment; rather, we are ensuring that the added costs of the non-
HEU sourced Tc-99m go only to the hospitals incurring the costs and 
that their payments are not diluted by increased payments to uninvolved 
facilities. In this way, we are not offsetting the current nuclear scan 
payment by the $10 non-HEU add-on payment even though we currently plan 
to offset future payment increases to the extent necessary to avoid 
double payments, as those increased costs will be included in the costs 
reported by hospitals.
    Comment: Several commenters suggested that CMS use the average 
sales price (ASP) methodology to establish the additional payment 
amount for Tc-99m based on non-HEU sources. One commenter suggested 
that CMS use the ASP data when available as a benchmark for determining 
costs that are packaged. A few commenters suggested that payment based 
on the ASP methodology be applied in the same manner CMS pays for 
therapeutic radiopharmaceuticals. The commenters stated that this will 
establish transparency in the ratesetting for radioisotopes derived 
from non-HEU sources.
    Response: We note that the ASP methodology does not apply to the 
Tc-99m radioisotope but only to the radiopharmaceutical that results 
from the combination of the isotope with the pharmaceutical moiety. 
Moreover, the ASP methodology is particularly unsuited to use on the 
radioisotope component alone because the isotope does not have an ASP. 
The radioisotope is typically produced by a generator and, whereas the 
ASP of a generator can be determined, the cost of a single dose is 
highly dependent on the number and timing of elutions of the generator, 
information that is not captured in the ASP. In fact, ASP is marginally 
valuable for Tc-99m radiopharmaceuticals only because the cost of the 
drug component is typically large compared to the cost of the isotope. 
This fact also argues against the comment that ASP would increase 
``transparency'' of the cost of Tc-99m: There is no additional 
transparency of an isotope packaged into a payment with the drug than 
there is for an isotope packaged into a payment with the scan. Finally, 
the use of the ASP methodology would not differentiate between the cost 
of a non-HEU sourced Tc-99m and the cost of using an HEU source, which 
is the purpose of this payment. The proposed additional payment 
accounts for the increased cost of the isotope, which meets both 
incremental payment and transparency goals.
    Comment: A few commenters recommended that CMS establish parallel 
codes for the use of HEU and non-HEU sourced radiopharmaceuticals to 
collect cost data for future ratesetting. Most of the commenters were 
concerned with the complexity involved in adding and reporting a single 
code.
    Response: We do not believe that an entire set of parallel codes 
would lessen the complexity or the administrative cost and, in fact, we 
believe it would significantly increase them. We acknowledge that this, 
like many other options we have had on other issues, could 
significantly improve the accuracy of our ratesetting. However, based 
on other comments from the hospitals that would have to use these 
parallel codes, we do not believe that we or the hospitals would 
consider the increased administrative cost to be worth the slight 
increase in payment precision.
    Comment: A few commenters requested that CMS clarify the meaning of 
``calculation by `Full Cost Recovery' ''. Some commenters also 
requested clarification of what this method encompasses.
    Response: Full Cost Recovery is a concept that is well known to the 
producers, processors, and manufacturers but is not commonly discussed 
by radiopharmacies and hospitals. Unlike other supplies, radioisotopes 
typically require nuclear reactors for initial production, and many of 
the capital and environmental costs are not captured in the prices. For 
example, some reactors were built decades ago for other purposes and 
can be used (relatively) ``free of charge'' because it costs almost the 
same to run the reactor and do nothing as it does to run the reactor 
and irradiate some uranium. This has implications on the accounting of 
capital costs, which, in many cases, were or are recovered by other 
uses to which the reactors were put. Similarly, moderately enriched 
uranium left over from previous programs may be cheaply downgraded and 
provided at a ``low'' cost because the alternative is to allow it to 
decay in storage with no consequent benefit. In both cases, the Tc-99m 
produced is obtained by hospitals at a bargain price, but not at a 
price that is sustainable because the old reactors will need to be 
replaced and the enriched uranium will be depleted. There are other 
unique costs for radioisotopes, such as the need to make arrangements 
for long-term storage of radioactive waste. Failure to account for 
those costs can lower the price of the radioisotope for some hospitals 
today but creates a long-term problem in that other hospitals must pick 
up the costs. Full Cost Recovery is the accounting principle that 
ensures that all of these long-term costs are included in cost 
calculations.
    Full Cost Recovery is obviously not important to the hospitals 
although, because it is critically important in providing for the long-
term supply of the radioisotope, it is actually a major underlying 
cause of payment inequities associated with this transition. From the 
standpoint of this final rule with comment period then, Full Cost 
Recovery is coupled to the non-HEU criterion for purposes of the 
additional payment. Just as manufacturers will indicate that certain 
Tc-99m doses are derived from non-HEU sources, it is our expectation 
that the irradiator (reactor) and the processor of the non-HEU Mo-

[[Page 68323]]

99 will be able to confirm that Full Cost Recovery accounting was used 
in setting the price of the non-HEU sourced Mo-99, an accounting 
principle that is considered integral to the conversion to non-HEU 
sources. We expect the generator manufacturer to affirm to the 
radiopharmacy that its source is non-HEU, with this designation 
including accounting according to Full Cost Recovery. As mentioned 
earlier, we consider this affirmation to be sufficient for the 
radiopharmacy and the hospital, regardless of whether the affirmation 
is in the form of a letter or statement, a notation on the invoice, or 
a label on the vial or tracking slip. We do not believe that 
independent verification is necessary or even possible for the 
radiopharmacy and the hospital and require only their due diligence in 
accepting claims made by their suppliers. The costs of new capital 
expenses such as new reactors, including all their associated costs, 
are factored into the manufacturer's price of the Tc-99m and passed 
down to hospitals, and the additional payment is made to account for 
those unique costs that the hospitals will incur.
    Comment: One commenter asked that CMS delay finalizing the proposal 
until CY 2014 so that hospitals have adequate time to implement the 
proposed change. Another commenter recommended that CMS postpone the 
implementation of the proposed policy until CY 2015, so that hospitals 
could avoid the complexities of handling and segregating HEU sources 
versus non-HEU sources. Another commenter expressed doubt that 
hospitals would be able to obtain Tc-99m derived from non-HEU sources 
in CY 2013. Therefore, they requested that the proposal be deferred 
until CY 2014.
    One commenter expressed concern about the availability of non-HEU 
sources because they were told by their suppliers that a 100 percent 
non-HEU source supply is unavailable for CY 2012 and also will be 
unavailable by CY 2013. The commenter questioned whether this issue 
should be addressed by a payment system and suggested that this issue 
instead be addressed by the Administration as opposed to CMS. The 
commenter further suggested that the implementation of this proposal be 
delayed until there is some availability of 100 percent non-HEU sourced 
isotopes in this country.
    Response: We considered the timing of this proposed additional 
payment after advice and consultation from both the Mo-99 industry and 
other U.S. agencies. We were initially advised that it is the 
understanding of the industry that conversion to non-HEU sources is 
already underway and is expected to be completed by the end of 2016. We 
understand this remains the case. We are aware that currently 
commercial Tc-99m is not readily available in the United States as it 
is in the world market, but that there also has not been a demand from 
within the United States. We do understand there is an expectation that 
it will make an appearance in CY 2013.
    We acknowledge that the supply of non-HEU sourced Mo-99 may be 
small in CY 2013. However, we believe, as the industry believes, that 
conversion to non-HEU sourced Tc-99m is inevitable and will occur over 
the next several years. From the standpoint of the Medicare payment 
system, it is important for us to have some mechanism in place to 
mitigate any adverse impact on hospitals. If the supply is very low, 
hospitals will not be significantly disadvantaged and may elect to not 
make use of this additional payment in CY 2013. Conversely, if the 
supply starts to increase, some hospitals may be forced to shoulder a 
disproportionate share of the cost due to supplier relationships and 
contract status; this additional payment will create an opportunity for 
those hospitals to mitigate that cost. We fully expect that utilization 
of this additional payment will be small in CY 2013 but will increase 
in CYs 2014, 2015, and 2016 as this conversion occurs. We reiterate 
that the normal mechanisms of the OPPS will ultimately incorporate 
increased costs into APC calculations with resultant increased payments 
for the nuclear scans that use this radioisotope that will allow us to 
retire or modify this payment and incorporate the entire additional 
cost into the base payment. This additional payment will enable 
hospitals to avoid any inequities caused by suddenly rising local costs 
that are not able to be captured in a timely fashion by usual methods. 
Based on the timetable for conversion and the rescue nature of the 
payment, we believe that a delay until CY 2014 or CY 2015 is 
unnecessary.
    Comment: Several commenters suggested that an additional separate 
payment be given in other Medicare settings, including the physician's 
office and ASC, for radioisotopes derived from non-HEU sources. One 
commenter recommended that these additional payments also be made under 
Medicaid, the Department of Defense/Veterans Affairs, Indian Health 
Services health programs, and any other government health programs 
where nuclear medicine procedures are covered. This commenter 
acknowledged that its comments are outside the scope of the OPPS/ASC 
final rule with comment period.
    Response: We agree with the commenter that addressing additional 
payments for radioisotopes derived from non-HEU sources in other 
settings and payment systems, such as the Physician's Office, Medicaid, 
the Department of Defense/Veterans Affairs, Indian Health Services 
health programs, and any other government health programs where nuclear 
medicine procedures are covered, is outside the scope of the proposed 
rule and cannot be addressed in this final rule with comment period. In 
addition, we note that the Medicare authority for this additional 
payment is based on the need to establish equitable payments for 
hospitals. The authority to make equitable adjustments under section 
1833(t)(2)(E) of the Act does not extend to the ASC setting. We do use 
a HCPCS Q-code as the vehicle for this additional payment so that other 
payers and other payment systems could use this code if desired.
    After consideration of the public comments we received, we are 
finalizing our proposed policy with the modifications discussed above. 
Specifically, we are modifying the policy to provide that a product 
identified as non-HEU sourced must be at least 95 percent derived from 
non-HEU sources. We also are finalizing our proposal to establish a 
HCPCS code for Tc-99m from non-HEU sources with a revised code 
definition. The number and title of the new HCPCS code is HCPCS code 
Q9969 (Tc-99m from non-highly enriched uranium source, full cost 
recovery add-on, per study dose) for CY 2013. HCPCS code Q9969 is 
assigned to APC 1442 (Non-HEU TC-99M Add-On/Dose) with a status 
indicator of ``K'' and a CY 2013 payment rate of $10.

D. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services
a. Cardiac Telemetry (APC 0213)
    For CY 2013, we proposed to reassign 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 
physician prescribed transmission of daily and emergent data reports) 
from APC 0209 (Level II Extended EEG,

[[Page 68324]]

Sleep, and Cardiovascular Studies), which had a proposed rule payment 
rate of approximately $808, to APC 0340 (Minor Ancillary Procedures), 
which had a proposed rule payment rate of approximately $49.
    Comment: One commenter disagreed with CMS' proposal to reassign CPT 
code 93229 to APC 0340 because the service described by CPT code 93229 
involves the use of sophisticated technology requiring 24-hour, 7 days 
a week monitoring by a technician for up to 30 days, which according to 
the commenter, is not a minor procedure. According to the commenter, 
the proposed rule payment rate of approximately $49 is significantly 
lower than the MPFS payment rate of $694, and much lower than the 
average contractual arrangement charge to hospitals of $674. The 
commenter explained that while this procedure is performed primarily by 
independent diagnostic testing facilities (approximately 98 percent), 
this service is provided in the HOPD setting under contractual 
arrangements with hospitals. The commenter stated that the CPT code is 
fairly new because it was effective January 1, 2009, and suggested that 
the low geometric mean cost for the service could be attributed to 
miscoding by hospitals. The commenter believed that hospitals may be 
reporting CPT code 93229 incorrectly when they are actually performing 
other remote cardiac tests, such as the services described by CPT code 
93226 (External electrocardiographic recording up to 48 hours by 
continuous rhythm recording and storage; scanning analysis with report) 
or CPT code 93271 (External patient and, when performed, auto activated 
electrocardiographic rhythm derived event recording with symptom-
related memory loop with remote download capability up to 30 days, 24-
hour attended monitoring; transmission and analysis), that require 
fewer resources. In addition, the commenter questioned the validity of 
the claims data, given the low number of claims billed under the OPPS. 
The commenter requested that CMS delay the reassignment of the service 
described by CPT code 93229 to APC 0340, and urged CMS to maintain CPT 
code 93229 in APC 0209 until more data are available to determine an 
appropriate payment for the service.
    Response: The commenter is correct that CPT code 93229 was 
effective January 1, 2009. However, we believe that since that time 
hospitals have familiarized themselves with how to code this service 
appropriately. We have no reason to believe that hospitals are 
incorrectly reporting the service described by CPT code 93229, and note 
that we do not specify the methodologies that hospitals must use to set 
charges for this, or any other, procedure. The calculation of OPPS 
relative payment weights that reflect the relative resources required 
for HOPD services is the foundation of the OPPS. We rely on hospitals 
to bill all HCPCS codes accurately in accordance with their code 
descriptors and CPT and CMS instructions, as applicable, and to report 
charges on claims and charges and costs on their Medicare hospital cost 
report appropriately.
    We do not agree with the commenter that it is necessary to delay 
the reassignment of CPT code 93229 to APC 0340. We examined our claims 
data for the last 3 years, given the concerns raised by the commenter 
regarding the low number of claims. Our analysis revealed that the 
claims submitted for the service described by CPT code 93229 have 
steadily increased since CY 2009, but the cost for the procedure has 
been significantly lower than the APC payment rate. Specifically, the 
cost for the service described by CPT code 93229 in CY 2009 was 
approximately $287, based on 103 single claims (out of 114 total 
claims), approximately $260 in CY 2010, based on 184 single claims (out 
of 184 total claims), and approximately $172 for CY 2011, based on 
1,949 single claims (out of 1,949 total claims). Based on the claims 
data, we have no reason to believe that the claims data used to 
calculate the cost for CPT code 93229 for CY 2013 does not 
appropriately reflect the hospitals cost for providing this service.
    In addition, because of concerns raised by the commenter regarding 
reassigning CPT code 93229 to an APC that is labeled ``Minor Ancillary 
Procedures,'' further review of our claims data for this final rule 
with comment period showed that CPT code 93229 would be more 
appropriately assigned to APC 0213 (Level I Extended EEG, Sleep, and 
Cardiovascular Studies) than APC 0340 based on its clinical homogeneity 
and resource costs in relation to the other procedures assigned to APC 
0213. Our claims data show a geometric mean cost of approximately $172 
for CPT code 93229, which is relatively similar to the final geometric 
mean cost of approximately $178 for APC 0213.
    Further, we recognize that the MPFS pays separately for CPT code 
93229, but the MPFS and the OPPS are very different payment systems. 
Each system is established under a different set of statutory and 
regulatory principles, and the policies established under the MPFS do 
not have bearing on the payment policies under the OPPS.
    In summary, after consideration of the public comment we received, 
we are finalizing our CY 2013 proposal, with modification. 
Specifically, we are reassigning CPT code 93229 from APC 0209 to APC 
0213 (instead of the proposed APC 0340) for CY 2013. The final CY 2013 
geometric mean cost for APC 0213 is approximately $178.
b. Mechanical Thrombectomy (APC 0653)
    For CY 2013, we proposed to continue to assign CPT code 36870 
(Thrombectomy, percutaneous, arteriovenous fistula, autogenous or 
nonautogenous graft (includes mechanical thrombus extraction and intra-
graft thrombolysis)) to APC 0653 (Level I Hand Musculoskeletal 
Procedures), which had a proposed rule payment rate of approximately 
$2,445.
    Comment: Some commenters expressed concern regarding the proposed 
19.7 percent reduction in the payment rate for the APC in which the 
procedure describing a mechanical thrombectomy by arteriovenous access, 
CPT code 36870, is assigned. The commenters believed that such a 
reduction would impede Medicare beneficiary's access to the procedure. 
In addition, the commenters stated that CMS offered no explanation for 
the payment rate reduction, nor permitted adequate notice for a 
meaningful opportunity to comment. The commenters requested that CMS 
delay its proposal to reduce the payment rate for mechanical 
thrombectomy by AV access until stakeholders have been given a 
meaningful opportunity to comment.
    Response: On an annual basis, CMS evaluates hospital outpatient 
claims data to determine the cost of procedures and services paid under 
the OPPS to ensure appropriate APC assignment for the following year. 
This evaluation generally results in establishing new APCs, reassigning 
procedures and services to more appropriate APCs, or deleting APCs that 
are no longer applicable. In addition, this evaluation may result in 
revising relative payment weights, as well as 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. The OPPS proposed rule is published 
annually in the summer and is the mechanism used by CMS to inform the 
public of the proposed changes for the upcoming year and provide an 
opportunity for comment. As has been

[[Page 68325]]

our practice, we encourage the public to submit their comments on 
issues addressed in the proposed rule. Comments received in response to 
the proposed rule are addressed in the final rule with comment period, 
which is also published annually in the winter.
    For the CY 2013 update, our analysis of the latest hospital 
outpatient data for claims submitted for services provided during CY 
2011 shows a geometric mean cost for CPT code 36870 of approximately 
$2,662, based on 539 single claims (out of 50,476 total claims), which 
is relatively similar to the proposed rule payment rate of 
approximately $2,748 for APC 0653. Based on our claims data, we believe 
that APC 0653 is the most appropriate APC assignment for CPT code 36870 
based on its clinical homogeneity and resource costs in relation to the 
other procedures assigned to the APC. Consistent with our policy of 
reviewing APC assignments annually, we will again reevaluate the cost 
of CPT code 36870 and its APC assignment in CY 2013 for the CY 2014 
rulemaking cycle.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal without modification. We will continue 
to maintain CPT code 36870 in APC 0653 for CY 2013. The final CY 2013 
geometric mean cost for APC 0653 is approximately $2,748.
c. Non-Congenital Cardiac Catheterization (APC 0080)
    For CY 2011, the AMA's CPT Editorial Panel restructured the Cardiac 
Catheterization section of the CPT codebook so that combinations of 
services that were previously reported using multiple codes are now 
reported with one CPT code. This revision deleted several non-
congenital cardiac catheterization-related CPT codes from the 93500 
series and created new CPT codes in the 93400 series and in the 93500 
series. We discussed these coding changes in detail in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71846 through 71849), 
along with the process by which we assigned the new CPT codes to APCs 
that we believe are comparable with respect to clinical characteristics 
and resources required to furnish the cardiac catheterization services 
described by the new CPT codes. As discussed in that final rule with 
comment period, we were able to use the existing CY 2009 hospital 
outpatient claims data and the most recent cost report data to create 
simulated costs for the new separately payable CPT codes for CY 2011. 
Specifically, to estimate the hospital costs associated with the 20 new 
non-congenital cardiac catheterization-related CPT codes based on their 
CY 2011 descriptors, we used claims and cost report data from CY 2009. 
Because of the substantive coding changes associated with the new non-
congenital cardiac catheterization-related CPT codes for CY 2011, we 
used our CY 2009 single and ``pseudo'' single claims data to simulate 
the new CY 2011 CPT code definitions. We stated that many of the new 
CPT codes were previously reported using multiple CY 2009 CPT codes, 
and we provided a crosswalk of the new CY 2011 cardiac catheterization 
CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in 
Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71849). Table 11 showed the criteria we applied to select a claim to be 
used in the calculation of the cost for the new codes (shown in Column 
A). As we stated in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71847 through 71848), we developed these criteria based on our 
clinicians' understanding of the services that were reported by the CY 
2009 CPT codes that, in various combinations, reflect the services 
provided that are described in the new CPT codes. We used approximately 
175,000 claims for the new non-congenital catheterization-related CPT 
codes, together with the single and ``pseudo'' single procedure claims 
for the remaining non-congenital catheterization-related CPT codes in 
APC 0080 (Diagnostic Cardiac Catheterization), to calculate CPT code 
level costs and the payment rate for APC 0080 of approximately $2,698. 
We noted that, because the CPT codes listed in Table 11 were new for CY 
2011, they were identified with comment indicator ``NI'' in Addendum B 
to that final rule with comment period to indicate that the interim APC 
assignment was subject to public comment. We specifically requested 
public comment on our methodology for simulating the costs for these 
new CY 2011 CPT codes, in addition to public comments on the payment 
rates themselves (75 FR 71848).
    For CY 2012, we continued to use the CY 2011 methodology in 
determining the APC assignments for the new cardiac catheterization CPT 
codes. That is, we continued to use the CY 2011 methodology in 
determining the APC assignments for the cardiac catheterization CPT 
codes by using the existing hospital outpatient claims and the cost 
report data from the predecessor cardiac catheterization CPT codes to 
simulate an estimated cost for the new cardiac catheterization CPT 
codes in determining the appropriate APC assignments. Specifically, we 
used the CY 2010 hospital outpatient claims data and the most recent 
cost report data to create simulated costs for the new separately 
payable CPT codes for CY 2012 to determine the payment rates for the 
APC to which the cardiac catheterization CPT codes were assigned. For 
CY 2012, we did not make any changes to the CY 2011 APC assignments of 
any of the CPT codes assigned to APC 0080 because the claims data 
supported continuation of these APC assignments.
    As we discussed in the CY 2013 OPPS/ASC proposed rule, because the 
cardiac catheterization CPT codes were new for CY 2011, CY 2013 is the 
first year that claims data are available for ratesetting for these 
specific CPT codes (77 FR 45084 through 45085). For CY 2013, our 
analysis of the CY 2011 claims data available for the proposed rule 
showed no violation of the 2 times rule for the cardiac catheterization 
CPT codes because the lowest cost of a CPT code with significant claims 
data in APC 0080 was approximately $1,716 (for CPT code 93451), while 
the highest cost of a CPT code with significant claims data was 
approximately $3,308 (for CPT code 93461). We stated in the proposed 
rule that we believe that the cardiac catheterization CPT codes 
continue to be appropriately assigned to APC 0080 based on clinical 
homogeneity and resource costs. Therefore, for CY 2013, we proposed to 
continue to assign the cardiac catheterization CPT codes to APC 0080.
    Comment: One commenter pointed out that CPT codes 93463 
(Pharmacologic agent administration (eg, inhaled nitric oxide, 
intravenous infusion of nitroprusside, dobutamine, milrinone, or other 
agent) including assessing hemodynamic measurements before, during, 
after and repeat pharmacologic agent administration, when performed 
(list separately in addition to code for primary procedure)) and 93464 
(Physiologic exercise study (eg, bicycle or arm ergometry) including 
assessing hemodynamic measurements before and after (list separately in 
addition to code for primary procedure)), which appeared in Table 5 
(Proposed APCs to Which Non-Congenital Cardiac Catheterization CPT 
Codes Would Be Assigned for CY 2013) of the CY 2013 OPPS/ASC proposed 
rule do not appear to represent cardiac catheterization procedures.
    Response: CPT codes 93463 and 93464 are packaged procedures. These 
CPT codes appeared in Table 5 of the CY 2013 OPPS/ASC proposed rule 
because these procedures are performed

[[Page 68326]]

in conjunction with cardiac catheterization procedures. CPT code 93463 
is an add-on code that describes a pharmacologic agent that may be 
administered when a cardiac catherization procedure is performed. 
Similarly, CPT code 93464 is an add-on code that describes a 
physiologic exercise test that may be combined with a cardiac 
catheterization. Because these procedures are used in conjunction with 
cardiac catherization procedures, we believe that listing them in Table 
5 of the CY 2013 OPPS/ASC proposed rule was appropriate.
    After consideration of the public comment that we received, we are 
finalizing our proposal, without modification, to continue to assign 
the cardiac catheterization CPT codes to APC 0080 for CY 2013, as 
listed below in Table 20 below. The final CY 2013 geometric mean cost 
for APC 0080 is approximately $2,726.
[GRAPHIC] [TIFF OMITTED] TR15NO12.032

d. Endovascular Revascularization of the Lower Extremity (APCs 0083, 
0229, and 0319)
    For the CY 2011 update, the AMA's CPT Editorial Panel created 16 
new CPT codes under the Endovascular Revascularization section of the 
2011 CPT codebook to describe endovascular revascularization procedures 
of the lower extremity performed for occlusive disease. In the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we 
discussed the process and methodology by which we assigned the CY 2011 
endovascular revascularization CPT codes to APCs that we believe are 
comparable with respect to clinical characteristics and resources 
required to furnish the services. Specifically, we were able to use the 
existing CY 2009 hospital outpatient claims data and the most recent 
cost report data to create simulated costs for 12 of the 16 new 
separately payable CPT codes for CY 2011. Because the endovascular 
revascularization CPT codes were new for CY 2011, we used our CY 2009 
single and ``pseudo'' single claims data to simulate the new CY 2011 
CPT code definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71844), many of the new endovascular 
revascularization CPT codes were previously reported using a 
combination of CY 2009 CPT codes. In order to simulate costs, we 
selected claims that we believe met the definition for each of the new 
endovascular revascularization CPT codes. Table 7 showed the criteria 
we

[[Page 68327]]

applied to select a claim to be used in the calculation of the costs 
for the new CPT codes (shown in Column A). As we stated in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71842), we developed 
these criteria based on our clinicians' understanding of services that 
were reported by the CY 2009 CPT codes that, in various combinations, 
reflect the services provided that are described by the new CPT codes 
for CY 2011.
    After determining the simulated costs for the procedures, we 
assigned each CPT code to appropriate APCs based on their clinical 
homogeneity and resource use. Of the 16 CPT new codes, we assigned 9 
CPT codes to APC 0083 (Coronary or Non-Coronary Angioplasty and 
Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter 
Placement of Intravascular Shunts), and created new APC 0319 
(Endovascular Revascularization of the Lower Extremity) for the 
remaining 2 CPT codes. Table 8 of the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71845) displayed their final CY 2011 APC 
assignments and CPT code costs. We noted that, because these CPT codes 
were new for CY 2011, they were assigned comment indicator ``NI'' in 
Addendum B to the CY 2011 OPPS/ASC final rule with comment period to 
identify them as new interim APC assignments for CY 2011, and subject 
to public comment. We specifically requested public comment on our 
methodology for simulating the costs for these new CY 2011 CPT codes in 
addition to public comments on the payment rates themselves (75 FR 
71845).
    As stated in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology 
to determine the APC assignments for the CPT codes that describe 
endovascular revascularization of the lower extremity. Because previous 
endovascular revascularization CPT codes were in existence prior to CY 
2011 and assigned to designated APCs, we continued to use existing 
hospital outpatient claims and cost report data from the established 
CPT codes to simulate estimated costs for the endovascular 
revascularization CPT codes to determine the appropriate APC 
assignments for CY 2012, as we did for CY 2011. In the CY 2012 OPPS/ASC 
final rule with comment period, we also revised the title of APC 0083 
from ``Coronary or Non-Coronary Angioplasty and Percutaneous 
Valvuloplasty'' to ``Coronary Angioplasty, Valvuloplasty, and Level I 
Endovascular Revascularization of the Lower Extremity''; revised the 
title of APC 0229 from ``Transcatheter Placement of Intravascular 
Shunts and Stents'' to ``Level II Endovascular Revascularization of the 
Lower Extremity''; and revised the title of APC 0319 from 
``Endovascular Revascularization of the Lower Extremity'' to ``Level 
III Endovascular Revascularization of the Lower Extremity''.
    Because the endovascular revascularization of the lower extremity 
CPT codes were new for CY 2011, CY 2013 is the first year of claims 
data that are available for ratesetting for these specific CPT codes. 
For CY 2013, review of the procedures with significant claims data in 
APCs 0083, 0229, and 0319 did not show 2 times rule violations in these 
APCs. In the CY 2013 OPPS/ASC proposed rule, we stated that we believe 
that the endovascular revascularization CPT codes assigned to APCs 
0083, 0229, and 0319 continue to be appropriately assigned based on 
clinical homogeneity and resource costs. Therefore, we proposed to 
continue to assign the endovascular revascularization CPT codes to APCs 
0083, 0229, and 0319 for CY 2013 (77 FR 45083 through 45084).
    Comment: Several commenters believed that the assignment of CPT 
code 37183 (Revision of transvenous intrahepatic portosystemic shunt(s) 
(tips) (includes venous access, hepatic and portal vein 
catheterization, portography with hemodynamic evaluation, intrahepatic 
tract recanulization/dilatation, stent placement and all associated 
imaging guidance and documentation) and 37210 (Uterine fibroid 
embolization (ufe, embolization of the uterine arteries to treat 
uterine fibroids, leiomyomata), percutaneous approach inclusive of 
vascular access, vessel selection, embolization, and all radiological 
supervision and interpretation, intraprocedural roadmapping, and 
imaging guidance necessary to complete the procedure) to APC 0229 
(Level II Endovascular Revascularization of the Lower Extremity) 
violated the 2 times rule. The commenter believed that these two codes 
should be reassigned to APC 0083 (Coronary Angioplasty, Valvuloplasty, 
and Level I Endovascular Revascularization of the Lower Extremity).
    Response: As stated above, in determining whether a 2 times rule 
violation exists in an APC, we consider only those HCPCS (both CPT and 
Level II Alphanumeric HCPCS codes) codes that are significant based on 
the number of claims. For purposes of identifying significant HCPCS 
codes for examination to determine if they violate 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 
cost to be significant (75 FR 71832). This longstanding definition of 
when a 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 100 million single procedure or single 
session claims we use for establishing costs. Similarly, a 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.
    For this CY 2013 OPPS/ASC final rule with comment period, our 
analysis of the CY 2011 claims data showed that CPT code 37183 had 211 
single claims (out of 302 total claims) while CPT code 37210 had 211 
single claims (out of 254 total claims). Of the 12 procedures assigned 
to APC 0229, only 5 procedures meet the definition of significant 
claims. Specifically, CPT codes 37205 (Transcatheter placement of an 
intravascular stent(s) (except coronary, carotid, vertebral, iliac, and 
lower extremity arteries), percutaneous; initial vessel), 37221 
(Revascularization, endovascular, open or percutaneous, iliac artery, 
unilateral, initial vessel; with transluminal stent placement(s), 
includes angioplasty within the same vessel, when performed), 37225 
(Revascularization, endovascular, open or percutaneous, femoral, 
popliteal artery(s), unilateral; with atherectomy, includes angioplasty 
within the same vessel, when performed), 37226 (Revascularization, 
endovascular, open or percutaneous, femoral, popliteal artery(s), 
unilateral; with transluminal stent placement(s), includes angioplasty 
within the same vessel, when performed), and 37229 (Revascularization, 
endovascular, open or percutaneous, tibial, peroneal artery, 
unilateral, initial vessel; with atherectomy, includes angioplasty 
within the same vessel, when performed) have significant claims data to 
determine whether a violating of the 2 times rule exists within APC 
0229. Review of the procedures assigned to APC 0229 revealed that the 
range of the CPT geometric mean costs for the procedures with 
significant claims data is between approximately $7,013 (for CPT code 
37205, which represents 14 percent of the single claims) and 
approximately $9,915 (for CPT code

[[Page 68328]]

37229, which represents 5 percent of the single claims). Taking into 
consideration all of the codes with significant claims that are 
assigned to APC 0229, CPT codes 37183 and 37210 do not meet the 
definition of significant claims to determine if there is a violation 
of the 2 times rule within APC 0229.
    Therefore, based on the clinical similarity to other procedures 
currently assigned to APC 0229, and because there is no determination 
of a violation of the 2 times rule, we are continuing to assign CPT 
codes 37183 and 37210 to APC 0229 for CY 2013. For CY 2013, APC 0229 
has a final geometric mean cost of approximately $8,905.
    Comment: Several commenters recommended the reassignment of add-on 
CPT code 37223 (Revascularization, endovascular, open or percutaneous, 
iliac artery, each additional ipsilateral iliac vessel; with 
transluminal stent placement(s), includes angioplasty within the same 
vessel, when performed (list separately in addition to code for primary 
procedure)) from APC 0083 to APC 0229 because the proposed geometric 
mean cost of the procedure is similar to the geometric mean costs of 
procedures assigned to APC 0229 (although the commenters also pointed 
out that the cost data calculated from single claims for CPT code 37223 
are unreliable because CPT code 37223 is an add-on code and would not 
appear by itself on a claim). Some commenters also argued that the 
assignment of CPT code 37223 to APC 0083 results in a violation of the 
2 times rule. The commenters stated that the reassignment of CPT code 
37223 to APC 0229 would be consistent with CMS' policy of assigning 
add-on codes to the same APC as their base codes. In addition, the 
commenters asserted that this reassignment would not only ensure 
patient access for this therapeutic procedure, but also would promote 
clinical homogeneity and similar resource cost of procedures assigned 
to APC 0229 and provide accurate payment for the procedure.
    Response: Although there are many add-on codes that have been 
assigned to the same APC as their base code, there are some procedures 
that are add-on codes that have been assigned to different APCs from 
their base or primary codes. In establishing an appropriate APC 
assignment, we take into consideration the clinical homogeneity and 
similarity in resource use associated with the procedure or service. 
This determination may result in the same APC assignment for both the 
base code and the add-on code, or in different APC assignments, as 
illustrated in Table 21 below. Therefore, we disagree with the 
commenters' assertion that we should reassign CPT code 37223 to APC 
0229 so that it is in the same APC as its base code.
    We also do not agree with commenters that the composition of APC 
0083 constitutes a violation of the 2 times rule because CPT code 37223 
does not have sufficient single claims to qualify as a significant 
procedure for purposes of applying the 2 times rule, as described 
earlier in this section. Based on our understanding of the procedure, 
we continue to believe that APC 0083 is the most appropriate assignment 
for CPT code 37223 based on clinical considerations and similarity in 
resource use to other procedures assigned to APC 0083, as we have 
stated in the past (76 FR 74156).
[GRAPHIC] [TIFF OMITTED] TR15NO12.033

    Further, in response to the commenters' concerns regarding 
providing accurate payment for the procedure described by CPT code 
37223 to ensure patient access, we believe that the payment rate for 
the procedure does not inhibit HOPDs from performing the procedure. The 
OPPS, like other Medicare payment systems, is budget neutral and 
overall increases in payments are limited to the hospital inpatient 
market basket increase. We believe that our payment rates generally 
reflect the costs that are associated with providing care to Medicare 
beneficiaries in cost efficient settings, and we believe that our 
payment rates are adequate to ensure access to services.

[[Page 68329]]

    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 37223 to APC 0083 for CY 2013.
    Comment: One commenter believed that CPT codes 37234 
(Revascularization, endovascular, open or percutaneous, tibial/peroneal 
artery, unilateral, each additional vessel; with transluminal stent 
placement(s), includes angioplasty within the same vessel, when 
performed (list separately in addition to code for primary procedure)), 
and 37235 (Revascularization, endovascular, open or percutaneous, 
tibial/peroneal artery, unilateral, each additional vessel; with 
transluminal stent placement(s) and atherectomy, includes angioplasty 
within the same vessel, when performed (list separately in addition to 
code for primary procedure)) are inappropriately assigned to APC 0083, 
and recommended that they be reassigned to APC 0229. The commenter 
indicated that these procedures involve both angioplasty with stent 
placements, similar to the procedure described by CPT code 37221 
(Revascularization, endovascular, open or percutaneous, iliac artery, 
unilateral, initial vessel; with transluminal stent placement(s), 
includes angioplasty within the same vessel, when performed), which is 
assigned to APC 0229. The commenter also stated that CPT codes 37234 
and 37235 are similar to the stent procedures described by CPT codes 
37205 (Transcatheter placement of an intravascular stent(s) (except 
coronary, carotid, vertebral, iliac, and lower extremity arteries), 
percutaneous; initial vessel) and 37206 (Transcatheter placement of an 
intravascular stent(s) (except coronary, carotid, vertebral, iliac, and 
lower extremity arteries), percutaneous; each additional vessel (list 
separately in addition to code for primary procedure)), which are 
assigned to APC 0229. The commenter concluded that the payment rate for 
APC 0083 does not reflect the resources associated with placement of a 
cardiovascular stent; therefore, CPT codes 37234 and 37235 should be 
reassigned to APC 0229.
    Response: We continue to believe that APC 0083 is the most 
appropriate assignment for these CPT codes based on clinical and 
resource considerations. We do not agree that the procedures described 
by CPT codes 37234 and 37235 are dissimilar to other procedures in APC 
0083 because they involve a stent. In addition, an analysis of CY 2011 
claims data shows only one single claim for CPT code 37234 (out of 153 
total claims) and no single claims (out of 31 total claims) for CPT 
code 37235. Therefore, the outpatient claims data do not support an APC 
reassignment of these CPT codes. Because these CPT codes were made 
effective January 1, 2011, CY 2011 is the first year of claims data 
available for CPT codes 37234 and 37235. Consistent with CMS' policy of 
reviewing APC assignments annually, we will reevaluate the cost of 
these procedures and their APC assignments next year for the CY 2014 
rulemaking cycle.
    After consideration of the public comment we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT codes 37234 and 37235 to APC 0083, which has a CY 2013 final 
geometric mean cost of approximately $4,139.
    Table 22 below provides the list of endovascular revascularization 
CPT codes assigned to APCs 0083, 0229, and 0319 for CY 2013.

[[Page 68330]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.034

e. External Electrocardiographic Monitoring (APC 0097)
    In the CY 2012 OPPS/ASC final rule with comment period, we assigned 
new CPT codes 0296T (External electrocardiographic recording) and 0297T 
(External electrocardiographic recording; scanning analysis with 
report) on an interim basis to APC 0097 (Level I Non-Invasive 
Physiologic Studies), which has a CY 2012 payment rate of approximately 
$68 and a CY 2013 proposed payment rate of approximately $67.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period supported our placement of CPT code 0296T in 
APC 0097. The commenter stated that the service described by CPT code 
0296T is clinically similar to other services in that APC. However, the 
commenter believed that CPT code 0297T would be more appropriately 
assigned to APC 0692 (Level II Electronic Analysis of Devices), which 
has a CY 2013 proposed rule cost of approximately $113). The commenter 
argued that CPT code 0297T is similar in nature and in required 
resources to CPT code 93271 (Electrocardiographic monitoring and 
analysis), which is assigned to APC 0692, because it has a similar 
monitoring period and requires similar network and information 
technology resources.
    Response: Based on our understanding of the resources that are 
required to furnish the services described by CPT codes 93271 and 
0297T, we do not agree with the commenter. The service described by CPT 
code 93271 includes 24-hour attended monitoring, while the service 
described by CPT 0297T does not. Therefore, we believe that CPT code 
0297T is more clinically similar to the services assigned to APC 0097. 
Therefore, for CY 2013, we will continue to assign this service to APC 
0097, which has a final CY 2013 geometric mean cost of approximately 
$68. We will reevaluate the APC placement using our standard 
ratesetting methodology when we receive claims data for these services.
f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697)
    Under the OPPS, echocardiography services are reported using a 
combination of CPT codes and HCPCS C-codes. Hospitals report the 
echocardiography CPT codes when performing echocardiography procedures 
without contrast. Alternatively, hospitals report the HCPCS C-codes 
when performing echocardiography procedures with contrast, or 
procedures without contrast followed by procedures with contrast. In 
addition to the HCPCS C-codes, hospitals should also report the 
appropriate units of the HCPCS codes for the contrast agents used in 
the performance of the echocardiograms.
    Currently, there are four APCs that describe echocardiography 
services:
     APC 0128 (Echocardiogram With Contrast)
     APC 0697 (Level I Echocardiogram Without Contrast)
     APC 0269 (Level II Echocardiogram Without Contrast)

[[Page 68331]]

     APC 0270 (Level III Echocardiogram Without Contrast)
    For CY 2013, we proposed payment rates for these APCs of 
approximately $571, $212, $392, and $558, respectively.
    Comment: One commenter expressed concern regarding the APC 
assignment of the procedures for fetal echocardiography to APC 0697. 
The commenter believed that this APC classification and payment rate 
are inconsistent with the resources required to perform fetal 
echocardiography studies. These resources, the commenter noted, 
substantially exceed the resources generally needed for adult services. 
Therefore, the commenter recommended that CMS reassign fetal 
echocardiography CPT codes 76825 (Echocardiography, fetal, 
cardiovascular system, real time with image documentation (2d), with or 
without m-mode recording;) and 76826 (Echocardiography, fetal, 
cardiovascular system, real time with image documentation (2d), with or 
without m-mode recording; follow-up or repeat study) to the same APC as 
adult echocardiography procedures, APC 0269 (Level II Echocardiogram 
Without Contrast).
    Response: For the CY 2013 OPPS/ASC proposed rule, we proposed to 
assign CPT codes 76825 and 76826 to APC 0697, which had a proposed 
payment rate of $211.71. As we stated in the CY 2012 OPPS/ASC final 
rule with comment period, because these codes have been in existence 
for almost 20 years, and have been reportable under the OPPS since it 
was implemented in 2000, we believe that the low frequency of these 
services is the result of infrequent use of this procedure on Medicare 
beneficiaries. Analysis of our claims data from past years revealed 
that these procedures are relatively low volume procedures. CPT code 
76825 has had fewer than 330 single claims for ratesetting for each 
year with a cost that has ranged between approximately $88 and 
approximately $140. Similarly, CPT code 76826 has had fewer than 50 
single claims for ratesetting for each year with a cost that has ranged 
between approximately $85 and approximately $92. For this CY 2013 OPPS/
ASC final rule with comment period, CPT codes 76826 and 76825 are 
assigned APCs with payment rates that exceed their respective 
individual geometric mean costs. Therefore, based on our claims data, 
we believe that CPT codes 76825 and 76826 are appropriately assigned to 
APC 0697 for CY 2013 based on their clinical homogeneity and resource 
costs of the other procedure assigned to APC 0697.
    Comment: Several commenters expressed concern regarding a violation 
of the 2 times rule for APC 0128 and urged CMS not to finalize an 
exemption from the 2 times rule for APC 0128. The commenters stated 
that the assignment of HCPCS codes C8924 (Transthoracic 
echocardiography with contrast, or without contrast followed by with 
contrast, real-time with image documentation (2d), includes m-mode 
recording, when performed, follow-up or limited study) and C8930 
(Transthoracic echocardiography, with contrast, or without contrast 
followed by with contrast, real-time with image documentation (2d), 
includes m-mode recording, when performed, during rest and 
cardiovascular stress test using treadmill, bicycle exercise and/or 
pharmacologically induced stress, with interpretation and report; 
including performance of continuous electrocardiographic monitoring, 
with physician supervision) to APC 0128 results in a violation of the 2 
times rule in particular, and that the other procedures assigned to APC 
0128 are not clinically comparable in nature, therefore resulting in an 
APC payment rate that does not reflect the wide range of resources 
utilized for the procedures assigned to APC 0128. The commenters 
further recommended that CMS reconfigure APC 0128 so that the 
procedures are clinically similar with respect to resources. One 
commenter recommended that CMS adopt three levels of contrast-enhanced 
APCs that parallel the three APCs that have been established for non-
contrast enhanced procedures.
    Response: As stated above, we have four separate APCs to which 
echocardiography services are assigned. Procedures that utilize 
contrast agents are currently assigned to APC 0128, while procedures 
without contrast agents are assigned to one of three APCs, specifically 
APC 0270, APC 0269, or APC 0697. In the CY 2013 OPPS/ASC proposed rule, 
we proposed a payment rate for APC 0128 of approximately $571 for CY 
2013. As we do every year, we reviewed our claims data for the services 
assigned to APC 0128. Based on our review, and taking into 
consideration the public comments received in response to the final 
rule with comment period, we agree with commenters that APC 0128 has a 
2 times violation that cannot be exempted for this CY 2013 OPPS/ASC 
final rule with comment period. As we have stated in section III.B. of 
this final rule with comment period, we make exemptions to the 2 times 
rule's limit on the variation of costs within each APC group in unusual 
cases, such as low volume items and services. In deciding to propose 
exemptions to the 2 times rule, we look at the respective APC's 
resource homogeneity, clinical homogeneity, hospital outpatient 
setting, frequency of service (volume), and opportunity for upcoding 
and code fragmentation. We believe that, for this CY 2013 OPPS/ASC 
final rule with comment period, it would be inappropriate to exempt APC 
0128 from the 2 times rule and to continue to assign echocardiography 
services utilizing contrast agents to one APC, based on our evaluation 
of the aforementioned criteria. Therefore, for CY 2013, we are 
splitting APC 0128 to create two new level APCs: APC 0177 (Level I 
Echocardiogram with Contrast) and APC 0178 (Level II Echocardiogram 
with Contrast).
    After consideration of the public comments we received, we are 
finalizing our proposals, with the modifications mentioned above, to 
continue to calculate the costs of the HCPCS codes describing the non-
contrast echocardiography procedures based on APCs 0697, 0269, and 
0270, and to calculate the costs for the HCPCS codes describing 
contrast echocardiography procedures based on new APCs 0177 and 0178. 
For a more detailed discussion and history of the OPPS payment for 
echocardiography services, we refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66644 through 66646), the CY 2009 
OPPS/ASC final rule with comment period (72 FR 68542 through 68544), 
and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60374 
through 60383).
    Table 23 below shows the procedure assignments and the final 
geometric mean cost assigned to echocardiography APCs, including the 
new Level I and Level II Echocardiogram with Contrast APCs.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR15NO12.035

BILLING CODE 4120-01-C
2. Gastrointestinal Services
a. Laparoscopic Adjustable Gastric Band (APC 0132)
    Effective January 1, 2006, the AMA's CPT Editorial Panel 
established CPT code 43770 (Laparoscopy, surgical, gastric restrictive 
procedure; placement of adjustable gastric restrictive device (eg, 
gastric band and subcutaneous port components)) to describe the 
bariatric placement of an adjustable band by laparoscopy. From January 
1, 2006 through December 31, 2011, CPT code 43770 was assigned to 
status indicator ``C'' to indicate that the procedure was not paid 
separately under the OPPS because the procedure was considered an 
``inpatient'' procedure. However, in the CY 2012 OPPS/ASC final rule 
(76 FR 74355), we stated that we received a comment requesting that 
this CPT code be removed from the inpatient list and assigned to a 
separately payable APC, effective January 1, 2012. Based on input from 
our physicians and review of our claims data, we determined that it was 
appropriate to remove CPT code 43770 from the inpatient list because 
patients undergoing this procedure can typically be managed 
postoperatively as outpatients. Consequently, we assigned CPT code 
43770 to APC 0131 (Level II Laparoscopy), effective January 1, 2012.
    At the August 2012 HOP Panel meeting, a presenter requested that 
the Panel recommend to CMS the reassignment of CPT code 43770 from APC 
0131 to a new APC. The commenter expressed concern about the existing 
APC assignment and indicated that APC 0131 does not adequately cover 
the costs of performing the procedure. After discussion of the

[[Page 68333]]

procedure and review of the hospital outpatient claims data, the Panel 
recommended that CPT code 43770 remain in APC 0131 for the CY 2013 
update.
    For CY 2013, we proposed to continue to assign CPT code 43770 to 
APC 0131, which had a proposed rule payment rate of approximately 
$3,497.
    Comment: Several commenters disagreed with the proposal to continue 
to assign CPT code 43770 to APC 0131 because the procedure is different 
from other procedures assigned to this APC. According to one commenter, 
the procedures assigned to APC 0131 are less intensive (for example, 
resource cost) than CPT code 43770. Another commenter stated that the 
procedures assigned to APC 0131 are not similar to CPT code 43770 
because this procedure includes the implantation of a gastric band 
device as well as a port device, while the other procedures assigned to 
this APC do not. In addition, some commenters believed that assignment 
of CPT code 43770 to APC 0131 violates the 2 times rule. According to 
the commenters, there is no existing APC that includes procedures that 
are comparable to the procedures described by CPT code 43770, both 
clinically and in terms of resource utilization. Therefore, they 
requested that CMS establish a new APC for CPT code 43770 to ensure the 
most appropriate payment for this procedure.
    However, we received conflicting statements on the issue of 
clinical comparability from some of the commenters. One commenter 
stated that, although there is no existing APC that accurately fits 
with CPT code 43770, the commenter mentioned that APC 0132 (Level III 
Laparoscopy) does include some procedures that are more clinically 
comparable to CPT code 43770 than the procedures assigned to APC 0131, 
and suggested that APC 0132 would be an appropriate APC assignment for 
this procedure. Another commenter considered suggesting a reassignment 
of CPT code 43770 to APC 0132 but stated that the procedures assigned 
to APC 0132 are not comparable in terms of resource utilization. 
Although most of the commenters agreed that establishing a new APC for 
CPT code 43770 would be more appropriate, some commenters suggested 
assigning the procedure to APC 0132 as an interim APC assignment if a 
new APC cannot be established for the CY 2013 update.
    Response: We do not agree with the commenters' assertion that 
assigning CPT code 43770 to APC 0131 violates the 2 times rule. In 
determining whether a 2 times rule violation exists in an APC, we 
consider only those HCPCS codes that are significant based on the 
number of claims. 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 comprise at least 2 percent of the single major 
claims used to establish the costs of the procedures assigned to an APC 
to be significant (75 FR 71832). 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 100 million single procedure or single session 
claims we use for establishing costs. Similarly, a HCPCS code for which 
there are fewer than 99 single claims and which comprises less than 2 
percent of the single major claims within an APC will have a negligible 
impact on the costs of the procedures in an APC. For the CY 2013 OPPS/
ASC proposed rule, claims data for CPT code 43770 showed 171 single 
claims out of 216 total claims and comprised less than 1 percent of the 
claims for procedures within APC 0131. Although CPT code 43770 had more 
than 99 single major claims, it did not contribute to at least 2 
percent of the single major claims for procedures within APC 0131. 
Therefore, in the CY 2013 OPPS/ASC proposed rule, we determined that 
assigning CPT code 43770 to APC 0131 did not violate the 2 times rule 
because it did not meet the definition of a significant HCPCS code.
    As stated above, the HOP Panel made a recommendation to continue to 
assign CPT code 43770 to APC 0131 for the CY 2013 update. However, 
after the Panel meeting, we reviewed our more recent claims data for 
this final rule with comment period, and our analysis revealed that the 
procedure would be more appropriately assigned to APC 0132 (Level III 
Laparoscopy). Specifically, our analysis showed 213 single claims (out 
of 262 total claims) for CPT code 43770 with a geometric mean cost of 
approximately $7,410. Furthermore, our analysis revealed that CPT code 
43770 meets the definition of significant claims because the procedure 
represents more than 99 single major claims and contribute to at least 
2 percent of the claims for procedures within APC 0132. Consequently, 
we do not agree with the Panel's recommendation, and are reassigning 
CPT code 43770 to APC 0132.
    In summary, after consideration of the public comments we received, 
we are revising the APC assignment for CPT code 43770 from APC 0131 to 
0132 for CY 2013. The final CY 2013 geometric mean cost for APC 0132 is 
approximately $5,268.
b. Transoral Incisionless Fundoplication (APC 0422)
    For CY 2013, we proposed to continue to assign CPT code C9724 
(Endoscopic full-thickness plication in the gastric cardia using 
endoscopic plication system (eps); includes endoscopy) to APC 0422 
(Level III Upper GI Procedures), which had a proposed payment rate of 
approximately $1,878.
    We note that at the August 2012 HOP Panel meeting, a presenter 
requested that the Panel recommend to CMS the reassignment of HCPCS 
code C9724 from APC 0422 to a new APC, or alternatively, to establish a 
new APC with a descriptor of ``Level IV Upper GI Procedures.'' The 
commenter stated that the payment rate for APC 0422 does not cover the 
cost of providing the procedure. After discussion of the procedure and 
review of the hospital outpatient claims data, the Panel recommended 
that HCPCS code C9724 remain in APC 0422 for the CY 2013 update.
    Comment: Several commenters disagreed with the proposal to continue 
to assign HCPCS code C9724 to APC 0422. The commenters stated that the 
proposed payment rate for APC 0422 would not cover the cost of 
performing the procedure. According to the commenters, the cost of 
performing the procedure is approximately $5,000. The commenters urged 
CMS to either reassign HCPCS code C9724 to APC 1565 (New Technology--
Level XXVIII ($5000-$5500)), which had a proposed payment rate of 
approximately $5,250, or establish a new APC titled ``Level IV Upper GI 
Procedures'' with a payment rate of approximately $5,000.
    Response: HCPCS code C9724, which was established by CMS effective 
April 1, 2005, describes an endoscopic full-thickness plication 
procedure for the treatment of gastroesophageal reflux disease (GERD). 
Since April 2005, HCPCS code C9724 has been assigned to APC 0422. 
Because this code has been in existence since April 2005, we have 
claims data for several years. For this final rule with comment period, 
which is based on claims submitted from January 1, 2011 through 
December 31, 2011, our data show a geometric mean cost of approximately 
$5,728 based on 24 single claims (out of 120 total claims) for HCPCS 
code C9724. In addition, we agree with the Panel's recommendation to 
maintain HCPCS code C9724 in APC 0422 for the CY 2013 update. Based on 
the clinical similarity to other

[[Page 68334]]

procedures currently assigned to APC 0422, and because there is no 
violation with the 2 times rule, we will continue to assign HCPCS code 
C9724 to APC 0422. Consistent with CMS' policy of reviewing APC 
assignments annually, we will reevaluate the cost of HCPCS code C9724 
and its APC assignment for the CY 2014 rulemaking cycle.
    In addition, because of concerns related to the current descriptor 
for HCPCS code C9724, we are revising the long descriptor to read 
``Endoscopic full-thickness plication of the stomach using endoscopic 
plication system (eps); includes endoscopy,'' effective January 1, 
2013. This change in the long descriptor is necessary to accurately 
describe how the procedure is currently performed.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal without modification and will continue 
to maintain HCPCS code C9724 in APC 0422. The final CY 2013 geometric 
mean cost for APC 0422 is approximately $1,921.
c. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    The AMA's CPT Editorial Panel created CPT code 0242T 
(Gastrointestinal tract transit and pressure measurement, stomach 
trough colon, wireless capsule, with interpretation and report) 
effective January 1, 2011. For CY 2011, we initially assigned CPT code 
0242T to APC 0361 (Level II Alimentary Tests), with a payment rate of 
$282.48.
    For CY 2012, we maintained the assignment of CPT code 0242T to APC 
0361 with a payment rate of $285.59. We noted in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74242) that we routinely make 
assignments of new CPT codes to clinical APCs before we have claims 
data that are indicative of the resource costs of a procedure. We make 
these assignments initially using the best currently available 
information, while reviewing claims data once such data become 
available and making reassignments accordingly based on those data.
    We stated in the CY 2012 OPPS/ASC final rule with comment period 
that, as was the case when we made the initial assignment for CY 2011, 
we continued to believe that there are relevant clinical similarities 
between the service described by CPT code 0242T and other services 
assigned to APC 0361 to continue to justify this APC assignment. The 
service described by CPT code 0242T and the services assigned to APC 
0361 all involve tests of the alimentary canal. We believed that the 
clinical attributes and CY 2012 costs of the services assigned to APC 
0361 supported the initial assignment of CPT code 0242T to APC 0361. We 
indicated that we routinely make assignments of new CPT codes to 
clinical APCs before we have claims data to indicate the procedural 
resource costs, and that we generally wait until claims data are 
available before reassignment to a new APC. For CY 2012, we maintained 
our assignment of CPT code 0242T to APC 0361, which has a final median 
cost of $285.89, and we stated that we would review this assignment for 
CY 2013 when some claims data should be available for this procedure.
    For CY 2013, we proposed to maintain the assignment of CPT code 
0242T to APC 0361, which had a proposed rule geometric mean cost of 
approximately $311 and a proposed payment rate of approximately $303. 
We now have a small number of claims for use in CY 2013 for CPT code 
0242T, which had a proposed rule geometric mean cost of approximately 
$613. The range of procedure level costs in APC 0361 for the CY 2013 
proposed rule was approximately $214 to approximately $633. This range 
of costs does not constitute a 2 times rule violation because the range 
of costs for procedures with significant volume in the APC is 
approximately $302 to approximately $406.
    We did not receive any public comments on our proposed APC 
assignment of CPT code 0242T to APC 0361.
    At the August 2012 meeting of the HOP Panel, the Panel recommended 
that CMS assign CPT code 0242T to APC 0142 (Level I Small Intestine 
Endoscopy), based on the procedure's proposed rule mean cost of 
approximately $613, with a frequency of 8 claims.
    Our CY 2013 final rule claims data show a cost of approximately 
$497 for CPT code 0242T, based on 8 claims. Our analysis comparing the 
proposed rule data and the final rule data for CPT code 0242T shows 
that one claim was dropped and another added, resulting in the 
fluctuation in geometric mean costs for the small number of claims 
between the proposed rule dataset and the final rule dataset for this 
procedure. The CY 2013 final geometric mean cost for APC 0361 is 
approximately $311, which includes a range of costs for procedures in 
the APC of approximately $209 to approximately $633. The CY 2013 final 
geometric mean cost for APC 0142 is approximately $772, which includes 
a range of costs for procedures in the APC of approximately $569 to 
approximately $826. Therefore, based on the final rule geometric mean 
cost for CPT code 0242T, assignment of the code to APC 0361 is 
appropriate. We also continue to believe that CPT code 0242T is similar 
clinically to other procedures assigned to APC 0361. Therefore we are 
maintaining our assignment of the CPT code 0242T procedure to APC 0361 
for CY 2013.
    We note that the CPT Editorial Panel is replacing the CPT code for 
the procedure described by CPT code 0242T with a Category I CPT code, 
CPT code 91112 (Gastrointestinal transit and pressure measurement, 
stomach trough colon, wireless capsule, with interpretation and 
report), effective January 1, 2013. Therefore, we are deleting CPT code 
0242T from the OPPS effective January 1, 2013, and assigning 
replacement CPT code 91112 to APC 0361 for this procedure.
3. Integumentary System Services
a. Extracorporeal Shock Wave Wound Treatment (APC 0340)
    In the CY 2012 OPPS/ASC final rule with comment period, we assigned 
new CPT codes 0299T (Extracorporeal shock wave for integumentary wound 
healing, initial wound) and 0300T (Extracorporeal shock wave for 
integumentary wound healing, each additional wound) on an interim basis 
to APC 0340 (Minor Ancillary Procedures), which has a CY 2012 payment 
rate of approximately $46 and a CY 2013 proposed rule payment rate of 
approximately $49.
    Comment: One commenter objecting to the interim APC assignment of 
CPT codes 0299T and 0300T believed that the assignment is not 
consistent clinically or in terms of the resources associated with the 
shock wave treatment procedures. The commenter stated that these 
services are more similar clinically and in related resources to the 
high-energy shock wave procedure for musculoskeletal conditions that is 
assigned to APC 0050 (Level II Musculoskeletal Procedures Except Hand 
and Foot), which has a CY 2012 payment rate of approximately $2,269. 
The commenter believed that assignment of these codes to a New 
Technology APC would be appropriate to gather cost data, and indicated 
that they would submit an application for new technology payments for 
these codes to CMS.
    We received other similar comments to the proposed rule from 
several clinicians in the field who were involved in the initial 
clinical trial of the extracorporeal shock wave procedure. These 
commenters discussed

[[Page 68335]]

the clinical trial and the clinical attributes of this treatment, 
indicating that it offers significantly greater clinical benefit than 
other wound healing therapies at a considerably lower cost. They 
objected to CMS' assignment of CPT codes 0299T and 0300T to APC 0340. 
The commenters believed that the payment rate for this APC would 
inhibit the use of this emerging technology and would prevent patient 
access to the treatment.
    Response: We agree with the commenters that it may be more 
appropriate in terms of clinical and resource similarity to assign CPT 
codes 0299T and 0300T to an APC other than APC 0340. However, we do not 
agree that CPT codes 0299T and 0300T should be assigned to APC 0050. 
Having considered the information provided by the commenters, and based 
on our evaluation of clinical and resource similarity to existing 
services, we believe that placement in APC 0133 (Level I Skin Repair) 
would be more appropriate for these services until claims data are 
available. For CY 2013, we are placing CPT codes 0299T and 0300T in APC 
0133, which has a final geometric mean cost of approximately $88. We 
will reevaluate the APC placement when claims data are available for CY 
2014.
b. Application of Skin Substitute (APCs 0133 and 0134)
    For CY 2012, we made assignments for several new (replacement) CPT 
codes for the application of skin substitutes. We assigned CPT code 
15272 (Application of skin substitute graft to trunk, arms, legs, total 
wound surface area up to 100 sq cm; each additional 25 sq cm or part 
thereof) and CPT code 15276 (Application of skin substitute graft to 
face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet 
and/or multiple digits, total wound surface area up to 100 sq cm; each 
additional 25 sq cm or part thereof) to APC 0133 (Level I Skin Repair), 
which has a CY 2012 payment rate of approximately $84 and a CY 2013 
proposed payment rate of approximately $86. We assigned CPT code 15274 
(Application of skin substitute graft to trunk, arms, legs, total wound 
surface area greater than or equal to 100 sq cm; each additional 100 sq 
cm or part thereof) and CPT code 15278 (Application of skin substitute 
graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, 
hands, feet and/or multiple digits, total wound surface area greater 
than or equal to 100 sq cm; each additional 100 sq cm or part thereof) 
to APC 0134 (Level II Skin Repair), which has a CY 2012 payment rate of 
approximately $228 and a CY 2013 proposed payment rate of approximately 
$252.
    Comment: One commenter stated that CMS should have assigned the new 
codes to the APC that includes their predecessor base codes so that a 2 
times rule violation is avoided. They requested that for CY 2013, CMS 
reassign CPT codes 15272 and 15276 to APC 0134, crosswalking them to 
the predecessor add-on CPT code 15341 and assign them to the same APC 
as the former base CPT code 15340. Similarly, the commenter requested 
that CMS reassign CPT codes 15274 and 15278 to APC 0135 (Level III Skin 
Repair) which includes their applicable base codes (CPT codes 15273 and 
15277).
    Response: As we indicated in the CY 2012 OPPS/ASC final rule (76 FR 
74269), we assigned these four replacement CPT codes for CY 2012 based 
on their clinical and estimated resource similarity to the services in 
their assigned APCs. We also took into account the size descriptions in 
the new codes' long descriptors. There was not a one-to-one crosswalk 
between the old skin substitute application codes and the new CPT 
codes, as suggested by the commenter. Several of the old CPT codes map 
to a single new code. Therefore, we made the most appropriate 
assignment based on clinical homogeneity and estimated resource 
similarity, taking into account all of the former procedures that are 
now encompassed by a single code and the new coding structure for the 
family of codes.
    For CY 2013, we will continue to assign CPT codes 15272 and 15276 
to APC 0133, which has a final geometric mean cost of approximately 
$88, and CPT codes 15274 and 15278 to APC 0134, which has a final 
geometric mean cost of approximately $259. We will reevaluate the 
placement of these codes when claims data become available in the CY 
2014 rulemaking cycle.
c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)
    Effective January 1, 2008, the CPT Editorial Panel created CPT code 
0183T (Low Frequency, Non-Contact, Non-Thermal Ultrasound). Since that 
time, we have assigned this service to either APC 0013 (Level II 
Debridement and Destruction) or APC 0015 (Level III Debridement and 
Destruction). Initially, for CY 2008 and CY 2009, we placed this 
service in the higher Level III APC 0015, with a payment rate of 
approximately $100. Based on our review of the first year of hospital 
claims data (CY 2008 claims), for CY 2010 we reassigned the service to 
the lower Level II APC 0013, with a payment rate of approximately $59. 
For CY 2011 and CY 2012, due to a change in the estimated cost of CPT 
code 0183T, we reassigned it to the higher level APC 0015, with a 
payment rate of approximately $105 in CY 2011 and approximately $103 in 
CY 2012.
    For CY 2013, we proposed to reassign CPT 0183T to APC 0013 because 
its proposed rule geometric mean cost of approximately $89 was closer 
to the proposed rule geometric mean cost of APC 0013 (approximately 
$73) than the proposed rule geometric mean cost of APC 0015 
(approximately $110).
    Comment: One commenter objected to the reassignment of CPT code 
0183T to APC 0013 because the commenter's estimated cost of furnishing 
this service of approximately $101 would be greater than its proposed 
payment. The commenter believed that procedures currently assigned to 
APC 0013 and those assigned to APC 0015 are not homogeneous clinically 
or in terms of resource requirements. The commenter requested that CMS 
split APC 0013 and APC 0015 to create a third APC, such that APC 0013 
would include the services with costs less than $80; the new APC would 
include services with costs between $80 and $110; and APC 0015 would 
include services with costs greater than or equal to $110.
    Another commenter recommended that CMS merge APC 0013 and APC 0015, 
arguing that both APCs are for skin procedures and noting that the 
proposed cost for the highest volume service in APC 0013, described by 
CPT code 17000 (Destruction of premalignant lesions; first lesion), is 
more than half of the cost of the highest volume service in APC 0015, 
described by CPT code 97597 (Open wound debridement; first 20 sq cm or 
less).
    Response: The final rule geometric mean cost of CPT code 0183T and 
APC 0013 (approximately $88 and $74, respectively) did not change 
significantly from their proposed rule costs and remain very similar. 
There also is no significant change in the final rule geometric mean 
cost of APC 0015 (approximately $110). We note that merging the two 
APCs as one commenter suggested would create several 2-times rule 
violations, and we see no clinical or other need to further split the 
APCs. Therefore, because the geometric mean cost of CPT code 0183T 
continues to be closer to the geometric mean cost of APC 0013 than that 
of APC 0015, and because merging the APCs would create several 2 times 
rule violations, for CY 2013, we are finalizing our proposal to 
reassign CPT code 0183T to APC 0013.

[[Page 68336]]

4. Nervous System Services
a. Scrambler Therapy (APC 0275)
    For the CY 2012 update, the AMA's CPT Editorial Panel established 
Category III CPT code 0278T (Transcutaneous electrical modulation pain 
reprocessing (eg, scrambler therapy), each treatment session (includes 
placement of electrodes)) effective January 1, 2012. CPT code 0278T 
describes a transcutaneous electrical modulation pain reprocessing 
procedure and involves the use of four to five electrodes that deliver 
electrical stimulation to treat chronic chemo-induced neuropathic pain. 
Based on the nature of the procedure, which can be performed by 
physicians, nurses, or physical therapists, the therapy involves 10 
sessions (1 session per day for 10 days), and each session takes 
approximately between 30 and 45 minutes.
    In Addendum B of the CY 2012 OPPS/ASC final rule with comment 
period, we assigned CPT code 0278T to APC 0215 (Level I Nerve and 
Muscle Tests) which has a CY 2012 payment rate of approximately $44. We 
also assigned this CPT code comment indicator ``NI'' to indicate that 
the code was new for CY 2012 with an interim APC assignment that was 
subject to public comment following the publication of the final rule 
with comment period. Specifically, the code's APC assignment and status 
indicator were subject to public comment. We received one public 
comment regarding the interim APC assignment for CPT code 0278T which 
we address below in this section.
    We note that we do not discuss APC or status indicator assignments 
for new codes for the upcoming year in the proposed rule because the 
new codes are not available when we publish the proposed rule. Rather, 
as has been our practice in the past, we implement new HCPCS codes in 
the OPPS final rule with comment period, at which time we invite public 
comments regarding the treatment of the new codes. We subsequently 
respond to those comments in the final rule with comment period for the 
following year's OPPS update.
    As has been our practice since the implementation of the OPPS in 
2000, we carefully review all new procedures before assigning them to 
an APC. In determining the APC assignment for CPT code 0278T, we took 
into consideration the clinical and resource characteristics involved 
with Scrambler Therapy. Based on our initial review of the components 
of these services and consultation with our medical advisors, we 
assigned CPT code 0278T to APC 0215 for CY 2012.
    At the February 2012 HOP Panel meeting, a presenter requested the 
reassignment of CPT code 0278T from APC 0215 to APC 0206 (Level II 
Nerve Injections) based on resource cost and clinical homogeneity. The 
presenter stated that the assignment of CPT code 0278T to APC 0215 is 
not appropriate because the procedures in this APC are primarily 
diagnostic in nature, whereas CPT code 0278T represents a therapeutic 
procedure. The presenter further added that the time and cost involved 
with providing the service associated with CPT code 0278T is 
considerably greater than the time and cost involved for procedures 
assigned to APC 0215, and recommended that the Scrambler Therapy would 
be more appropriately assigned to APC 0206 because the procedures in 
APC 0206 are mostly therapeutic in nature and represent similar costs. 
At the February 2012 meeting, the Panel made no recommendation to 
reassign CPT code 0278T from its current APC 0215 assignment for CY 
2013.
    In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT code 0278T to APC 0215. At the August 2012 HOP 
Panel meeting, the same presenter at February 2012 Panel meeting made 
the same request to the Panel to recommend to CMS to reassign CPT code 
0278T to a more appropriate APC. Specifically, at the August 2012 HOP 
Panel meeting, the requester recommended that CPT code 0278T be 
reassigned to APC 0204 (Level I Nerve Injections) based on clinical and 
cost considerations. During the discussion, one of the Panel members 
pointed out that the procedures assigned to APC 0204 represent nerve 
injections, which is in contrast to how the procedure described by CPT 
code 0278T is delivered because the procedure associated with the 
Scrambler Therapy does not involve injections. After discussion of the 
issue, the HOP Panel recommended that CMS assign CPT code 0278T to APC 
0218 (Level II Nerve and Muscle Tests).
    Comment: One commenter to the CY 2012 OPPS/ASC final rule with 
comment period recommended the reassignment of CPT code 0278T from APC 
0215 to APC 0206 based on the commenter's cost analysis. Alternatively, 
the commenter recommended assignment of CPT code 0278T to APC 0204 
because this is the APC assigned to unlisted CPT code 64999 (Unlisted 
procedure, nervous system), which would be used to report the Scrambler 
Therapy if CPT code 0278T had not been established.
    Response: As a new Category III CPT code for CY 2012, we do not yet 
have hospital claims data for the procedure. Category III CPT codes are 
temporary codes that describe emerging technology, procedures, and 
services, and are created by the AMA to allow for data collection for 
new services or procedures. 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, 
information from specialty societies, input from CMS medical advisors, 
and other information available to us. Based on our review of the 
clinical characteristics of the service described by CPT code 0278T and 
the information provided by the commenter, we do not believe that we 
have sufficient clinical or cost information to justify a reassignment 
to a different APC at this time. As we do every year for other services 
and procedures under the OPPS, we will review the claims data for CPT 
code 0278T for CY 2012 for the CY 2014 rulemaking cycle. Because CPT 
code 0278T was a new code for CY 2012, the first time we will have 
claims data for this procedure is next year for the CY 2014 update, and 
at which time we will reevaluate the APC assignment for this code.
    Comment: Some commenters recommended a range of the appropriate 
payment for CPT code 0278T based on their internal analysis. One 
commenter recommended that CPT code 0278T be assigned to an APC that 
has a payment rate of between $124 to $144 based on their analysis, by 
taking into consideration the site of service, staff time involved, and 
system costs associated with providing the therapy. Another commenter 
stated that the total cost of providing Scrambler Therapy is 
approximately $274; however, an initial payment of approximately $184 
may be adequate for hospitals to initiate treatment. The commenter 
further stated that the proposed payment rate of approximately $81 for 
APC 0218, which was recommended by the HOP Panel at the August 2012 
meeting, is adequate. However, the commenter asserted that the proposed 
payment rate of approximately $150 for New Technology APC 1540 (New 
Technology--Level III ($100--$200)) would be more appropriate.
    Response: After further review of the HOP Panel recommendation at 
the August 2012 meeting and consideration of the public comments that 
we received on this particular procedure, we believe that we should 
continue to assign the

[[Page 68337]]

Scrambler Therapy to APC 0215. Therefore, we are not accepting the 
Panel's recommendation to reassign CPT code 0278T to APC 0218. In 
addition, we do not agree with the commenter that CPT code 0278T should 
be assigned to New Technology APC 1540. Based on our understanding of 
the procedure, we believe that APC 0215 is the most appropriate APC 
assignment for CPT code 0278T based on its similarity to other 
procedures assigned to APC 0215. We will review the claims data for CPT 
0278T next year for the CY 2014 rulemaking to determine whether an APC 
reassignment for the Scrambler Therapy is necessary.
    After consideration of the public comments received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT code 0278T to APC 0215 for CY 2013. The final CY 2013 
geometric mean cost for APC 0215 is approximately $44.
b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)
    Since July 2006, CPT codes have existed to describe Transcranial 
Magnetic Stimulation Therapy (TMS) therapy. The initial CPT codes were 
temporary Category III CPT codes, specifically, CPT code 0160T 
(Therapeutic repetitive transcranial magnetic stimulation treatment 
planning) and 0161T (Therapeutic repetitive transcranial magnetic 
stimulation treatment delivery and management, per session), that were 
effective July 1, 2006. For CY 2011, the CPT Editorial Panel deleted 
CPT code 0160T on December 31, 2010, and replaced it with CPT code 
90867 (Therapeutic repetitive transcranial magnetic stimulation (tms) 
treatment; initial, including cortical mapping, motor threshold 
determination, delivery and management) effective January 1, 2011. 
Similarly, CPT code 0161T was deleted on December 31, 2010, and was 
replaced with CPT code 90868 (Therapeutic repetitive transcranial 
magnetic stimulation (tms) treatment; subsequent delivery and 
management, per session) effective January 1, 2011. In CY 2012, the 
AMA's CPT Editorial Panel established an additional TMS therapy code, 
specifically CPT code 90869 (Therapeutic repetitive transcranial 
magnetic stimulation (tms) treatment; subsequent motor threshold re-
determination with delivery and management), that was effective January 
1, 2012.
    In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT codes 90867, 90868, and 90869 to APC 0218 (Level 
II Nerve and Muscle Tests), which had a proposed payment rate of 
approximately $81.
    Comment: One commenter disagreed with the proposed APC assignment 
and stated that the TMS therapy codes are not similar to the services 
assigned to APC 0218. The commenter recommended three options on the 
appropriate APC assignment.
    Under the first option, the commenter recommended the reassignment 
of CPT codes 90867, 90868, and 90869 to APC 0216 (Level III Nerve and 
Muscle Tests), which had a proposed payment rate of approximately $182. 
The commenter also recommended the revision of the APC title 
description to read ``Level III Nerve and Muscle Tests & TMS''. The 
commenter stated that the TMS therapy services are similar to the 
services described by CPT codes 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 physician attendance), 95962 
(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; each additional 
hour of physician attendance (list separately in addition to code for 
primary procedure)), and 96000 (Comprehensive computer-based motion 
analysis by video-taping and 3d kinematics), which are assigned to APC 
0216.
    Under the second option, the commenter recommended the 
establishment of a new APC for the three TMS therapy CPT codes, and 
further recommended revising the APC title description to read 
``Transcranial Magnetic Stimulation''.
    Under the third option, the commenter suggested assigning CPT codes 
90867, 90868, and 90869 to APC 0320 (Electroconvulsive Therapy), which 
had a proposed payment rate of approximately $441. Although TMS therapy 
is clinically related to electroconvulsive therapy (ECT), the commenter 
stated that its resource costs are lower than ECT.
    Response: We appreciate the commenter's thoughtful suggestions on 
the APC assignments for CPT codes 90867, 90868, and 90869. We do not 
agree with the commenter that the procedures described by CPT codes 
90867, 90868, and 90869 would be appropriately assigned to APC 0320 
from a clinical perspective because the provision of electroconvulsive 
therapy generally requires more extensive monitoring and services (for 
example, muscle blockade) than transcranial magnetic treatment delivery 
and management. However, based on the latest claims data used for this 
rulemaking, we do agree with the commenter's suggestion that APC 0216 
would be the more appropriate APC assignment for the three TMS therapy 
CPT codes. Analysis of our more recent claims data revealed that the 
resources associated with CPT codes 90867, 90868, and 90869 are similar 
to those services assigned to APC 0216. Specifically, for claims 
submitted during CY 2011, which were used for this final rule with 
comment period, CPT code 90867 showed a geometric mean cost of 
approximately $190 based on 15 single claims (out of 18 total claims), 
and a geometric mean cost of approximately $233 for CPT code 90868 
based on 609 single claims (out of 614 total claims). In addition, 
review of the procedures assigned to APC 0216 showed that the range of 
the geometric mean cost for the procedures with significant claims data 
is between approximately $146 (for CPT code 92584 
(Electrocochleography)) and approximately $233 (for CPT code 90868 
(Tcranial magn stim tx deli)). Based on the clinical and resource 
similarity to other procedures currently assigned to this APC, we 
believe it is appropriate to reassign the TMS therapy services to APC 
0216. Although CPT code 90869 is a new code for CY 2012, we believe 
that it is appropriate to reassign this service to APC 0216, similar to 
the APC assignment of CPT codes 90867 and 90868. Because of this 
reassignment, we also are revising the APC title descriptions of APCs 
0215, 0216, and 0218 to appropriately reflect the services within each 
APC. Specifically, we are revising the APC title description of APC 
0215 from ``Level I Nerve and Muscle Tests'' to ``Level I Nerve and 
Muscle Services''; the title description of APC 0218 from ``Level II 
Nerve and Muscle Tests'' to ``Level II Nerve and Muscle Services''; and 
the title description of APC 0216 from ``Level III Nerve and Muscle 
Tests'' to ``Level III Nerve and Muscle Services''.
    After consideration of the public comment we received, we are 
finalizing our CY 2013 proposal, with modification. That is, we are 
reassigning CPT codes 90867, 90868, and 90869 from APC 0218 to APC 
0216, which has a final CY 2013 geometric mean cost of approximately 
$189. Table 24 below shows the final APC assignments for CPT codes 
90867, 90868, and 90869 for CY 2013.

[[Page 68338]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.036

c. Paravertebral Neurolytic Agent (APC 0207)
    Effective January 1, 2012, the AMA's CPT Editorial Panel created 
CPT code 64633 (Destruction by neurolytic agent, paravertebral facet 
joint nerve(s), with imaging guidance (fluoroscopy or ct); cervical or 
thoracic, single facet joint). For CY 2012, we assigned new CPT code 
64633 on an interim basis to APC 0207 (Level III Nerve Injections). 
This interim APC assignment was consistent with our standard process 
for dealing with new CPT codes effective on January 1 for the upcoming 
calendar year, which is to assign each code to the APC that we believe 
contains services that are comparable with respect to clinical 
characteristics and resources required to furnish the service. CPT code 
64633 was assigned a comment indicator of ``NI'' in Addendum B to the 
CY 2012 OPPS/ASC final rule with comment period to identify it as a new 
interim APC assignment for the new year and the APC assignment for this 
new code was open to public comment for 60 days following the 
publication of the CY 2012 OPPS/ASC final rule with comment period. For 
CY 2013, we proposed to continue to assign CPT code 64633 to APC 0207, 
which had a proposed payment rate of approximately $568.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period objected to the assignment of CPT code 64633 
to APC 0207 because the commenter believed that the payment rate for 
APC 0207 substantially underpays providers for this service.
    Response: Due to the lack of any claims data for CPT code 64633, we 
have no way to validate or substantiate the claim made by the 
commenter. We expect to have CY 2012 claims data for CPT code 64633 
available in CY 2013 in preparation for the CY 2014 rulemaking cycle 
and will reevaluate the APC assignment of CPT code 64633 at that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT code 64633 to APC 0207, which has a final CY 2013 APC 
geometric mean cost of approximately $582.
d. Programmable Implantable Pump (APC 0691)
    Effective January 1, 2012, the AMA's CPT Editorial Panel created 
two new CPT codes that combine pump refill and programming/analysis 
procedures: CPT code 62369 (Electronic analysis of programmable, 
implanted pump for intrathecal or epidural drug infusion (includes 
evaluation of reservoir status, alarm status, drub prescription 
status); with reprogramming and refill) and CPT code 62370 (Electronic 
analysis of programmable, implanted pump for intrathecal or epidural 
drug infusion (includes evaluation of reservoir status, alarm status, 
drub prescription status); with reprogramming and refill (requiring 
physician's skill)). For CY 2012, CPT codes 62369 and 62370 received a 
new interim APC assignment to APC 0691 (Level III Electronic Analysis 
of Devices), consistent with our standard process for dealing with new 
CPT codes effective on January 1 for the upcoming calendar year, which 
is to assign each code to the APC that we believe contains services 
that are comparable with respect to clinical characteristics and 
resources required to furnish the service. CPT codes 62369 and 62370 
were both given a comment indicator of ``NI'' in Addendum B to the CY 
2012 OPPS/ASC final rule with comment period to identify it as a new 
interim APC assignment for the new year and the APC assignment for 
these two new codes was open to public comment for 60 days following 
the publication of the CY 2012 OPPS/ASC final rule with comment period. 
For CY 2013, we proposed to continue to assign CPT codes 62369 and 
62370 to APC 0691, which had a proposed payment rate of approximately 
$192.
    Comment: Commenters who responded to the CY 2012 OPPS/ASC final 
rule with comment period objected to the assignment of CPT codes 62369 
and 62370 to APC 0691 because they believed that the payment rate for 
APC 0691 substantially underpays providers for these services.
    Response: Due to the lack of any claims data for CPT codes 62369 
and 62370, we have no way to validate or substantiate the claim made by 
commenters. We expect to have CY 2012 claims data for CPT codes 62369 
and 62370 in CY 2013 in preparation for the CY 2014 rulemaking cycle 
and will reevaluate the APC assignment of CPT codes 62369 and 62370 at 
that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT codes 62369 and 62370 to APC 0691, which has a final CY 2013 
APC geometric mean cost of approximately $197.
e. Revision/Removal of Neurostimulator Electrodes (APC 0687)
    For CY 2013, we proposed to continue to assign CPT code 64569 
(Revision or replacement of cranial nerve (eg, vagus nerve) 
neurostimulator electrode array, including connection to existing pulse 
generator) to APC 0687 (Revision/Removal of Neurostimulator 
Electrodes), which had a proposed CY 2013 payment rate of approximately 
$1,576.
    Comment: Commenters objected to the assignment of CPT code 64569 in 
APC 0687 because they stated that this code is used to report both the 
revision and the replacement of neurostimulator electrodes. The 
commenters believed that hospital resources are substantially greater 
when neurostimulator electrodes are being replaced rather than revised. 
The commenters asked CMS to reassign CPT code 64569 to device-dependent 
APC 0040 (Level I Implantation/Revision/Replacement of

[[Page 68339]]

Neurostimulator Electrodes) or assign new HCPCS codes to differentiate 
between electrode replacements (with a new electrode) and electrode 
revisions (without a new electrode) so that electrode revisions map to 
APC 0687 and electrode replacements map to APC 0040. The commenters 
noted that, like CPT code 64569, the procedures currently assigned to 
APC 0040 involve the implantation of a new electrode, either as an 
initial implant or as a replacement, while all of the procedures 
currently assigned to APC 0687, with the exception of CPT code 64569, 
are defined as ``revision or removal'' or simply ``removal'' of 
electrodes. The commenters stated that the resources associated with 
the procedure described by CPT code 64569 are similar to the resources 
associated with the procedures assigned to APC 0040.
    Response: We agree with the commenters that the resources 
associated with the procedure described by CPT code 64569 are similar 
to the resources associated with procedures assigned to APC 0040, and 
that these procedures share clinical characteristics. We note that the 
CY 2013 final rule geometric mean cost for CPT code 64569 of 
approximately $5,473 is more consistent with the CY 2013 final rule 
geometric mean cost of APC 0040 of approximately $4,526 than with the 
CY 2013 final rule geometric mean cost of APC 0687 of approximately 
$1,554. Therefore, we are modifying our proposal and assigning CPT code 
64569 to APC 0040 for CY 2013.
5. Ocular Services: Placement of Amniotic Membrane (APC 0233)
    In CY 2011, the AMA CPT Editorial Panel revised the long descriptor 
for CPT code 65780 (Ocular surface reconstruction; amniotic membrane 
transplantation, multiple layers) to include the words ``multiple 
layers'' to further clarify the code descriptor. In addition, the AMA's 
CPT Editorial Panel created two new CPT codes that describe the 
placement of amniotic membrane on the ocular surface without 
reconstruction: one describing the placement of a self-retaining (non-
sutured/non-glued) device on the surface of the eye; and the other 
describing a single layer of amniotic membrane sutured to the surface 
of the eye. Specifically, the AMA's CPT Editorial Panel established CPT 
codes 65778 (Placement of amniotic membrane on the ocular surface for 
wound healing; self-retaining) and 65779 (Placement of amniotic 
membrane on the ocular surface for wound healing; single layer, 
sutured), effective January 1, 2011.
    As has been our practice since the implementation of the OPPS in 
2000, we review all new procedures before assigning them to an APC. In 
determining the APC assignments for CPT codes 65778 and 65779, we took 
into consideration the clinical and resource characteristics involved 
with placement of amniotic membrane products on the eye for wound 
healing via a self-retaining device and a sutured, single-layer 
technique. In the CY 2011 OPPS/ASC final rule with comment period (75 
FR 72402), we assigned CPT code 65778 to APC 0239 (Level II Repair and 
Plastic Eye Procedures), which had a payment rate of approximately 
$559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye 
Procedures), which had a payment rate of approximately $519.
    In addition, consistent with our longstanding policy for new codes, 
we assigned these two new CPT codes to interim APCs for CY 2011. 
Specifically, we assigned CPT codes 65778 and 65779 to comment 
indicator ``NI'' in Addendum B of the CY 2011 OPPS/ASC final rule with 
comment period to indicate that the codes were new with interim APC 
assignments that were subject to public comment. In accordance with our 
longstanding policy, our interim APC assignment for each code was based 
on our understanding of the resources required to furnish the service 
as defined in the code descriptor and input from our physicians.
    At the Panel's February 28-March 1, 2011 meeting, a presenter 
requested the reassignment of CPT codes 65778 and 65779 to APC 0244 
(Corneal and Amniotic Membrane Transplant), which is the same APC to 
which CPT code 65780 is assigned. The presenter indicated that, prior 
to CY 2011, the procedures described by CPT codes 65778 and 65779 were 
previously reported under the original version of CPT code 65780, which 
did not specify ``multiple layers,'' and as such these new CPT codes 
should continue to be assigned to APC 0244. Further, the presenter 
stated that the costs of the procedures described by CPT codes 65778 
and 65779 are very similar to the cost of the procedure described by 
CPT code 65780.
    The Panel recommended that CMS reassign the APC assignments for 
both CPT codes 65778 and 65779. Specifically, the Panel recommended the 
reassignment of CPT code 65778 from APC 0239 to APC 0233 (Level III 
Anterior Segment Eye Procedures), and the reassignment of CPT code 
65779 from APC 0255 to APC 0233. In addition, the Panel recommended 
that CMS furnish data when data become available for these two codes. 
We noted at that time that because these CPT codes were effective 
January 1, 2011, the first available claims data for these codes would 
be for the CY 2013 OPPS rulemaking cycle.
    We accepted the Panel's recommendations. However, in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74247), we indicated 
that, while we agreed with the Panel's recommendation to reassign CPT 
codes 65778 and 65779 to APC 0233, we believed that CPT code 65778 
should be assigned to a conditionally packaged status indicator of 
``Q2'' to indicate that the procedure would be packaged when it is 
reported with another procedure that is also assigned to status 
indicator ``T''; but in all other circumstances, the CPT code would be 
paid separately. Because the procedure described by CPT code 65778 
would rarely be provided as a separate, stand-alone service in the 
HOPD, and because the procedure would almost exclusively be provided in 
addition to and following another procedure or service, we proposed to 
reassign CPT code 65778 a conditionally packaged status indicator of 
``Q2.'' In addition, our medical advisors indicated that the procedure 
described by CPT code 65778 is not significantly different than placing 
a bandage contact lens on the surface of the eye to cover a corneal 
epithelial defect. CPT code 65778 describes the simple placement of a 
special type of bandage (a self-retaining amniotic membrane device) on 
the surface of the eye, which would most commonly be used in the HOPD 
to cover the surface of the eye after a procedure that results in a 
corneal epithelial defect.
    At the August 10-11, 2011 Panel meeting, a presenter urged the 
Panel to recommend to CMS not to conditionally package CPT code 65778 
for CY 2012, and instead, assign it status indicator ``T.'' Based on 
information presented at the meeting, and after further discussion of 
the issue, the Panel recommended that CMS reassign the status indicator 
for CPT code 65778 from conditionally packaged ``Q2'' to status 
indicator ``T.'' Several commenters also urged CMS not to finalize its 
proposal to conditionally package CPT code 65778 by assigning it status 
indicator ``Q2'' and instead adopt the Panel's recommendation to assign 
status indicator ``T.''
    After consideration of the Panel's August 2011 recommendation and 
the public comments that we received in response to the CY 2012 OPPS/
ASC

[[Page 68340]]

proposed rule, we finalized our proposal and reassigned the status 
indicator for CPT code 65778 from ``T'' to ``Q2'' effective January 1, 
2012 (76 FR 74246). Given the clinical characteristics of this 
procedure, we believed that conditionally packaging CPT code 65778 was 
appropriate under the OPPS.
    For the CY 2013 OPPS update, we proposed (77 FR 45123) to continue 
to assign CPT code 65778 a conditionally packaged status indicator of 
``Q2.'' Similarly, we stated that we believe that we should assign CPT 
code 65779 to a conditionally packaged status indicator of ``Q2.'' 
Therefore, for CY 2013, we proposed to revise the status indicator for 
CPT code 65779 from status indicator ``T'' to ``Q2'' to indicate that 
the procedure would be packaged when it is reported with another 
procedure that is also assigned status indicator ``T,'' but in all 
other circumstances, the CPT code would be paid separately. This 
reassignment would enable hospitals to perform either procedures (CPT 
code 65778 or 65779) when appropriate, and would not differentiate one 
procedure from the other because of the status indicator assignment 
under the OPPS.
    As indicated at the February 28-March 1, 2011 Panel meeting, 
because CPT codes 65778 and 65779 were effective January 1, 2011, the 
first available claims data for these codes would be in CY 2012 for the 
CY 2013 OPPS rulemaking. We now have claims data for CPT codes 65778 
and 65779, and our data show that both procedures are performed in the 
HOPD setting. Analysis of the CY 2011 claims data available for the 
proposed rule, which was based on claims processed from January 1 
through December 31, 2011, revealed that the estimated cost for CPT 
code 65778 is approximately $1,025 based on 33 single claims (out of 
130 total claims), and the estimated cost for CPT code 65779 is 
approximately $2,303 based on 35 single claims (out of 260 total 
claims). Based on the clinical similarity to other procedures currently 
assigned to APC 0233, and because there was no violation with the 2 
times rule, we stated that we believe that we should continue to assign 
both CPT codes 65778 and 65779 to APC 0233, which had a payment rate of 
approximately $1,150. Review of the procedures assigned to APC 0233 
showed that the range of the cost for the procedures with significant 
claims data is between approximately $859 (for CPT code 65400 (Removal 
of eye lesion)) and approximately $1,397 (for CPT code 66840 (Removal 
of lens material)).
    In summary, for CY 2013, we proposed to continue to assign CPT code 
65778 to a conditionally packaged status indicator of ``Q2'' and to 
reassign the status indicator for CPT code 65779 from ``T'' to ``Q2,'' 
similar to CPT code 65778. In addition, we proposed to continue to 
assign both CPT codes 65778 and 65779 to APC 0233, which had a proposed 
geometric mean cost of approximately $1,150. Both procedures and their 
CY 2013 APC assignments were displayed in Table 19 of the proposed 
rule.
    At the August 2012 HOP Panel Meeting, a presenter urged the Panel 
to recommend to CMS not to conditionally package CPT code 65779 for CY 
2013, and instead, assign status indicator ``T'' to the code. Based on 
the information presented at the meeting, and after further discussion 
of the issue, the HOP Panel made no recommendation to revise the status 
indicator assignment for CPT code 65779.
    Comment: One commenter urged CMS not to finalize its proposal to 
conditionally package CPT code 65779 by assigning it status indicator 
``Q2,'' and recommended that CMS continue to assign the code status 
indicator ``T.'' The commenter expressed concern that assigning a 
``Q2'' status indicator to CPT code 65779 would impede access to this 
procedure because, in a majority of the cases (84 percent), hospitals 
perform this procedure with another procedure. Consequently, a ``Q2'' 
status indicator would result in no payment for CPT code 65779. The 
commenter further recommended that CMS assign CPT code 65779 to APC 
0244, or another APC that better reflects the resources associated with 
the procedure, such as APC 0241 (Level IV Repair and Plastic Eye 
Procedures) or APC 0234 (Level IV Anterior Segment Eye Procedures).
    Response: We believe that the revision in status indicator for CPT 
code 65779 would enable hospitals to perform either procedures (CPT 
code 65778 or 65779) when appropriate, and would not differentiate one 
procedure from the other because of the status indicator assignment 
under the hospital OPPS. In addition, because CPT codes 65778 and 65779 
were new for CY 2011, CY 2013 is the first year of claims data that we 
have available for ratesetting for both CPT codes. Analysis of the CY 
2011 claims data revealed a geometric mean cost of approximately $989 
for CPT code 65778 based on 36 single claims (out of 142 total claims), 
and approximately $2,314 for CPT code 65779 based on 37 single claims 
(out of 280 total claims). Review of the procedures assigned to APC 
0233 showed that the range of the CPT geometric mean cost for the 
procedures with significant claims data is between approximately $867 
(for CPT code 65400 (Removal of eye lesion)) and approximately $1,390 
(for CPT code 66840 (Removal of lens material)). Based on the clinical 
similarity to other procedures currently assigned to APC 0233, and 
because there is no violation with the 2 times rule, we believe that we 
should continue to assign CPT code 65779 to APC 0233, which has a final 
geometric mean cost of approximately $1,162 for CY 2013.
    As has been our practice since the implementation of the OPPS, we 
annually review all the items and services within an APC group to 
determine, with respect to comparability of the use of resources, for 
any 2 times rule violations. 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. For CPT codes 65778 and 
65779, we will again reevaluate their APC assignments for the CY 2014 
OPPS rulemaking cycle.
    After consideration of the public comment that we received, we are 
finalizing our CY 2013 proposal, without modification, to assign status 
indicator ``Q2'' to CPT code 65779. When the service is furnished with 
a separately payable surgical procedure with status indicator ``T'' on 
the same day, payment for CPT code 65779 is packaged. Otherwise, 
payment for CPT code 65779 is made separately through APC 0233, which 
has a final CY 2013 geometric mean cost of approximately $1,162. The 
amniotic membrane procedures and their CY 2013 final APC assignments 
are displayed in Table 25 below.

[[Page 68341]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.037

6. Radiology Oncology
a. Proton Beam Therapy (APCs 0664 and 0667)
    APC 0664 (Level I Proton Beam Radiation Therapy) includes two 
procedures: CPT code 77520 (Proton treatment delivery; simple, without 
compensation), which had a CY 2013 proposed rule cost of approximately 
$331 (based on 185 single claims of 185 total claims submitted for CY 
2011); and CPT code 77522 (Proton treatment delivery; simple, with 
compensation), which had a proposed rule cost of approximately $1,191 
(based on 14,279 single claims of 15,405 total claims submitted for CY 
2011). APC 0667 (Level II Proton Beam Radiation Therapy) also includes 
two procedures: CPT code 77523 (Proton treatment delivery, 
intermediate), which had a proposed rule cost of approximately $920 
(based on 3,009 single claims out of 3,202 total claims submitted for 
CY 2011), and CPT code 77525 (Proton treatment delivery, complex), 
which had a proposed rule cost of approximately $483 (based on 1,400 
single claims out of 1,591 total claims submitted for CY 2011). Based 
on these CY 2011 claims data, under the current APC structuring the 
proposed rule cost of APC 0664 was approximately $1,171, and the 
proposed rule cost of APC 0667 was approximately $750.
    Because only a few hospitals bill Medicare for these services, 
their payment rates, which are set annually based on claims data 
according to the standard OPPS ratesetting methodology, may fluctuate 
significantly from year to year. For CY 2013, under the current APC 
assignments, the proposed rule cost of APC 0664 was approximately the 
same as its CY 2012 payment rate of $1,184. However, the proposed rule 
cost of APC 0667 decreased substantially from the CY 2012 payment rate. 
We also observed that for CY 2013, as in several prior years, the lower 
level APC 0664 did not include the lower cost services among the four 
CPT codes. For CY 2013, we proposed to improve the resource homogeneity 
within the proton beam therapy APCs by including the services requiring 
fewer resources in APC 0664 (Level I) and the services requiring 
greater resources in APC 0667 (Level II). Specifically, we proposed to 
reassign CPT code 77522 to APC 0667 and to reassign CPT code 77525 to 
APC 0664. Under the proposed reassignment, the estimated cost of APC 
0664 was approximately $462, and the estimated cost of APC 0667 was 
approximately $1,138. We invited public comments on this proposal.
    Comment: Several commenters indicated that the decrease in the cost 
of APC 0667 is attributable to inaccurate coding and cost reporting 
during part of CY 2010 and part of CY 2011, on the part of one 
hospital. The commenters stated that one hospital's services that 
should have been billed as CPT code 77523 were instead billed as CPT 
code77525, which has a lower estimated cost. They stated that these 
services were also reported under an unintended cost center in the 
hospital's cost report, and argued that the current APC configuration 
better reflects the clinical similarity and relative resources used to 
furnish proton beam therapy services. We received a comment from the 
hospital in question indicating the same. This provider also stated 
that these issues were corrected and do not affect any claims in CY 
2012. These commenters requested that we therefore forego using the CY 
2011 claims data to set CY 2013 rates because they are based in part on 
inaccurate data reported by one of the few billing providers. They 
requested that CMS maintain both the CY 2012 payment rates and the 
current CY 2012 APC configuration through CY 2013, and the HOP Panel 
agreed with this recommendation at its August 2012 public meeting.
    One commenter recommended that CMS obtain corrected data from the 
provider in question and use the corrected data in updating the CY 2012 
proton beam therapy payment rates for CY 2013. The commenter 
recommended that if CMS could not accomplish this in time for 
publication of the CY 2013 final rule, CMS exclude the reportedly 
erroneous data from its ratesetting process and update the CY 2012 
payments for proton beam services for CY 2013 using the remaining 
claims data. In either event, the commenter recommended that we not 
restructure the APCs this year because despite what the cost data show, 
simple and complex proton beam therapy services are not clinically 
homogenous.
    Another commenter supported the proposed reduction in payments for 
proton beam services. The commenter stated that given the cost of 
establishing and staffing proton beam centers, proton beam therapy does 
not yield commensurate benefit over other therapies.
    Response: We appreciate the public comments and the HOP Panel's 
recommendation. After consideration of the public comments we received, 
we are updating the payment rates for proton beam therapy for CY 2013 
to reflect the most recently available claims data from all providers. 
Therefore, we are not maintaining the CY 2013 payment rates at CY 2012 
levels, and we are not excluding the reportedly erroneous data from the 
ratesetting process. However, we are maintaining the current APC 
structure for CY 2013 and will reevaluate the costs and appropriateness 
of the APC structuring for proton beam services next year. Using the 
current APC assignments for proton beam services, the CY 2013 final 
geometric mean cost of APC 0664 (including CPT codes 77520 and 77522) 
is approximately $1,169. The CY 2013 final geometric mean cost of APC 
0667 (including CPT codes 77523 and 77525) is approximately $702.

[[Page 68342]]

b. Device Construction for Intensity Modulated Radiation Therapy (IMRT) 
(APC 0305)
    Effective January 1, 2010, the CPT Editorial Panel created CPT code 
77338 (Construction of multi-leaf collimator (MLC) device(s) for IMRT 
per IMRT plan) to report all of the devices furnished under a single 
IMRT treatment plan. The code was created as part of an effort to 
consolidate the reporting of multiple services or units of service into 
a single code. For CY 2011, we assigned CPT 77338 to APC 0310 (Level 
III Therapeutic Radiation Treatment Preparation) based on a simulated 
cost of approximately $792 that we calculated using CY 2009 claims data 
for the predecessor CPT code 77334 ((Treatment devices, design and 
construction; complex (irregular blocks, special shields, compensators, 
wedges, molds or casts)).
    For CY 2012, using our standard ratesetting methodology and the 
first year of available claims data for CPT code 77338, and based upon 
a final rule cost of approximately $188, we reassigned this service 
from APC 0310 to APC 0305 (Level II Therapeutic Radiation Treatment 
Preparation) with a final payment rate of approximately $264. In our 
response to public comments, we noted several possible reasons for the 
discrepancy in the reported cost of the service relative to its 
predecessor code. We stated that it is not unusual for providers to 
bill a given service in a manner that is inconsistent with what we 
would expect based on the definition of a new code. We also noted 
potential clinical reasons for the apparent anomaly, such as the 
inclusion of labor-intensive physical blocks, shields, and molds in the 
service described by CPT code77334, and accounting rationales such as 
the crosswalking of a single collimator setting to the charges for the 
construction of a physical block, also in the service described by CPT 
code 77334. We stated that we saw no basis to ignore our robust set of 
single procedure claims submitted by a significant number of hospitals 
by continuing to simulate a cost for CPT code 77338.
    In the CY 2013 OPPS/ASC proposed rule Addenda, based on a proposed 
rule cost of approximately $293, we proposed to continue the current 
assignment of CPT code 77338 for CY 2013 to APC 0305, and to add this 
service to the bypass list which would increase the number of claims 
that could be used in setting its payment rate.
    Comment: One commenter objected to the continued assignment of CPT 
code 77338 to APC 0305. The commenter again noted the low estimated 
cost of this service compared to its predecessor code, and continued to 
believe that providers are inappropriately coding the service. They 
requested that for CY 2013, we simulate the cost of this service using 
the alternative methodology that we used in CY 2011, and that we 
reassign the service to APC 0310, which has a final rule cost of 
approximately $1,013.
    Response: As we noted last year, we see no reason to discard the 
reported claims data for CPT code 77338, which has a CY 2013 final rule 
geometric mean cost of approximately $297. For the reasons previously 
discussed, for CY 2013 we will continue assigning this CPT code to APC 
0305, which has a final geometric mean cost of approximately $299. We 
will reevaluate whether this placement is appropriate next year when 
additional claims data are available.
c. Other Radiation Oncology Services (APCs 0310 and 0412)
    Comment: One commenter addressed the proposed payment rates for the 
following services: CPT code 77418 (Radiation treatment delivery 
intensity modulated radiotherapy), which is assigned to APC 0412 (Level 
II Radiation Therapy) and is separately paid; CPT code 77295 (3-D 
Therapeutic radiology simulation-aided field setting), which is 
assigned to APC 0310 (Level III Therapeutic Radiation Treatment 
Preparation) and is also separately paid; CPT code 77373 (Stereotactic 
body radiation therapy delivery), which has a status indicator of ``B'' 
(Not covered under the OPPS); and CPT code 77014 (CT scan for therapy 
guidance), which has status indicator of ``N'' and is packaged. The 
commenter expressed concern about perceived decreases in payment for 
these services.
    Response: Under our standard ratesetting methodology, we proposed a 
slight payment increase for CPT 77418 from approximately $459 in CY 
2012 to approximately $484 in CY 2013, based on a CY 2013 proposed rule 
geometric mean cost of $497. Similarly, we proposed a slight payment 
increase for CPT 77295 from approximately $953 in CY 2012 to 
approximately $985 in CY 2013, based on a CY 2013 proposed rule 
geometric mean cost of $988. The final CY 2013 geometric mean cost of 
CPT 77418 is approximately $498, and the final CY 2013 geometric mean 
cost of CPT 77295 is approximately $991.
    Since 2007, we have not recognized CPT code 77373 under the OPPS, 
and hospitals should instead report this service using HCPCS code G0251 
(Linear accelerator based stereotactic radiosurgery, delivery). HCPCS 
code G0251 is assigned to APC 0065 (Level I Stereotactic Radiosurgery, 
MRgFUS, and MEG), whose payment rate also increased from CY 2012 (final 
CY 2012 payment of approximately $902) to CY 2013 (final CY 2013 
geometric mean cost of approximately $1,007). CPT code 77014 has been 
packaged under the OPPS since 2008 when we implemented our guidance 
services policy.
d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 
0065, 0066, 0067, and 0127)
    For CY 2013, we proposed to continue to assign CPT code 77371 
(Radiation treatment delivery, stereotactic radiosurgery (SRS), 
complete course of treatment of cranial lesion(s) consisting of 1 
session; multi-source Cobalt 60 based) to APC 0127 (Level IV 
Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 
proposed payment rate of approximately $8,011.
    We also proposed to continue to recognize four existing HCPCS G-
codes that describe linear accelerator-based SRS treatment delivery 
services for separate payment in CY 2013. Specifically, we proposed the 
following: to assign HCPCS code G0173 (Linear accelerator based 
stereotactic radiosurgery, complete course of therapy in one session) 
and HCPCS code G0339 (Image-guided robotic linear accelerator-based 
stereotactic radiosurgery, complete course of therapy in one session or 
first session of fractionated treatment) to APC 0067 (Level III 
Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 
proposed payment rate of approximately $3,294; to assign HCPCS code 
G0251 (Linear accelerator-based stereotactic radiosurgery, delivery 
including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, maximum five sessions per course 
of treatment) to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, 
and MEG), which had a CY 2013 proposed payment rate of approximately 
$967; and to assign HCPCS code G0340 (Image-guided robotic linear 
accelerator based stereotactic radiosurgery, delivery including 
collimator changes and custom plugging, fractionated treatment, all 
lesions, per session, second through fifth sessions, maximum five 
sessions per course of treatment) to APC 0066 (Level II Stereotactic 
Radiosurgery, MRgFUS, and MEG), which had a CY

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2013 proposed payment rate of approximately $2,361.
    Further, we proposed to continue to assign SRS CPT codes 77372 
(Radiation treatment delivery, stereotactic radiosurgery (SRS) 
(complete course of treatment of cerebral 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) status indicator ``B'' (Codes that are not recognized by 
OPPS when submitted on an outpatient hospital Part B bill type (12x and 
13x)) under the OPPS, to indicate that these CPT codes are not payable 
under the OPPS.
    Comment: One commenter urged CMS to reevaluate the APC assignments 
for the linear accelerator-based (LINAC) and robotic Cobalt-60 based 
stereotactic radiosurgery (r-SRS) HCPCS codes. The commenter stated 
that no clinical data exist to support the need for differential 
payments for LINAC-based and Cobalt-60 r-SRS procedures. The commenter 
further explained that there is no clinical evidence to suggest that 
one system is superior to the other, and the costs of purchasing and 
maintaining the devices are similar. The commenter recommended that CMS 
assign HCPCS code G0339 and CPT code 77371 to the same APC, thereby 
establishing payment parity for the complete course of treatment for 
intracranial and other head and neck r-SRS, regardless of equipment or 
energy source. In addition, the commenter argued that this APC 
reevaluation is necessary to protect the Medicare program and 
beneficiaries from excessive costs associated with Cobalt-60-based 
system, when both the LINAC-based and Cobalt-60-based systems are 
similar in clinical homogeneity and resource costs.
    Response: We disagree with the commenter's argument that the LINAC-
based and Cobalt-60 based systems have similar resource costs. For the 
past several years, we have seen resource differences based on the 
geometric mean costs for the LINAC-based and Cobalt-60-based systems, 
and analysis of our claims data show that the geometric mean costs for 
LINAC-based and Cobalt-60-based SRS procedures differ significantly. 
Since CY 2007, when CPT code 77371 became effective, our claims data 
have shown consistently a cost of more than $7,000 for the service 
associated with the Cobalt-60-based system, which is higher than the 
mean cost of approximately $3,500 for the LINAC-based system (described 
by HCPCS G-code G0339).
    Analysis of the updated CY 2011 claims data used for this final 
rule with comment period indicates that the code-specific geometric 
mean costs for the LINAC-based and Cobalt-60-based systems continue to 
differ. Our updated claims data on the hospital outpatient claims 
available for CY 2013 ratesetting show a geometric mean cost of 
approximately $8,138 for CPT code 77371 based on 410 single claims (out 
of a total of 4,598 claims), which is significantly higher than the 
geometric mean costs associated with HCPCS codes G0173, G0251, G0339, 
and G0340. Specifically, our claims data indicate a geometric mean cost 
of approximately $2,605 for HCPCS code G0173 based on 923 single claims 
(out of a total of 1,597 claims), a geometric mean cost of 
approximately $1,007 for HCPCS code G0251 based on 12,965 single claims 
(out of a total of 13,746 claims), a geometric mean cost of 
approximately $3,497 for HCPCS code G0339 based on 8,287 single claims 
(out of a total of 10,462 claims), and a geometric mean cost of 
approximately $2,423 for HCPCS code G0340 based on 25,444 single claims 
(out of a total of 25,708 claims). Because the geometric mean costs of 
HCPCS code G0339 and CPT code 77371 differ significantly, we do not 
believe it would be appropriate to provide OPPS payment through a 
single APC for these r-SRS treatment delivery services in CY 2013. We 
continue to believe that APC 0127 is an appropriate APC assignment for 
CPT code 77371, and, similarly, that APC 0067 is an appropriate APC 
assignment for HCPCS code G0339 based on consideration of the clinical 
characteristics associated with these procedures and based on the 
geometric mean costs for these services calculated from the most 
recently available hospital outpatient claims and cost report data. 
Consistent with our current policy to annually assess the 
appropriateness of the APC assignments for all services under the 
hospital OPPS, we will continue to monitor our claims data for the SRS 
treatment delivery services in the future.
    As we have stated in the past (74 FR 60456), the OPPS is a 
prospective payment system, where APC payment rates are based on the 
relative costs of services as reported to us by hospitals according to 
the most recent claims and cost report data as described in section 
II.A. of this final rule with comment period. The 2 times rule 
specifies that the mean cost of the highest cost item or service within 
a payment group may be no more than 2 times greater than the mean cost 
of the lowest cost item or service within the same group. Based on the 
2 times rule, HCPCS code G0339 and CPT code 77371 could not be assigned 
to the same APC and, because hospitals continue to report very 
different costs for these services, we believe it is appropriate to 
maintain their assignments to different payment groups for CY 2013. As 
a matter of payment policy, the OPPS does not set payment rates for 
services based on considerations of clinical effectiveness. 
Furthermore, in accordance with the statute, we budget neutralize the 
OPPS each year in the annual update so that projected changes in 
spending for certain services are redistributed to payment for other 
services.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals, without modification, to continue to 
assign CPT code 77371 to APC 0127, which has a final CY 2013 APC 
geometric mean cost of approximately $8,138, and to continue to assign 
HCPCS code G0339 to APC 0067, which has a final CY 2013 APC geometric 
mean cost of approximately $3,395.
e. Intraoperative Radiation Therapy (IORT) (APC 0412)
(1) Background
    The AMA's CPT Editorial Panel created three new Category I CPT 
codes for intraoperative radiation therapy (IORT), effective January 1, 
2012: CPT codes 77424 (Intraoperative radiation treatment delivery, x-
ray, single treatment session); 77425 (Intraoperative radiation 
treatment delivery, electrons, single treatment session); and 77469 
(Intraoperative radiation treatment management). As with all new CPT 
codes for CY 2012, these three codes were included in Addendum B to the 
CY 2012 OPPS/ASC final rule with comment period (available via the CMS 
Web site), effective on January 1, 2012. In accordance with our 
standard practice each year, our clinicians review the many CPT code 
changes that will be effective in the forthcoming year and make 
decisions regarding status indicators and/or APC assignments based on 
their understanding of the nature of the services. We are unable to 
include proposed status indicators and/or APC assignments in the 
proposed rule for codes that are not announced by the AMA's CPT 
Editorial Panel prior to the issuance of the proposed rule. Therefore, 
in accordance with our longstanding policy, we include, in the final 
rule with comment period, interim status indicators and/or APC 
assignments for all new CPT codes that are announced by the AMA's CPT 
Editorial Panel subsequent to the issuance of the OPPS/ASC proposed

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rule to enable payment for new services as soon as the codes are 
effective.
    We identified the new codes for IORT for CY 2012 in Addendum B to 
the CY 2012 OPPS/ASC final rule with comment period as being open to 
public comment by showing a comment indicator of ``NI'' and made 
interim status indicator assignments for each of these new IORT codes, 
based on our understanding of the clinical nature of the services they 
describe. Specifically, for CY 2012, we packaged these IORT service 
codes with the surgical procedures with which they are billed, 
assigning them interim status indicators of ``N'' (Items and Services 
Packaged into APC Rates). We did so based on a policy that was adopted 
in the CY 2008 OPPS final rule with comment period (72 FR 66610 through 
66659) to package services that are typically ancillary and supportive 
of a principal diagnostic or therapeutic procedure, which would 
generally include intraoperative services. Because IORT are 
intraoperative services furnished as a single dose during the time of 
the related surgical session, we packaged them into the payment for the 
principal surgical procedures with which they are performed based on 
claims data used for the CY 2012 OPPS/ASC final rule with comment 
period.
    Subsequent to issuance of the CY 2012 OPPS/ASC final rule with 
comment period, stakeholders provided comments on the interim status of 
these IORT service codes for CY 2012, asserting that these services are 
not ancillary to the surgical procedures, urging us to unpackage these 
codes, and requesting that we assign them to an APC reflective of the 
resources used to provide the IORT services. Commenters who responded 
to the CY 2012 OPPS/ASC final rule with comment period argued that IORT 
services described by CPT codes 77424 and 77425 are separate, distinct, 
and independent radiation treatment services from the surgical services 
to remove a malignant growth. According to the commenters, IORT is 
performed separately by a radiation oncologist and a medical physicist 
when there is concern for residual unresected cancer because of narrow 
margins related to the surgical resection. A number of the commenters 
provided varied estimates of the cost of IORT as between $4,000 and 
$7,000 per treatment, and some commenters cited a hospital survey of 
per treatment costs for the procedure described by CPT code 77424 of 
$4,441.17 and for the procedure described by CPT code 77425 of 
$6,897.50.
    One commenter stated that the x-ray intraoperative service 
described by CPT code 77424 has previously been reported with CPT code 
0182T (High dose rate electronic brachytherapy, per fraction), which is 
a separately paid OPPS service. However, the commenter pointed out that 
it would not be proper to report intraoperative radiation therapy with 
CPT code 0182T because now CPT codes 77424 and 77425 more specifically 
and accurately describe the intraoperative radiation services. One 
commenter recommended that CPT code 77425 be mapped to a new technology 
APC.
(2) CY 2013 Proposals for CPT Codes 77424, 77425, and 77469
    Based on the public comments and information received on the IORT 
policies contained in the CY 2012 OPPS/ASC final rule with comment 
period, and after further review and consideration of those public 
comments and the clinical nature of the IORT procedures, we agreed that 
IORT services are not the typical intraoperative services that we 
package, as they are not integral to or dependent upon the surgical 
procedure to remove a malignancy that precedes IORT. Therefore, for CY 
2013, we proposed to unpackage CPT codes 77424 and 77425 and assign 
them to APC 0412, currently titled ``IMRT Treatment Delivery'' (77 FR 
45124). We stated that IORT treatment services are clinically similar 
to other radiation treatment forms, such as IMRT treatment, which are 
assigned to APC 0412. Furthermore, we proposed to change the title of 
APC 0412 to ``Level III Radiation Therapy'' to encompass a greater 
number of clinically similar radiation treatment modalities. The CY 
2013 proposed rule geometric mean cost for APC 0412, based on CY 2011 
claims data, was approximately $496. We also proposed to monitor 
hospitals' costs for furnishing the services described by CPT codes 
77424 and 77425.
    In the CY 2013 proposed rule, we stated that we believe that CPT 
code 77469 should receive equal treatment to other radiation management 
codes, such as CPT code 77431 (Radiation therapy management with 
complete course of therapy consisting of 1 or 2 fractions only) and CPT 
code 77432 (Stereotactic radiation treatment management of cranial 
lesion(s) (complete course of treatment consisting of 1 session)), 
which are assigned status indicator ``B'' (Codes that are not 
recognized by OPPS when submitted on an outpatient hospital Part B bill 
type (12x and 13x)) and are not paid under the OPPS. Therefore, we 
proposed that the appropriate status indicator code assignment for CPT 
code 77469 be ``B'' for nonpayable status under the OPPS for CY 2013, a 
change from its current CY 2012 status indicator assignment of ``N'' 
for packaged payment status.
    At its August 2012 meeting, the HOP Panel recommended that CMS 
assign CPT code 77424 and CPT code 77425 to APC 0313 (Brachytherapy), 
and consider renaming the APC ``Brachytherapy and Intraoperative 
Radiation Therapy.'' The Panel also recommended that CMS present to the 
Panel cost data regarding CPT codes 77424 and 77425, when available or 
by the August 2013 Panel meeting.
    Comment: Many commenters supported the proposal to unpackage CPT 
codes 77424 and 77425, but objected to the proposed assignment of these 
codes to APC 0412. The commenters asserted that APC 0412 is neither 
reflective of the clinical characteristics nor the resources needed to 
perform the IORT services described by CPT codes 77424 and 77425. The 
commenters pointed out the clinical differences between IORT and IMRT, 
in that IORT provides a much higher dose of radiation during a single 
fraction (session) lasting about 45 minutes, while IMRT provides lower 
doses over multiple fractions lasting about 15 minutes. The commenters 
asserted that IMRT's cost over the full course of therapy is $17,000 to 
$20,000, much higher than IORT's cost.
    Many commenters requested that CMS assign CPT codes 77424 and 77425 
to an appropriate APC based on clinical similarity to other radiation 
treatments and suggested that CMS use external cost data to estimate 
the costs of IORT, because cost data from hospital claims are not yet 
available for these new CPT codes. Some commenters recommended that CPT 
codes 77424 and 77425 be assigned to APC 0313 (Brachytherapy), which 
has a proposed payment rate of approximately $685, because the IORT 
services are more similar to brachytherapy services than the IMRT 
services currently assigned to APC 0412. These commenters asserted that 
both IORT and brachytherapy involve placement of a radiation source 
inside or next to the area of the body requiring treatment, while IMRT, 
which is a form of external beam radiation therapy, delivers radiation 
from outside the body. The commenters opined that CPT codes 77424 and 
77425 and the APC 0313 brachytherapy procedures have similar resource 
costs, particularly because the X-ray based IORT procedure is 
comparable to high dose rate (HDR) brachytherapy, and the X-ray based 
IORT system may be used for the delivery of fractionated breast 
brachytherapy, often billed with CPT

[[Page 68345]]

code 0182T (High dose rate electronic brachytherapy, per fraction), 
which is assigned to APC 0313.
    Several other commenters stated that IORT is very different than 
HDR brachytherapy, as well as IMRT and multi-fraction stereotactic 
radiosurgery, in terms of both clinical characteristics and resource 
costs. Commenters stated that IORT capital equipment can only be used 
for IORT in the operating room, and not for other forms of radiation 
therapy, resulting in less patient utilization over which to spread 
costs. These commenters recommended that CMS assign CPT codes 77424 and 
77425 to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and 
MEG), which has a proposed payment rate of approximately $3,294. These 
commenters believed that IORT is more similar clinically to 
stereotactic radiosurgery (SRS) than IMRT, pointing out that SRS may be 
delivered in single or multiple fraction therapy and has many fewer 
(that is, 2 to 5) fractions, making it more similar to IORT, in that 
regard. A few commenters recommended that CMS assign IORT to a New 
Technology APC, with a wide range of recommended payment rates, from 
approximately $4,000 to approximately $7,000, citing various data 
estimates and sources including a survey of hospitals.
    Regarding our proposal to change the status indicator for CPT code 
77469 to ``B'' and make the service non-payable, one commenter 
supported the proposed change on the basis that it is consistent with 
our policy regarding other radiation treatment management codes.
    Response: We appreciate all of the feedback we received on the CY 
2012 interim status indicator assignment of ``N'' to CPT codes 77424 
and 77425 and the CY 2013 proposal to assign these CPT codes to APC 
0412. As stated in the CY 2013 OPPS/ASC proposed rule and described 
above, we agree with the commenters that IORT services are not the 
typical intraoperative services that we package, as they are not 
integral to or dependent upon the surgical procedure to remove a 
malignancy that precedes IORT.
    We agree with commenters that the resource costs of APC 0412 do not 
fit well with single fraction radiation therapy technologies, such as 
IORT. However, we believe the resource costs of IORT can be 
accommodated by one of the existing APCs for radiation therapy, and 
therefore, a new technology APC assignment is not needed. From a 
clinical standpoint, we agree with commenters that the procedures 
described by CPT codes 77424 and 77425 share important characteristics 
with SRS, particularly because SRS may be a single fraction therapy or 
involve many fewer fractions than IMRT. Based on the range of claimed 
costs provided by the commenters, which are all based on external 
costs, as we do not yet have claims data, there is clearly a wide range 
of reported or estimated costs for IORT services, and, as some 
commenters indicate, there may be a difference in the cost structures 
of CPT codes 77424 and 77425.
    After consideration of the public comments we received, we believe 
that an appropriate initial APC assignment for CPT codes 77424 and 
77425 is APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG), 
in terms of clinical characteristics, and the range of estimated costs 
for IORT services. Therefore, for CY 2013, we are assigning CPT codes 
77424 and 77425 to APC 0065, which has a CY 2013 final geometric mean 
cost of approximately $1,006. We will review the APC assignment of CPT 
codes 77424 and 77425, individually, once we have OPPS hospital claims 
data. Regarding the Panel recommendation that we present to the Panel 
cost data regarding CPT codes 77424 and 77425, we agree to provide cost 
data from claims for these service codes when available.
7. Imaging
a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397)
    Effective April 1, 2012, we created HCPCS code C9733 (Non-
ophthalmic fluorescent vascular angiography (FVA)) for a service that 
became known to us via the new technology APC application process. We 
assigned HCPCS code C9733 to APC 0397 (Vascular Imaging), which has a 
CY 2012 payment rate of $154.87 and a status indicator assignment of 
``Q2.'' The ``Q2'' status indicator provides that the service will have 
packaged APC payment if billed on the same date of service as a HCPCS 
code assigned status indicator ``T''; and in all other circumstances, 
there is a separate APC payment for the service. We proposed to 
continue to assign HCPCS code C9733 to APC 0397 for CY 2013, which had 
a CY 2013 proposed payment rate of $192.21, and to continue the 
assignment of the code to the ``Q2'' status indicator.
    The HOP Panel, at its August 2012 meeting, recommended that CMS 
maintain a status indicator of ``Q2'' for HCPCS code C9733, while 
making no recommendation as to its APC assignment. The proposed payment 
rate for APC 0397 was $197.08, with a range in individual procedure 
geometric mean costs from $140.78 to $202.97. We proposed the 
assignment of HCPCS code C9733 to APC 0397 because we believed that the 
service described by HCPCS code C9733 is similar in clinical 
characteristics to other vascular imaging services. We do not have 
claims cost data available for HCPCS code C9733 because it was made 
effective on April 1, 2012. For new HCPCS codes, our longstanding 
policy is to wait until we have claims data on new services before 
considering them for reassignment to clinical APCs other than the 
originally assigned APC.
    Comment: A number of commenters were appreciative that CMS created 
a new HCPCS code for non-ophthalmic FVA, but were concerned with the 
packaged status that would result from assigning HCPCS code C9733 
status indicator ``Q2'' because the procedure is usually performed with 
a service having a ``T'' status indicator. A few commenters pointed out 
that FVA is effective in assessing perfusion in tissue, and is 
particularly useful when vascular function is diminished. A number of 
commenters pointed out that the procedure is performed intraoperatively 
for this purpose, and is a valuable tool to assist the surgeon with 
clinical decision-making. Commenters also pointed out that the non-
ophthalmic FVA procedure has been used primarily in the hospital 
inpatient setting, and only recently offered in the hospital outpatient 
setting; therefore, outpatient data are only beginning to accumulate. 
However, commenters believed that because the ``Q2'' status indicator 
will typically result in packaging the cost of the procedure, the 
procedure will not be performed at many hospitals. The commenters 
asserted that it was very important that CMS change the status 
indicator of HCPCS code C9733 to ``S,'' which is the same status 
indicator as all other procedures assigned to APC 0397. Moreover, some 
commenters stated that other vascular imaging procedures, such as 
Doppler Ultrasound, fluoroscopy, and magnetic resonance angiography 
(MRA), are alternatives to the procedure described by HCPCS code C9733 
and are assigned status indicator ``S'' rather than status indicator 
``Q2.'' Another commenter noted that other modalities used for tissue 
perfusion screening in the hospital outpatient setting are assigned to 
APC 0096 (Level II Noninvasive Physiologic Studies), and these 
procedures also are assigned status indicator ``S.'' The commenter 
opined that assignment of status indicator ``Q2'' will encourage 
outpatient clinics to schedule multiple

[[Page 68346]]

visits to avoid the packaging of HCPCS code C9733. One commenter 
claimed that only a small number of APCs have more than one status 
indicator for their assigned procedures, and that no other HCPCS C-
codes have a status indicator of ``Q2.'' The commenter asserted that 
packaged status should only be assigned to procedures where data 
indicate that the costs and services associated with the procedure are 
integral to existing procedures.
    One commenter asserted that the assignment of HCPCS code C9733 to 
APC 0397 is not appropriate based on the costs of the procedure, and 
estimated that the cost is approximately $2,100 per procedure. The 
commenter stated that this estimate is based on a $6,000 monthly lease 
payment of the system's capital with 5 times per month use, disposable 
kit costs of approximately $800, plus $100 in indirect costs. The 
commenter recommended the assignment of HCPCS code C9733 to APC 0279 
(Level II Angiography and Venography), which has a CY 2013 proposed 
payment rate of approximately $2,219, or assignment of the C-code to 
New Technology APC 1522 (Level XXII New Technology), which has a CY 
2013 proposed payment rate of $2,250, for at least a 3-year 
transitional period, until the costs to perform the non-ophthalmic FVA 
procedure are known, in order to package the procedure.
    A few commenters were concerned that the HOP Panel, and perhaps CMS 
as well, were confusing the HCPCS code C9733 technology with a ``Wood's 
Lamp.'' The commenters explained the differences in the two 
technologies, indicating that there are clinically significant 
differences as a result of the properties of the fluorescent dyes with 
which they are used.
    Response: We believe that, when the non-ophthalmic FVA procedure is 
performed with a surgical procedure, it is ancillary to the surgical 
service, providing imaging services that are supportive and adjunctive 
to the surgical service. As a number of commenters stated, the 
procedure is used intraoperatively to assist the surgeon. In those 
instances when the service described by HCPCS code C9733 is performed 
as a stand-alone service, it is separately paid. Therefore, we believe 
the ``Q2'' status indicator is appropriate. Regarding the comment that 
there are only a few APCs that have more than one status indicator, we 
assign status indicators to HCPCS codes, not to APCs. APCs are 
sometimes composed of procedures that have similar roles in the overall 
provision of services (for example, they are either major or minor 
services, serve an adjunct role), but this is not always the case. We 
disagree that the ``Q2'' status indicator will encourage multiple 
clinic visits. In cases where surgery requires intraoperative imaging 
to assess tissue perfusion, the procedure described by HCPCS code C9733 
cannot be provided separate from the surgery. Regarding the estimated 
cost of the procedure that a commenter provided, we note that the 
assumptions regarding the use of the capital equipment markedly affects 
the estimate of the cost of the procedure. The commenter's assumed use 
of the equipment at 5 times per month, results in the $1,200 monthly 
capital cost. However, an assumed monthly use of 20 times results in 
$300 monthly costs, and 30 times per month results in $200 monthly 
capital costs, and so on. Low utilization of a new technology can 
result in aberrantly high per case cost estimates and illustrates why 
it is important for us to wait until hospital outpatient claims data 
become available to us for use in ratesetting. We understand the 
differences between the non-ophthalmic FVA and Wood's Lamp 
technologies, and assure the commenters that our decision is not based 
on any confusion regarding the two technologies.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal to assign HCPCS code C9733 to APC 0397 
and to continue to assign the code to status indicator ``Q2.'' APC 0397 
has a CY 2013 final geometric mean cost of approximately $340, which we 
note is a significant increase over the CY 2012 proposed rule mean 
cost.
b. Level II Nervous System Imaging (APC 0402)
    For CY 2013, we proposed to continue to assign CPT code 78607 
(Brain imaging, tomographic (spect)) in APC 0402 (Level II Nervous 
System Imaging), which had a proposed payment rate of approximately 
$477.
    Comment: Some commenters requested that CMS assess the accuracy of 
the payment rate calculation for APC 0402. One commenter stated that 
the proposed 22-percent payment reduction does not appear to be due to 
any significant reduction in hospital charges for the procedures 
included in the APC or the shift from the use of medical charges to the 
use of the geometric mean cost. Another commenter requested that CMS 
reassess its APC payment rate calculation, including the proposed 
geometric mean cost of brain SPECT, which is described by CPT code 
78607, and only phase in a change to the APC payment rate if the data 
support a reduction.
    Response: We reviewed our claims data and, for the CY 2013 update, 
used more claims to determine the payment rate for APC 0402, as 
compared to the CY 2012 update. For the CY 2012 final rule with comment 
period, there were 2,593 single claims (out of 4,643 total claims), 
while for the CY 2013 proposed rule, there were 3,062 single claims 
(out of 4,793 total claims) used to calculate the proposed payment rate 
for APC 0402. Also, as indicated in the file that we made available 
with the proposed rule entitled ``CY 2013 OPPS Comparison Between 
Proposed Geometric Mean and Median Based Payments,'' the proposed 
payment rate using either payment methodology shows a decrease in the 
payment rate for APC 0402 for the CY 2013 update. That is, the CY 2013 
proposed payment rate for APC 0402, based on the median cost 
methodology, was approximately $497, while the geometric mean cost 
methodology resulted in a CY 2013 proposed payment rate of 
approximately $477. While the proposed payment rate decreased for APC 
0402, overall, the use of the geometric mean methodology has been 
positive for many services. In addition, basing the OPPS payment 
calculations on geometric means aligns the metric used in the 
ratesetting methodology for the OPPS with that used for the IPPS.
    Further examination of the claims data used for this final rule 
with comment period revealed an increase in services assigned to APC 
0402. Specifically, our claims data show a geometric mean cost of 
approximately $472 based on 3,446 single claims (out of 5,345 total 
claims). Similarly, we saw the same pattern of increase in services and 
cost for CPT code 78607 from the proposed rule claims data to this 
final rule claims data. That is, for the CY 2013 OPPS/ASC proposed 
rule, the proposed geometric mean cost for CPT code 78607 was 
approximately $490 based on 2,295 single claims (out of 2,573 total 
claims), while the final rule geometric mean cost is approximately $468 
based on 2,592 single claims (out of 2,902 total claims). We note that 
CPT code 78607 represents 75 percent of the claims for services 
assigned to APC 0402. Because of the robust claims, we believe that our 
claims data accurately reflect the resource costs of the procedures 
assigned to APC 0402, including the service described by CPT code 
78607. We do not believe that applying a phase-in change to the APC 
payment rate for the brain SPECT CPT code 78607 is necessary, given the 
significant claims data for this procedure.

[[Page 68347]]

    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT code 78607 to APC 0402. The final CY 2013 geometric mean 
cost for APC 0402 is approximately $472.
c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)
    For CY 2011, the AMA's CPT Editorial Panel established three new 
CPT codes to describe computed tomography of the abdomen and pelvis. 
CPT codes 74176 (Computed tomography, abdomen and pelvis; without 
contrast material), 74177 (Computed tomography, abdomen and pelvis; 
with contrast material(s)), and 74178 (Computed tomography, abdomen and 
pelvis; without contrast material in one or both body regions, followed 
by contrast material(s) and further sections in one or both body 
regions) were effective January 1, 2011. As shown in Table 26, for CY 
2011, these services were paid under one of two methods under the OPPS. 
They were either paid separately through a single APC or through a 
composite APC. We assigned CPT code 74176 to APC 0332 (Computed 
Tomography Without Contrast), CPT code 74177 to APC 0283 (Computed 
Tomography With Contrast), and CPT code 74178 to APC 0333 (Computed 
Tomography Without Contrast Followed By Contrast). We also assigned CPT 
code 74176 to composite APC 8005 (CT and CTA Without Contrast 
Composite), and CPT codes 74177 and 74178 to composite 8006 (CT and CTA 
With Contrast Composite). We assigned the CPT codes to status indicator 
``Q3'' to indicate that they were eligible for composite payment under 
the multiple imaging composite APC methodology when they are furnished 
with other computed tomography procedures performed on the same patient 
on the same day.
[GRAPHIC] [TIFF OMITTED] TR15NO12.038

    Consistent with our longstanding policy for new codes, in Addendum 
B of the CY 2011 OPPS/ASC final rule with comment period, we assigned 
these new CPT codes to interim APCs for CY 2011, with comment indicator 
``NI'' to denote that the codes were new and the interim APC assignment 
would be open to public comment. In accordance with our longstanding 
policy to provide codes to enable payment to be made for new services 
as soon as the code is effective, our interim APC assignment for each 
code was based on our understanding of the resources required to 
furnish the service and its clinical characteristics as defined in the 
code descriptor.
    As we described in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74259), in general, stakeholders who provided comments on 
the interim APC assignments of these CPT codes for CY 2011 stated that 
the most appropriate approach to establishing payment for these new 
codes was to assign the procedures described by the codes to APCs that 
recognize that each of the new codes reflects the reporting, under a 
single code, of two services that were previously reported under two 
separate codes and that, therefore, payments would be more accurate and 
better reflective of the services under the OPPS than if we were to 
establish payment rates for the codes for CY 2012 using claims data 
that reflect the combined cost of the two predecessor codes. In 
addition, at the February 28-March 1, 2011 Panel meeting, several 
presenters expressed their concern and disagreement with our single APC 
assignments for these new codes. The presenters stated that the payment 
rates for the single APC assignments reflected only half of the true 
costs of these services based on their internal calculated costs. 
Similar to the public commenters, the presenters indicated that, prior 
to CY 2011, these services were reported using a combination of codes, 
and suggested that CMS revise the methodology to include these 
combinations of codes to determine accurate payment rates for these 
services. Specifically, the presenters indicated that simulating the 
costs for CPT codes 74176, 74177, and 74178 using historical claims 
data from the predecessor codes would result in the best estimates of 
costs for these CPT codes and, therefore, the most accurate payment 
rates.
    After examination of our claims data for the predecessor codes, and 
after considering the various concerns and recommendations that we 
received on this issue (specifically, the views of the stakeholders who 
met with us to discuss this issue, the comments received in response to 
the CY 2011 OPPS/ASC final rule with public comment period, and input 
from the Panel at its February 28-March 1, 2011 meeting), we proposed 
to revise our payment methodology for CPT codes 74176, 74177, and 74178 
for CY 2012 (76 FR 42235). That is, we proposed to simulate the costs 
for CPT codes 74176, 74177, and 74178 using historical claims data from 
the predecessor codes to determine the most accurate payment rates for 
these CPT codes. This new proposed payment methodology necessitated 
establishing two new APCs, specifically, APC 0331 (Combined Abdominal 
and Pelvis CT Without Contrast) to which CPT code 74176 would be 
assigned, and

[[Page 68348]]

APC 0334 (Combined Abdominal and Pelvis CT With Contrast) to which CPT 
codes 74177 and 74178 would be assigned. In addition, we proposed to 
continue to assign CPT code 74176 to composite APC 8005 and CPT codes 
74177 and 74178 to composite APC 8006 for CY 2012.
    Based on the feedback that we received from the Panel at its August 
10-11, 2011 meeting, and the public comments received in response to 
the CY 2012 OPPS/ASC proposed rule in support of the proposed revised 
payment methodology for CPT codes 74176, 74177, and 74178, we finalized 
our proposals in the CY 2012 OPPS/ASC final rule with comment period. 
Specifically, we reassigned CPT code 74176 from APC 0332 to APC 0331, 
CPT code 74177 from APC 0283 to APC 0334, and CPT code 74178 from APC 
0333 to APC 0334. (We refer readers to the CY 2012 OPPS/ASC final rule 
with comment period for a detailed description of the methodology we 
used to simulate the costs of these procedures using claims data for 
the predecessor CPT codes (76 FR 74259 through 74262).) We also 
continued with our composite APC assignments for these codes. 
Specifically, we continued to assign CPT code 74176 to composite APC 
8005 and CPT codes 74177 and 74178 to composite APC 8006. Table 27 
below shows the payment rates for these CPT codes for the CY 2012 
update.
[GRAPHIC] [TIFF OMITTED] TR15NO12.039

    We stated in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74262) that we would reassess whether there is a continued need 
for these APCs for the CY 2013 OPPS/ASC update once we have actual 
charges for these services. Because CPT codes 74176, 74177, and 74178 
became effective on January 1, 2011, we have hospital claims data 
available for these codes that we can use for ratesetting for the first 
time. In the CY 2013 OPPS/ASC proposed rule (77 FR 45086), we stated 
that analysis of the latest CY 2011 hospital outpatient claims data for 
the CY 2013 OPPS/ASC proposed rulemaking update, which was based on 
claims processed with dates of service from January 1, 2011 through 
December 31, 2011, revealed a decrease in costs for the three 
procedures, compared to the costs simulated using the predecessor CPT 
codes for CY 2012. CPT code 74176 showed a proposed geometric mean cost 
of approximately $314 based on 312,493 single claims (out of 713,662 
total claims), while CPT code 74177 showed a proposed geometric mean 
cost of approximately $476 based on 367,002 single claims (out of 
951,296 total claims). In addition, CPT code 74178 showed a proposed 
geometric mean cost of approximately $537 based on 184,580 single 
claims (out of 267,401 total claims). Because we used hospital claims 
data specific to CPT codes 74176, 74177, and 74178, we stated that we 
believe these costs accurately reflect the resources associated with 
providing computed tomography of the abdomen and pelvis as described by 
these CPT codes in the HOPD.
    Furthermore, our analysis of the CY 2011 claims data available for 
the proposed rule showed no 2 times rule violation for either APC 0331 
or APC 0334. Therefore, for CY 2013, we proposed to continue to assign 
CPT code 74176 to APC 0331 and CPT codes 74177 and 74178 to APC 0334. 
(Because we have claims data available for these three CPT codes, we 
will no longer simulate their costs using the predecessor codes as we 
did in CY 2012.) In addition, we proposed to continue to assign these 
codes to their existing composite APCs for CY 2013. Specifically, we 
proposed to continue to assign CPT code 74176 to composite APC 8005, 
and to assign CPT codes 74177 and 74178 to composite APC 8006.
    Comment: Several commenters expressed concern with the decreased 
payment rates for APCs 0331 and 0334, and suggested that the coding 
changes that occurred in CY 2011 for CPT codes 74176, 74177, and 74178, 
attributed to the payment reduction. Some of the commenters believed 
that because the codes were new in CY 2011, hospitals have not had 
enough time to appropriately adjust their charge masters to accurately 
reflect the CY 2011 coding changes. One commenter urged CMS to take 
whatever action necessary to mitigate the payment cuts for CY 2013. 
Some of commenters requested that CMS delay the use of claims data and 
continue the use of historical data for an additional year to give more 
time for education and adjustment of hospital charge masters.
    Response: We believe that hospitals have a process in place to 
adjust to the numerous coding changes that occur annually. There are 
hundreds of coding changes (that is, CPT, Level II Alphanumeric HCPCS, 
and ICD-9-CM codes) that occur every year, and hospitals make changes 
to their internal systems (for example, coding, charge masters, 
grouper, business office systems, among other) accordingly to capture 
these changes so that their claims are processed timely and accurately.
    Because of the substantial claims data that we have for these 
procedures, we see no reason to delay the use of the claims data in 
determining the costs for

[[Page 68349]]

CPT codes 74176, 74177, and 74178. Specifically, we were able to use at 
least 1 million claims that were submitted during CY 2011 in 
determining the payment rates for CPT codes 74176, 74177, and 74178. 
Our analysis for this final rule with comment period revealed a 
geometric mean cost of approximately $315 for CPT code 74176 based on 
333,144 single claims (out of 769,757 total claims), a geometric mean 
cost of approximately $477 for CPT code 74177 based on 388,506 single 
claims (out of 1,024,117 total claims), and a geometric mean cost of 
approximately $538 for CPT code 74178 based on 194,216 single claims 
(out of 283,435 total claims). We have no reason to believe that our 
claims data, as reported by hospitals, do not accurately reflect the 
hospital costs for CPT codes 74176, 74177 and 74178.
    After consideration of the public comments received, we are 
finalizing our CY 2013 proposal, without modification. Specifically, 
for CY 2013, we are continuing to assign CPT code 74176 to APC 0331 and 
CPT codes 74177 and 74178 to APC 0334. In addition, we are continuing 
to assign these CPT codes to their existing composite APCs for CY 2013. 
Specifically, we are continuing to assign CPT code 74176 to composite 
APC 8005, and to assign CPT codes 74177 and 74178 to composite APC 
8006.
    Table 28 below lists the computed tomography of the abdomen and 
pelvis CPT codes along with their status indicators, and single and 
composite APC assignments for CY 2013.
[GRAPHIC] [TIFF OMITTED] TR15NO12.040

8. Respiratory Services
a. Bronchoscopy (APC 0415)
    CPT code 31629 (Bronchoscopy, rigid or flexible, including 
fluoroscopic guidance, when performed; with transbronchial needle 
aspiration biopsy(s), trachea, main stem and/or lobar bronchus(i)) was 
established by the AMA's CPT Editorial Panel in 1987. CPT code 31634 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with balloon occlusion, with assessment of air leak, with 
administration of occlusive substance (eg, fibrin glue), if performed) 
was established effective January 1, 2011. CPT code 31629 has been 
assigned to APC 0076 (Level I Endoscopy Lower Airway) since August 
2000, when the hospital OPPS was implemented, while CPT code 31634 has 
been assigned to APC 0076 since the code was effective on January 1, 
2011.
    In the CY 2013 OPPS/ASC proposed rule, we proposed to reassign both 
CPT codes 31629 and 31634 from APC 0076 to APC 0415 (the Level II 
Endoscopy Lower Airway). Consistent with CMS' policy of reviewing APC 
assignments annually for any 2 times rule violations and 
appropriateness of APC assignments based on the latest hospital 
outpatient claims data, we evaluated the resource cost associated with 
the procedures assigned to APC 0076 for the CY 2013 rulemaking update. 
Based on our analysis, we determined that the configuration of APC 0076 
violated the 2 times rule. To eliminate the 2 times rule violation, we 
proposed to reassign CPT codes 31629 and 31634 from APC 0076 to APC 
0415 because we believe this APC appropriately reflects these services 
based on their resource costs as well as clinical homogeneity.
    At the August 2012 HOP Panel meeting, a presenter requested that 
the Panel recommend to CMS not to reassign CPT codes 31629 and 31634 to 
APC 0415 for CY 2013. The presenter stated that including both 
procedures in APC 0415 would result in a 2 times rule violation. In 
addition, the presenter recommended that CPT codes 31629 and 31634 be 
reassigned to APC 0074 (Level IV Endoscopy Upper Airway) instead of APC 
0415. After discussion of the procedures and review of the hospital 
outpatient claims and cost report data, the Panel recommended that CPT 
codes 31629 and 31634 be reassigned from APC 0076 to APC 0415 for the 
CY 2013 OPPS update.
    Comment: Some commenters disagreed with the proposal to include CPT 
codes 31629 and 31634 in APC 0415, and indicated that including both 
procedures reduces the proposed payment rate for APC 0415 by at least 
23 percent. One commenter specified that adding CPT codes 31629 and 
31634, which have greater volumes of lower geometric mean costs than 
other services assigned to APC 0415, reduces the overall payment of APC 
0415. One commenter indicated that the reduction in payment would 
hinder patient access to the pulmonary services listed under APC 0415 
and recommended alternative endoscopy lower airway APC configurations, 
such as establishing a new APC titled ``Level III Endoscopy Lower 
Airway'' for six lower endoscopy procedures, that would include both 
CPT codes 31629 and 31634 as well as four other lower endoscopy 
procedures. Specifically, the commenter suggested including CPT codes 
31626 (Bronchoscopy, rigid or flexible, including fluoroscopic 
guidance, when performed; with placement of fiducial markers, single or 
multiple), 31631 (Bronchoscopy, rigid or flexible, including 
fluoroscopic guidance, when performed; with placement of tracheal 
stent(s) (includes tracheal/bronchial dilation as required)), 31636 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with placement of bronchial stent(s) (includes tracheal/
bronchial dilation as required), initial bronchus), 31638 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with revision of tracheal or bronchial stent inserted at 
previous session (includes tracheal/bronchial

[[Page 68350]]

dilation as required)), and CPT codes 31629 and 31634. The commenter 
explained that CPT codes 31626, 31631, 31636, and 31638 are different 
from other procedures assigned to APC 0415 because they require 
implanting medical devices in the patient (fiducial markers, stents), 
which results in extra cost. Another commenter requested that CMS 
reevaluate the endoscopy lower airway APCs (0076 and 0415) as more 
claims data become available for newer procedures, and to meet with 
stakeholders to discuss the future reconfiguration of APCs for 
endoscopy lower airway.
    Response: As indicated above, we proposed to revise the APC 
assignments for CPT codes 31629 and 31634 after our analysis of the 
claims data for the CY 2013 rulemaking revealed a 2 times rule 
violation in APC 0076. Based on the latest hospital outpatient claims 
data for this final rule with comment period, we do not agree with the 
commenters that we should implement an alternative configuration for 
endoscopy lower airway APCs because the existing APCs are sufficient to 
reflect the costs of all of the procedures assigned to these APCs. We 
continue to believe that APC 0415 is the most appropriate APC 
assignment for CPT codes 31629 and 31634 because their resource costs 
are relatively similar to the procedures assigned to APC 0415. 
Therefore, we are accepting the Panel's recommendation and will assign 
both procedures to APC 0415. For the CY 2013 update, our analysis of 
the claims data submitted during CY 2011 and used for this final rule 
with comment period show a geometric mean cost of approximately $1,381 
based on 2,699 single claims (out of 12,209 total claims) for CPT code 
31629, and a relatively similar geometric mean cost of approximately 
$1,394 for CPT code 31634 based on 10 single claims (out of 16 total 
claims). Consistent with CMS' policy of reviewing APC assignments 
annually, we will again reevaluate the clinical similarity and resource 
use of the procedures in APC 0415 for the CY 2014 rulemaking cycle. 
Finally, we note that we regularly accept meetings from interested 
parties throughout the year, and we encourage stakeholders to continue 
a dialogue with us during the rulemaking cycle and throughout the year 
on this issue.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposal, without modification, to reassign CPT 
codes 31629 and 31634 from APC 0076 to APC 0415. The final CY 2013 
geometric mean cost for APC 0415 is approximately $1,617.
b. Upper Airway Endoscopy (APC 0075)
    For CY 2013, we proposed to continue to assign CPT codes 31295 
(Nasal/sinus endoscopy, surgical; with dilation of maxillary sinus 
ostium (eg, balloon dilation), transnasal or via canine fossa;), 31296 
(Nasal/sinus endoscopy, surgical; with dilation of frontal sinus ostium 
(eg, balloon dilation)), and 31297 (Nasal/sinus endoscopy, surgical; 
with dilation of sphenoid sinus ostium (eg, balloon dilation)) to APC 
0075 (Level V Endoscopy Upper Airway), which had a CY 2013 proposed 
payment rate of approximately $2,039. In addition, we proposed to 
reassign CPT code 31541 (Laryngoscopy, direct, operative, with excision 
of tumor and/or stripping of vocal cords or epiglottis; with operating 
microscope or telescope) from APC 0074 (Level IV Endoscopy Upper 
Airway) to APC 0075.
    Comment: Commenters objected to the assignment of CPT codes 31295, 
31296, and 31297 to APC 0075 because the commenters believed that the 
payment rate for APC 0075 substantially underpays providers. The 
commenters recommended that CMS create split APCs for sinus surgery 
with balloon catheter and without balloon catheter, the former of which 
should be deemed device-dependent to appropriately account for the cost 
of such procedures. The commenters also requested that CMS not finalize 
its proposal to reassign CPT 31541 to APC 0075 and, instead, maintain 
the code in APC 0074 for CY 2013.
    Response: We believe that the most clinically appropriate APC 
assignment for CPT codes 31295, 31296, and 31297 is APC 0075, which 
includes other nasal and sinus endoscopy procedures. When assigning 
procedures to an APC, we first consider the clinical and resource 
characteristics of a procedure and determine the most appropriate APC 
assignment. Regarding the resource costs of the procedures in question, 
the commenters asserted costs of approximately $4,000 for these 
procedures, which are currently assigned to the highest paying 
clinically appropriate APC (APC 0075), which is Level 5 out of 5 levels 
of APCs for ``endoscopy upper airway.'' The highest geometric mean cost 
of all of the procedures assigned to APC 0075 is approximately $4,000. 
Therefore, even the nonclaims data-based cost estimate for these 
procedures offered by the commenters is within the approximate range 
(although on the high end of the range) of the geometric mean costs for 
procedures assigned to APC 0075. We do not agree with the commenters 
that new APCs should be created to differentiate between sinus surgery 
with balloon catheter and without balloon catheter, as APC 0075 
accurately reflects a reasonable distribution of resource costs 
reflected in the group of clinically similar services currently 
assigned to the APC. We note that there is currently no 2 times rule 
violation in APC 0075. We do not agree with the commenters that CPT 
code 31541 should continue to be assigned to APC 0074, as CPT code 
31541's geometric mean cost of approximately $1,962 is higher than the 
geometric mean cost for any service currently assigned to APC 0074 and 
would result in a 2 times rule violation for APC 0074 as well. We 
believe that the geometric mean cost and clinical characteristics of 
CPT code 31541 justify its assignment to APC 0075 for CY 2013.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals, without modification, to continue to 
assign CPT codes 31295, 31296, and 31297 to APC 0075, and reassign CPT 
code 31541 to APC 0075, which has a final CY 2013 APC geometric mean 
cost of approximately $2,085.
9. Other Services
a. Payment for Molecular Pathology Services
    For the January 2012 update, the AMA's CPT Editorial Panel 
established 101 new molecular pathology services CPT codes that were 
designated as either Molecular Pathology Procedures Tier 1 or Molecular 
Pathology Procedures Tier 2 effective January 1, 2012. Tier 1 consisted 
of CPT codes 81200 through 81383, while Tier 2 consisted of CPT codes 
81400 through 81408. However, these new molecular pathology CPT codes 
are not valid for payment under Medicare for CY 2012.
    Instead, molecular pathology tests for CY 2012 are billed using 
combinations of longstanding CPT codes that describe each of the 
various steps required to perform a given test. This billing method is 
called ``stacking'' because different ``stacks'' of codes are billed 
depending on the components of the furnished test. Currently, all of 
the stacking codes are paid under the Clinical Laboratory Fee Schedule 
(CLFS) and one stacking code, CPT code 83912 (Molecular diagnostics; 
interpretation and report), is paid on both the CLFS and the Medicare 
Physician Fee Schedule (MPFS). Payment for the interpretation and 
report of a molecular pathology test when furnished and billed by a 
physician is made under the MPFS using the professional component (PC, 
or modifier ``26'') of CPT code 83912

[[Page 68351]]

(83912-26). Payment for the interpretation and report of a molecular 
pathology test when furnished by nonphysician laboratory staff is made 
under the CLFS using CPT code 83912. Thus, under Medicare, molecular 
pathology services are paid under a fee schedule other than the OPPS.
    In Addendum B of the CY 2012 OPPS/ASC final rule with comment 
period, we assigned the 101 molecular pathology services CPT codes to 
status indicator ``B'' to indicate that Medicare recognizes another 
more specific HCPCS code for the service, as well as to comment 
indicator ``NI'' to indicate that the CPT code was new for CY 2012 and 
that public comments would be accepted on the interim APC assignment 
for the new code, if applicable. We subsequently corrected the status 
indicator assignment for these CPT codes from ``B'' to ``E'' to 
indicate that they are not paid by Medicare in Addendum B of the CY 
2012 OPPS/ASC final rule with comment period that was posted on the CMS 
Web site. In the CY 2013 OPPS/ASC proposed rule, we proposed to 
reassign the status indicator for the 101 molecular pathology services 
CPT codes from ``E'' to ``A'' for CY 2013 to indicate that the codes 
would be paid under a Medicare fee schedule and not under the OPPS. The 
public comments that we received in response to the CY 2012 OPPS/ASC 
final rule with comment period and the CY 2013 OPPS/ASC proposed rule 
are addressed below.
    Comment: One commenter to the CY 2012 OPPS/ASC final rule with 
comment period requested that CMS consider paying separately for the 
molecular pathology services under the OPPS, and recommended that CMS 
reassign the services to status indicator ``X'' (Paid under OPPS; 
separate APC payment).
    Several commenters who responded to the CY 2013 OPPS/ASC proposed 
rule requested clarification of the status indicator assignment and 
payment status for the molecular pathology services. One commenter 
indicated that CMS did not specify whether CPT codes 81200 through 
81299, 81300 through 81383, and 81400 through 81408 will continue to be 
assigned status indicator ``E'' under the OPPS.
    Another commenter pointed out that CMS did not specifically discuss 
the 101 molecular pathology services CPT codes in the CY 2013 OPPS/ASC 
proposed rule, but did propose to assign status indicator ``A'' to the 
new molecular pathology services CPT codes. The commenter believed that 
CMS is unsure as to how these services will be paid, whether they will 
be paid under the MPFS or under the CLFS. The commenter recommended 
that CMS pay for the molecular pathology services codes under the MPFS 
to cover the professional interpretation and work components, and under 
the OPPS to cover the technical component of the services when provided 
in a HOPD.
    Response: Molecular pathology services are not paid under the OPPS. 
As explained above, molecular pathology services currently are billed 
using stacking codes that are paid under the CLFS with one stacking 
code, specifically, CPT code 83912, being paid under both the CLFS and 
the MPFS. For the CY 2013 update, the CPT ``stacking'' codes 83890 
through 83914 will be deleted on December 31, 2012, and will be 
replaced with 115 new molecular pathology CPT codes. Specifically, this 
includes the 101 molecular pathology services CPT codes discussed above 
plus an additional 14 new Tier I Molecular Pathology Procedure CPT 
codes that the AMA's CPT Editorial Panel established effective January 
1, 2013. In addition, CMS established one HCPCS G-code effective 
January 1, 2013. With the exception of the HCPCS G-code, the 115 
molecular pathology CPT codes will be paid under the CLFS. Payment for 
the interpretation and report of a molecular pathology test when 
furnished and billed by a physician will be made under the MPFS using 
the professional component-only HCPCS code G0452 (Molecular pathology 
procedure; physican interpretation and report). We refer readers to the 
CY 2013 MPFS final rule with comment period for further information on 
the molecular pathology services CPT codes.
    Although we did not discuss this issue in the preamble of the CY 
2013 OPPS/ASC proposed rule, we proposed to assign the 101 molecular 
pathology services CPT codes to status indicator ``A'' for the CY 2013 
update. Specifically, we assigned the 101 molecular pathology services 
CPT codes to status indicator ``A'' in Addendum B to the proposed rule 
(which is available via the Internet on the CMS Web site). We note that 
HCPCS codes listed in Addenda A and B are subject to comment, and 
responses to the comments received are addressed in the final rule with 
comment period.
    For CY 2013, the 101 molecular pathology services CPT codes will be 
assigned to status indicator ``A'' because they will be paid under the 
CLFS. Consistent with the OPPS assignment for the 101 molecular 
pathology services, the 14 new CPT codes also will be assigned to 
status indicator ``A'' for CY 2013. Specifically, CPT codes 81201 
through 81203, 81235, 81252 through 81254, 81321 through 81326, and 
81479 will be assigned to status indicator ``A'' because they will be 
paid under the CLFS. In addition, HCPCS code G0452 will be assigned to 
status indicator ``B'' to indicate that the HCPCS code describes a 
professional component-only service that is paid under the MPFS.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposal, without modification, to assign the 101 
molecular pathology services CPT codes to status indicator ``A'' for CY 
2013. Consistent with the OPPS assignment for the 101 molecular 
pathology services, the 14 new CPT codes also will be assigned to 
status indicator ``A'' for CY 2013. In addition, HCPCS code G0452 will 
be assigned to status indicator ``B'' under the OPPS for the CY 2013 
update.
b. Bone Marrow (APC 0112)
    For CY 2013, we proposed to continue to assign CPT code 38240 (Bone 
marrow or blood-derived peripheral stem cell transplantation; 
allogeneic) and CPT code 38241 (Bone marrow or blood-derived peripheral 
stem cell transplantation; autologous) to APC 0112 (Apheresis and Stem 
Cell Procedures), which had a CY 2013 proposed payment rate of 
approximately $2,878.
    Comment: One commenter requested that CMS create separate APCs for 
autologous and allogeneic transplants in recognition of the cost 
difference between the two procedures. In addition, the commenter urged 
CMS to develop an alternate ratesetting methodology for low volume 
services or services performed by a small number of providers to more 
accurately capture their costs.
    Response: We believe that CPT codes 38240 and 38241 are both 
appropriately assigned to APC 0112 based on clinical homogeneity. We 
note that there is no 2 times rule violation in APC 0112; therefore, we 
do not agree with the commenter's suggestion that we need to create 
separate APCs for autologous and allogeneic transplants. We appreciate 
the commenter's interest in developing an alternate ratesetting 
methodology for low-volume services as we are always eager to find 
improved methods to more accurately capture costs of services performed 
in the hospital outpatient setting.
    After consideration of the public comment we received, we are 
finalizing our CY 2013 proposal, without modification, to continue to 
assign CPT codes 38240 and 38241 to APC 0112,

[[Page 68352]]

which has a final CY 2013 APC geometric mean cost of approximately 
$2,972.

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 requires that, under the 
OPPS, a category of devices be eligible for transitional pass-through 
payments for at least 2, but not more than 3 years. This pass-through 
payment eligibility period begins with the first date on which 
transitional pass-through payments may be made for any medical device 
that is described by the category. We may establish a new device 
category for pass-through payment in any quarter. Under our established 
policy, we base the pass-through status expiration date for a device 
category on the date on which pass-through payment is effective for the 
category, which is the first date on which pass-through payment may be 
made for any medical device that is described by such category. We 
propose and finalize the dates for expiration of pass-through status 
for device categories as part of the OPPS annual update.
    We also have an established policy to package the costs of the 
devices 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.
    There currently are four device categories eligible for pass-
through payment. These device categories are described by HCPCS code 
C1749 (Endoscope, retrograde imaging/illumination colonoscope device 
(implantable)), which we made effective for pass-through payment 
October 1, 2010; HCPCS codes C1830 (Powered bone marrow biopsy needle) 
and C1840 (Lens, intraocular (telescopic)), which we made effective for 
pass-through payment October 1, 2011; and HCPCS code C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable)), which we 
made effective for pass-through payment January 1, 2012. In the CY 2012 
OPPS/ASC final rule with comment period, we finalized the expiration of 
pass-through payment for HCPCS code C1749, which will expire after 
December 31, 2012 (76 FR 74278). Therefore, after December 31, 2012, we 
will package the costs of the HCPCS code C1749 device into the costs of 
the procedures with which the devices are reported in the hospital 
claims data used in OPPS ratesetting.
b. CY 2013 Policy
    As stated above, section 1833(t)(6)(B)(iii) of the Act requires 
that, under the OPPS, a category of devices be eligible for 
transitional pass-through payments for at least 2, but not more than 3 
years. Device pass-through categories C1830 and C1840 were established 
for pass-through payments on October 1, 2011, and will have been 
eligible for pass-through payments for more than 2 years but less than 
3 years as of the end of CY 2013. Also, device pass-through category 
C1886 was established for pass-through payments on January 1, 2012, and 
will have been eligible for pass-through payments for at least 2 years 
but less than 3 years as of the end of CY 2013. Therefore, in the CY 
2013 OPPS/ASC proposed rule (77 FR 45125), we proposed a pass-through 
payment expiration date for device categories C1830, C1840, and C1886 
of December 31, 2013. Under our proposal, beginning January 1, 2014, 
device categories C1830, C1840, and C1886 will no longer be eligible 
for pass-through payments, and their respective device costs would be 
packaged into the costs of the procedures with which the devices are 
reported in the claims data.
    Comment: One commenter expressed concern that under the CMS 
proposal to expire device HCPCS code C1886 from pass-through payment, 
CMS will have difficulty in establishing a payment rate that will 
reflect all costs associated with bronchial thermoplasty, the procedure 
with which the HCPCS code C1886 device is used. The commenter indicated 
that the two bronchial thermoplasty codes, CPT code 0276T 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with bronchial thermoplasty, 1 lobe) and CPT code 0277T 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with bronchial thermoplasty, 2 or more lobes) are subject to 
noncoverage policies for all Category III CPT codes for all but two 
MACs, resulting in few Medicare claims for CY 2012, the year for which 
CPT codes 0276T and 0277T are reported for bronchial thermoplasty, and 
which will be used for CY 2014 ratesetting. The commenter estimated 
that there are nine Medicare claims for bronchial thermoplasty in CY 
2011, available for CY 2013 ratesetting, which were billed with HCPCS 
codes C9730 and C9731. The commenter requested that CMS delay the 
expiration of pass-through status for HCPCS code C1886 because of 
limited data available for CY 2014 ratesetting, and because two 
Category 1 CPT codes related to bronchial thermoplasty are expected to 
become effective January 1, 2013, which would result in these 
procedures being removed from the MAC local coverage determinations for 
noncovered services.
    Response: We created HCPCS code C1886 as a new device category 
effective January 1, 2012. As such, there are no claims for HCPCS code 
C1886 in our CY 2011 claims data. However, although we have no claims 
data for CY 2011, we have over 300 units of HCPCS code C1886 reported 
in the first 8 months of CY 2012, with robust cost data. Therefore, we 
believe that we will have sufficient CY 2012 claims on which to base 
payment rates for the bronchial thermoplasty procedures with which 
HCPCS code C1886 is billed.
    After consideration of the public comment we received, we are 
finalizing our proposal to expire from pass-through payment HCPCS C1886 
on December 31, 2013, and to package its costs with the costs of the 
procedures with which it is billed.
    We did not receive any public comments regarding our proposals to 
expire pass-through payment eligibility for device categories C1830 and 
C1840 and to package their respective costs into the costs of the 
procedures with which the devices are reported. Therefore, we are 
finalizing our proposals to expire from pass-through payment these 
device categories, and to package their costs with the costs of the 
procedures with which they are billed.
    We also received a number of comments related to packaging the 
costs of HCPCS code C1749 into the costs of the procedures with which 
the HCPCS code C1749 device are reported, a policy we finalized in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74278). We are 
discussing these public comments in this section instead of the section 
on packaging because of their relationship to device pass-through 
payment.
    Comment: A few commenters asserted that packaging payment for the 
HCPCS code C1749 device (retrograde colonoscope or Third Eye 
Retroscope) into the costs of colonoscopy procedure codes, with which 
it is billed, after the period of pass-through payment ends on December 
31, 2012, will not provide adequate payment for use of the device.
    One commenter based this assertion on a study of CY 2011 Medicare 
claims data (which the commenter summarized in its comment letter) for 
7 diagnostic colonoscopy procedures found in APC

[[Page 68353]]

0143 (Lower GI endoscopy) performed with HCPCS code C1749, finding that 
the weighted geometric mean costs of procedures in which HCPCS code 
C1749 was used is approximately $969; the cost of the same 7 
colonoscopy procedures without HCPCS code C1749 is approximately $437, 
showing a cost difference of approximately $532, which it attributed to 
the cost of the HCPCS code C1749 device. At the same time, the 
commenter pointed out that it identified 688 claims for these 7 
colonoscopy procedure codes that included units of HCPCS code C1749, 
while there were 1,067,828 claims for the same 7 procedure codes that 
did not include HCPCS code C1749 on the claim, or only 0.064 percent of 
the total claims for these 7 codes that included HCPCS code C1749. 
Therefore, the commenter claimed that the proposed rates for existing 
colonoscopy procedures do not fairly reflect the costs of HCPCS code 
C1749. The commenter further asserted that the proposed APC 0143 
payment rate of $691.58 would not pay hospitals adequately for the cost 
of a procedure using the HCPCS code C1749 device. The commenter claimed 
that the payment shortfall would be even greater in the ASC setting, 
where the proposed payment rate for colonoscopies is $389.60. The 
commenter requested that CMS create a G-code (entitled ``colonoscopy, 
flexible, proximal to splenic flexure; with continuous retrograde 
examination'') to be billed along with existing colonoscopy procedure 
codes when using the HCPCS code C1749 device; assign the new G-code and 
its costs to a unique device dependent APC under the OPPS and a device-
intensive APC under the ASC payment system; and require that HCPCS code 
C1749 be billed with the new G-code.
    Some commenters suggested that CMS continue to pay for HCPCS code 
C1749 separately, based on OPPS claims data, from the APC payment for 
the procedure under a unique device-dependent APC in the OPPS and a 
device-intensive APC for ASC payment because the HCPCS code C1749 
device represents the primary cost of this procedure. Another commenter 
requested that CMS extend the pass-through payment for HCPCS code C1749 
through CY 2013 to help further data collection for the device 
regarding its clinical role and to ensure access to the device for 
endoscopists' use.
    A number of commenters, including those who were patients or 
relatives of patients, emphasized the importance of being examined by 
the Third Eye Retroscope, the device upon which HCPCS code C1749 is 
based, because it provides dramatically improved detection rates of 
pre-cancerous adenomas, and urged CMS to improve payment for the HCPCS 
code C1749 procedure. Several commenters claimed that the proposal did 
not provide a code or payment to report use of the HCPCS code C1749 
device.
    Response: HCPCS code C1749 was created for device pass-through 
payment of the retrograde colonoscope effective October 1, 2010. Under 
the statute, hospitals are paid for devices eligible for pass-through 
payment, which is payment for the device in addition to the usual APC 
payment rate, for at least 2 but not more than 3 years from the date we 
establish pass-through payment. We finalized the expiration of pass-
through payment eligibility for HCPCS code C1749 on December 31, 2012, 
and, consistent with our normal ratesetting methodology for expired 
device pass-through payment, we finalized in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74278) our policy to package the costs 
of the HCPCS code C1749 device with the procedures with which it is 
billed, effective January 1, 2013 (76 FR 74278). For CY 2013, there are 
692 units of HCPCS code C1749 reported in our CY 2011 OPPS claims data, 
with a geometric mean cost of approximately $536. For CY 2013, these 
costs would be packaged into the procedures with which HCPCS code C1749 
are billed. CY 2011 was the first complete year that HCPCS code C1749 
was effective, and we assume that utilization of this new device will 
grow over time.
    We do not agree with the commenter that using the HCPCS code C1749 
retrograde colonoscope during a colonoscopy is a separate procedure, 
and therefore would require a G-code to describe a separate procedure. 
We believe that the retrograde colonoscopic portion of the procedure 
entails a small incremental amount of colonoscopy procedure time, as it 
is primarily used during withdrawal of the colonoscope, and there are 
few additional resource costs (such as procedure room time, equipment 
costs) other than the HCPCS code C1749 device itself, according to the 
commenter in its study of the 7 colonoscopy procedure codes. Therefore, 
the retrograde portion of the procedure is not a separate procedure on 
which to base a new G-code. Therefore, we will package costs for HCPCS 
code C1749 with the colonoscopic procedures with which they are billed 
according to our standard policy. Because we are declining to create a 
G-code to describe the retrograde colonoscopic portion of colonoscopy 
procedures, there is no need to create a new, dedicated device-
dependent APC, as requested by the commenter.
    We also do not agree with the commenter's alternate suggestion that 
separate payment is needed for HCPCS code C1749 at this time. HCPCS 
code C1749 is currently under separate payment under the pass-through 
provision, and once pass-through status expires, device costs are 
packaged into the payment for the procedure.
    Regarding the commenter's request that we extend the eligibility 
for pass-through payment of HCPCS code C1749 through CY 2013, based on 
the statutory limits at section 1833(t)(6)(B)(iii) of the Act and 
related payment policies not permitting partial year rate changes, we 
are not able to further extend pass-through payment for HCPCS code 
C1749. Moreover, we will be able to track the HCPCS code C1886 device 
utilization in CY 2013 even without the pass-through payment 
eligibility because HCPCS code C1749 will still be required to be 
reported with the procedures with which it is billed.
    The commenters who believe that HCPCS codes for pass-through 
devices become inactive when pass-through status for a device expires 
are incorrect. Under our longstanding policy, once the period of device 
pass-through payment is complete, we package the costs of the devices 
with the procedures with which they are billed. In the case of HCPCS 
code C1749, as stated previously, it is our proposal to package the 
device costs with the colonoscopy procedures with which the retrograde 
colonoscope is billed, effective January 1, 2013, to maintain HCPCS 
code C1749 for the device, and to require hospitals to include HCPCS 
code C1749 and its costs on the claims for the procedures with which it 
is billed. This will provide assurance that the costs of HCPCS code 
C1749 will be represented in our claims data and accounted for in the 
relevant APC payment rates.
    After consideration of the public comments we received, we are 
finalizing our proposals concerning the expiration for pass-through 
payment eligibility for device category codes C1830, C1840, and C1886 
as of December 31, 2013, and to package the device costs with the 
respective procedures with which these devices are billed. Furthermore, 
we are maintaining our previous decision to package the costs of HCPCS 
code C1749 with the procedures with which it is billed, as of January 
1, 2013.

[[Page 68354]]

2. 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 (cost of device) 
exceeds the portion of the otherwise applicable Medicare outpatient 
department fee schedule amount (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 the device. 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 eligible device's pass-
through payment amount. We have consistently employed an established 
methodology to estimate the portion of each APC payment rate that could 
reasonably be attributed to the cost of an associated device eligible 
for pass-through payment, using claims data from the period used for 
the most recent recalibration of the APC rates (72 FR 66751 through 
66752). We establish and update the applicable device APC offset 
amounts for eligible pass-through device categories through the 
transmittals that implement the quarterly OPPS updates.
    We currently have published a list of all procedural APCs with the 
CY 2012 portions (both percentages and dollar amounts) of the APC 
payment amounts that we determine are associated with the cost of 
devices on the CMS Web site at: http://www.cms.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 in CY 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-through process and payment 
methodology only (74 FR 60476).
b. CY 2013 Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45125), we proposed to 
continue, for CY 2013, 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 rates. We proposed to continue our 
policy, for CY 2013, that the pass-through evaluation process and pass-
through payment methodology for implantable biologicals that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice) and that are newly approved for pass-through status 
beginning on or after January 1, 2010, be the device pass-through 
process and payment methodology only. The rationale for this policy is 
provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60471 through 60477). We also 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 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)).
    For CY 2013, we also proposed to continue our policy established in 
CY 2010 to include implantable biologicals in our calculation of the 
device APC offset amounts. In addition, we proposed to continue to 
calculate and set any device APC offset amount for a new device pass-
through category that includes a newly eligible implantable biological 
beginning in CY 2013 using the same methodology we have historically 
used to calculate and set device APC offset amounts for device 
categories eligible for pass-through payment, and to include the costs 
of implantable biologicals in the calculation of the device APC offset 
amounts.
    In addition, we proposed to update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html the list of all procedural APCs with 
the final CY 2013 portions of the APC payment amounts that we determine 
are associated with the cost of devices so that this information is 
available for use by the public in developing potential CY 2013 device 
pass-through payment applications and by CMS in reviewing those 
applications.
    Comment: One commenter recommended that all biologicals, including 
implantable biologicals that are approved by the FDA under biological 
license applications (BLAs), be treated as drugs, rather than as 
devices, for pass-through payment purposes for CY 2013. The commenter 
claimed that when Congress enacted the current payment system for SCODs 
that previously had pass-through status, it intended for biologicals 
approved under BLAs to be paid under the specific statutory provisions 
for drugs. The commenter argued that it is only logical, then, that 
Congress would have intended for these BLA-approved therapies to be 
paid as pass-through drugs as well. The commenter requested that, if 
CMS continues to evaluate implantable biologicals under the pass-
through device criteria, CMS clarify its policy that the device pass-
through criteria apply only to biologicals if they are solely 
surgically implanted according to their FDA approved indications. The 
commenter stated that the current regulation at 42 CFR 419.64(a)(4) is 
unclear how we would evaluate pass-through eligibility of a biological 
that has both surgically implanted and nonimplantable indications. The 
commenter stated that the explanation CMS provided in the CY 2012 OPPS/
ASC final rule with comment period, that ``we mean to exclude from 
consideration for drug and biological pass-through status any 
biological that has an indication such that it may function as a 
surgically implanted or inserted biological, even if there are also 
indications in which the

[[Page 68355]]

biological is not surgically implanted or inserted'' (76 FR 74280), is 
unclear and inconsistent with what CMS has stated previously in policy 
and billing instructions. The commenter recommended that CMS revise the 
regulation text so that if refers to ``a biological that is not always 
surgically implanted into the body.''
    Response: As stated in previous OPPS/ASC final rules with comment 
period, we evaluate implantable biologicals that function as, and are 
substitutes for, implantable devices for OPPS payment purposes. This is 
done regardless of their category of FDA approval (74 FR 60476; 75 FR 
71924; 76 FR 74279 through 74280). We do not believe it is necessary to 
make our OPPS payment policies regarding implantable biologicals 
dependent on categories of FDA approval, the intent of which is to 
ensure the safety and effectiveness of medical products.
    We do not agree with the commenter who asserted that Congress 
intended biologicals approved under BLAs to be paid under the specific 
OPPS statutory provisions that apply to SCODs, including the pass-
through provisions. Moreover, as we stated in previous OPPS/ASC final 
rules with comment period, Congress did not specify in the statute that 
we must pay for implantable biologicals as biologicals rather than 
devices, if they also meet our criteria for payment as a device (74 FR 
60476; 75 FR 71924; and 76 FR 74280). We continue to believe that 
implantable biologicals meet both the definitions of a device and a 
biological and that, for payment purposes, it is appropriate for us to 
consider implantable biologicals as implantable devices in all cases, 
and not as biologicals.
    We do not agree with the commenter's assertion that the explanation 
offered in the CY 2012 OPPS/ASC final rule with comment period of the 
regulation text at 42 CFR 419.64(a)(4)(iii) which indicates that a 
biological for drug pass-through payment purposes must not be 
surgically implanted or inserted into the body, is inconsistent with 
our prior description of this policy, the application of this policy to 
date, and billing instruction to hospitals. Our policy and application 
process have consistently reflected that implantable biologicals are 
subject to the device application process since the beginning of CY 
2010. For CYs 2010, 2011, and 2012, we finalized the same 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 as of January 1, 2010, be the device 
pass-through process and payment methodology only (74 FR 60476, 75 FR 
71924, and 76 FR 74280, respectively). We have not established a policy 
in any year that stated that implantable biologicals needed to be 
solely surgically inserted or implanted to be subject to the device 
pass-through process and payment methodology. Furthermore, there is no 
inconsistency with our policy and billing instructions regarding pass-
through devices or implantable biologicals because there are no billing 
instructions regarding the device pass-through application process. 
Rather, application instructions are found on the CMS Web site 
(currently at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf). The language on 
the device application web site is consistent with the language in the 
CYs 2010, 2011, and 2012 final rules with comment period, stating that, 
as of January 1, 2010, implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or natural orifice) 
are being evaluated for device pass-through payment under the 
instructions using the device pass-through process. We reiterate our 
explanation provided in the CY 2012 final rule with comment period (76 
FR 74280) regarding the regulatory language at 42 CFR 419.64(a)(4), 
that we mean to exclude from consideration for drug and biological 
pass-through status any biological that has an indication such that it 
may function as a surgically implanted or inserted biological, even if 
there also are indications in which the biological is not surgically 
implanted or inserted. We will add similar language to our device and 
drug pass-through application Web sites as well.
    We are finalizing the following proposals for CY 2013: to continue 
our established methodology to estimate the portion of each APC payment 
rate that could reasonably reflect the cost of an associated device 
eligible for pass-through payment; to continue our policy that the 
pass-through evaluation process and pass-through payment methodology 
for implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) and that are newly 
approved for pass-through status beginning on or after January 1, 2010, 
be the device pass-through process and payment methodology only; to 
continue our established policies for calculating and setting the 
device APC offset amounts for each device category eligible for pass-
through payment; and 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, 
and, if device costs packaged into the existing APC structure are 
associated with the new category, to deduct the device APC offset 
amount from the pass-through payment for the device category.
    For CY 2013, we also are finalizing our proposal and continuing our 
policy established in CY 2010 to include implantable biologicals in our 
calculation of the device APC offset amounts, and to continue to 
calculate and set any device APC offset amount for a new device pass-
through category that includes a newly eligible implantable biological 
beginning in CY 2013 using the same methodology we have historically 
used to calculate and set device APC offset amounts for device 
categories eligible for pass-through payment, and to include the costs 
of implantable biologicals in the calculation of the device APC offset 
amounts.
    In addition, we will update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html the list of all procedural APCs with 
the final CY 2013 portions of the APC payment amounts that we determine 
are associated with the cost of devices so that this information is 
available for use by the public in developing potential CY 2013 device 
pass-through payment applications and by CMS in reviewing those 
applications.
3. Clarification of Existing Device Category Criterion
a. Background
    Section 1833(t)(6)(B)(ii)(IV) of the Act directs the Secretary to 
establish a new device category for pass-through payment for which none 
of the pass-through categories in effect (or that were previously in 
effect) is appropriate. Commenters who responded to our various 
proposed rules, as well as applicants for new device categories, had 
expressed concern that some of our existing and previously in effect 
device category descriptors were overly broad, and that the device 
category descriptors as they are currently written may preclude some 
new technologies from qualifying for establishment of a new device 
category for pass-through payment (70 FR 68630 through 68631). As a 
result of these comments, we finalized a policy, effective January 1, 
2006, to create an additional category for devices that meet all of the 
criteria required to establish a new category for

[[Page 68356]]

pass-through payment in instances where we believe that an existing or 
previously in effect category descriptor does not appropriately 
describe the new device. Accordingly, effective January 1, 2006, we 
revised Sec.  419.66(c)(1) of the regulations to reflect this policy 
change. In order to determine if a new device is appropriately 
described by any existing or previously in effect category of devices, 
we apply two tests based upon our evaluation of information provided to 
us in the device category application. First, an applicant for a new 
device category must show that its device is not similar to devices 
(including related predicate devices) whose costs are reflected in the 
currently available OPPS claims data in the most recent OPPS update. 
Second, an applicant must demonstrate that utilization of its device 
provides a substantial clinical improvement for Medicare beneficiaries 
compared with currently available treatments, including procedures 
utilizing devices in any existing or previously in effect device 
categories. We consider a new device that meets both of these tests not 
to be appropriately described by any existing or previously in effect 
pass-through device categories (70 FR 68630 through 68631).
b. Clarification of CY 2013 Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45126), we proposed, 
for CY 2013, to clarify the test that requires an applicant for a new 
device category to show that its device is not similar to devices 
(including related predicate devices) whose costs are reflected in the 
currently available OPPS claims data in the most recent OPPS update. We 
clarified that this test includes showing that a new device is not 
similar to predicate devices that once belonged in any existing or 
previously in effect pass-through device categories. Under this test, a 
candidate device may not be considered to be appropriately described by 
any existing or previously in effect pass-through device categories if 
the applicant adequately demonstrates that the candidate device is not 
similar to devices (including related predicate devices) that belong or 
once belonged to an existing or any previously in effect device 
category, and that the candidate device is not similar to devices whose 
costs are reflected in the OPPS claims data in the most recent OPPS 
update. The substantial clinical improvement criterion, which also must 
be satisfied in every case, as indicated in Sec.  419.66(c)(2) of our 
regulations, is separate from the criterion that a candidate device not 
be similar to devices in any existing or previously in effect pass-
through categories. We invited public comments regarding this proposed 
clarification.
    We did not receive any public comments on our proposal to clarify 
the test that requires an applicant for a new device category to show 
that its device is not similar to devices (including related predicate 
devices) whose costs are reflected in the currently available OPPS 
claims data. Therefore, we are clarifying our existing policy as noted 
above.

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

1. Background
    To ensure equitable payment when the hospital receives a device 
without cost or with full credit, in CY 2007, we 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 are 
instructed to report no cost/full credit cases using the ``FB'' 
modifier on the line with the procedure code in which the no cost/full 
credit device is used. In cases in which the device is furnished 
without cost or with full credit, the hospital is instructed to report 
a token device charge of less than $1.01. In cases in which the device 
being inserted is an upgrade (either of the same type of device or to a 
different type of device) with a full credit for the device being 
replaced, the hospital is instructed to report as the device charge the 
difference between its usual charge for the device being implanted and 
its usual charge for the device for which it received full credit. In 
CY 2008, we expanded this payment adjustment policy to include cases in 
which hospitals receive partial credit of 50 percent or more of the 
cost of a specified device. Hospitals are instructed to append the 
``FC'' modifier to the procedure code that reports the service provided 
to furnish the device when they receive a partial credit of 50 percent 
or more of the cost of the new device. We refer readers to the CY 2008 
OPPS/ASC final rule with comment period for more background information 
on the ``FB'' and ``FC'' payment adjustment policies (72 FR 66743 
through 66749).
2. APCs and Devices Subject to the Adjustment Policy
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45126), we proposed, 
for CY 2013, to continue the existing policy of reducing OPPS payment 
for specified APCs by 100 percent of the device offset amount when a 
hospital furnishes a specified device without cost or with a full 
credit and by 50 percent of the device offset amount when the hospital 
receives partial credit in the amount of 50 percent or more of the cost 
for the specified device. (We refer readers to section II.A.2.d.(1) of 
this final rule with comment period for a description of our standard 
ratesetting methodology for device-dependent APCs.)
    For CY 2013, 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 this policy applies (71 FR 68072 through 
68077). Specifically: (1) All procedures assigned to the selected APCs 
must involve implantable devices that would be reported if device 
insertion procedures were performed; (2) the required devices must be 
surgically inserted or implanted devices that remain in the patient's 
body after the conclusion of the procedure (at least temporarily); and 
(3) the device offset amount must be significant, which, for purposes 
of this policy, is defined as exceeding 40 percent of the APC cost. We 
also proposed to continue to restrict the devices to which the APC 
payment adjustment would apply to a specific set of costly devices to 
ensure that the adjustment would not be triggered by the implantation 
of an inexpensive device whose cost would not constitute a significant 
proportion of the total payment rate for an APC. We stated in the CY 
2013 OPPS/ASC proposed rule (77 FR 45127) that we continue to believe 
these criteria are appropriate because free devices and device credits 
are likely to be associated with particular cases only when the device 
must be reported on the claim and is of a type that is implanted and 
remains in the body when the beneficiary leaves the hospital. We 
believe that the reduction in payment is appropriate only when the cost 
of the device is a significant part of the total cost of the APC into 
which the device cost is packaged, and that the 40-percent threshold is 
a reasonable definition of a significant cost.
    As indicated in the CY 2013 OPPS/ASC proposed rule (77 FR 45127), 
we examined the offset amounts calculated from the CY 2013 proposed 
rule data and the clinical characteristics of APCs to determine whether 
the APCs to which the no cost/full credit and partial credit device 
adjustment policy applied in CY 2012 continue to meet the criteria for 
CY 2013, and to determine whether

[[Page 68357]]

other APCs to which the policy did not apply in CY 2012 would meet the 
criteria for CY 2013. Based on the CY 2011 claims data available for 
the proposed rule, we did not propose any changes to the APCs and 
devices to which this policy applies.
    Table 20 of the CY 2013 OPPS/ASC proposed rule (77 FR 45127) listed 
the proposed APCs to which the payment adjustment policy for no cost/
full credit and partial credit devices would apply in CY 2013, and 
displayed the proposed payment adjustment percentages for both no cost/
full credit and partial credit circumstances. We proposed that the no 
cost/full credit adjustment for each APC to which this policy would 
continue to apply would be the device offset percentage for the APC 
(the estimated percentage of the APC cost that is attributable to the 
device costs that are already packaged into the APC). We also proposed 
that the partial credit device adjustment for each APC would continue 
to be 50 percent of the no cost/full credit adjustment for the APC.
    Table 21 of the CY 2013 OPPS/ASC proposed rule (77 FR 45128) listed 
the proposed devices to which the payment adjustment policy for no 
cost/full credit and partial credit devices would apply in CY 2013. We 
stated in the CY 2013 proposed rule (77 FR 45127) that we would update 
the lists of APCs and devices to which the no cost/full credit and 
partial credit device adjustment policy would apply for CY 2013, 
consistent with the three criteria discussed earlier in this section, 
based on the final CY 2011 claims data available for the CY 2013 OPPS/
ASC final rule with comment period. The updated lists of APCs and 
devices appear below in Table 29 and Table 30, respectively, of this 
final rule with comment period. We note that there are no changes to 
the lists of APCs and devices compared to the proposed rule for CY 
2013.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45127), we proposed, 
for CY 2013, that OPPS payments for implantation procedures to which 
the ``FB'' modifier is appended are reduced by 100 percent of the 
device offset for no cost/full credit cases when both a device code 
listed in Table 21 of the proposed rule is present on the claim, and 
the procedure code maps to an APC listed in Table 20 of the proposed 
rule. We also proposed that OPPS payments for implantation procedures 
to which the ``FC'' modifier is appended are reduced by 50 percent of 
the device offset when both a device code listed in Table 21 of the 
proposed rule is present on the claim and the procedure code maps to an 
APC listed in Table 20 of the proposed rule. Beneficiary copayment is 
based on the reduced amount when either the ``FB'' modifier or the 
``FC'' modifier is billed and the procedure and device codes appear on 
the lists of procedures and devices to which this policy applies.
    Comment: Commenters reported that there are some instances in which 
the hospital receives a full credit for only one component of a 
pacemaker or ICD replacement procedure that involves both a lead and a 
generator. Specifically, the commenters noted that the 2012 CPT Code 
Book states that when a pulse generator insertion involves the 
insertion or replacement of one or more lead(s), use system CPT codes 
33206 (Insertion of new or replacement of permanent pacemaker with 
transvenous electrode(s); atrial), 33207 (Insertion of new or 
replacement of permanent pacemaker with transvenous electrode(s); 
ventricular), and 33208 (Insertion of new or replacement of permanent 
pacemaker with transvenous electrode(s); atrial and ventricular) for 
pacemakers or CPT code 33249 (Insertion or replacement of permanent 
pacing cardioverter-defibrillator system with transvenous lead(s), 
single or dual chamber) for pacing cardioverter-defibrillators. The 
commenters noted that hospitals would still be required to assign an 
``FB'' or ``FC'' modifier to the procedure code representing the 
replacement procedure, and the applicable offset would be applied to 
the entire APC payment, even when only one of the devices involved in 
the procedure was received at no cost or with full or partial credit. 
According to the commenters, the offset reduction may actually be much 
greater or much less than the credit received by the hospital, 
depending upon the component that was credited. The commenters 
requested that CMS alleviate this issue by allowing hospitals to bill 
individual CPT codes for each component of the replacement procedure, 
rather than requiring the reporting of a full system as suggested by 
the CPT guidance. The commenters stated that this would allow the FB or 
FC modifiers and the respective offsets to be applied accurately to the 
payment for the individual component receiving the credit, rather than 
being broadly applied to the APC payment for the entire replacement.
    Response: We agree with the commenters that hospitals would be 
required to assign an ``FB'' or ``FC'' modifier to the procedure code 
representing the pacemaker or ICD replacement procedure as they 
describe, and that the applicable offset would be applied to the entire 
APC payment, even when just one of the devices involved in the 
procedure (that is, a lead or a generator) was received at no cost or 
with full or partial credit. However, we do not agree that this is 
problematic. As the commenter noted, the offset reduction may actually 
be much greater or much less than the credit received by the hospital, 
depending upon the component that was credited. As we have stated in 
the past (76 FR 74282), we recognize that, in some cases, the estimated 
device cost and, therefore, the amount of the payment reduction will be 
more or less than the cost a hospital would otherwise incur. However, 
because averaging is inherent in a prospective payment system, we do 
not believe this is inappropriate. Therefore, we do not agree that we 
should allow hospitals to bill individual CPT codes for each component 
of the replacement procedure, rather than requiring the reporting of a 
full system as suggested by the CPT guidance, as the commenters 
suggested.
    Comment: One commenter noted that the no cost/full credit and 
partial credit adjustment policy applies only when expensive devices 
are replaced and requested clarification regarding the assignment of 
the ``FB/FC'' modifier to devices that providers receive at no cost or 
at an ``inexpensive'' cost. According to the commenter, providers lack 
clear guidelines to determine what is meant by ``inexpensive.'' The 
commenter also noted that there are inconsistencies between the ``FB/
FC'' modifier list and the list of device-dependent APCs in the CY 2013 
OPPS/ASC proposed rule, specifically that the FB/FC listing is not an 
inclusive listing of all device-dependent APCs.
    Response: As we stated in the Medicare Claims Processing Manual 
(Pub. 100-04, Chapter 4, Section 61.3.1), when a hospital furnishes a 
device received without cost or with full credit from a manufacturer, 
the hospital must append modifier ``-FB'' to the procedure code (not 
the device code) that reports the service provided to furnish the 
device. As we stated in the Medicare Claims Processing Manual (Pub. 
100-04, Chapter 4, Section 61.3.3), when a hospital receives a partial 
credit of 50 percent or more of the cost of a new replacement device 
due to warranty, recall, or field action, the hospital must append 
modifier ``-FC'' to the procedure code (not on the device code) that 
reports the service provided to replace the device. This guidance does 
not instruct providers to determine whether a no cost/full credit or 
partial credit device is ``expensive'' or ``inexpensive.'' Rather, 
providers should append the ``FB'' and ``FC'' modifiers to

[[Page 68358]]

all procedures that meet the requirements of these instructions. The I/
OCE determines, on a claim by claim basis, when to apply the no cost/
full credit and partial credit device adjustment policy (that is, when 
both a specified device code is present on the claim, and the procedure 
code to which the ``FB'' or ``FC'' modifier is appended maps to a 
specified APC, as described previously in this section).
    Regarding the comment that there are inconsistencies between the 
``FB/FC'' modifier list and the list of device-dependent APCs in the CY 
2013 OPPS/ASC proposed rule, we believe that the commenter is referring 
to the fact that Table 20 in the CY 2013 OPPS/ASC proposed rule (the 
list of proposed APCs to which the no cost/full credit and partial 
credit device adjustment policy would apply (77 FR 45127)) and Table 4A 
(the list of proposed device-dependent APCs (77 FR 45082)) are not 
identical. The commenter is correct that the list of APCs to which the 
no cost/full credit and partial credit device adjustment policy will 
apply in CY 2013 in this section and the list of device-dependent APCs 
in section II.A.2.d.(1) of the proposed rule and this final rule with 
comment period are not the same. We believe this is appropriate 
because, as we describe earlier in this section, we use the following 
criteria to determine the list of APCs to which this policy will apply: 
(1) All procedures assigned to the selected APCs must involve 
implantable devices that would be reported if device insertion 
procedures were performed; (2) the required devices must be surgically 
inserted or implanted devices that remain in the patient's body after 
the conclusion of the procedure (at least temporarily); and (3) the 
device offset amount must be significant. Not all device-dependent APCs 
meet these criteria, and therefore are appropriately excluded from the 
list of APCs to which the no cost/full credit and partial credit device 
adjustment policy applies.
    After consideration of the public comments we received, we are 
finalizing our CY 2013 proposals, without modification, to continue the 
established no cost/full credit and partial credit adjustment policies. 
Table 29 below lists the APCs to which the payment adjustment policy 
for no cost/full credit and partial credit devices will apply in CY 
2013 and displays the final adjustment percentages for both no cost/
full credit and partial credit circumstances. Table 30 below lists the 
devices to which the no cost/full credit and partial credit device 
adjustment policy will apply for CY 2013, consistent with the three 
selection criteria discussed earlier in this section and based on the 
CY 2011 claims data available for this final rule with comment period.
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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 (also referred to as biologics). As enacted by the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 
1999 (Pub. L. 106-113), this provision requires the Secretary to make 
additional payments to hospitals for: current orphan drugs, as 
designated under section 526 of the Federal Food, Drug, and Cosmetic 
Act (Pub. L. 107-186); current drugs and biologicals and brachytherapy 
sources used for the treatment of cancer; and current 
radiopharmaceutical drugs and biologicals. For those drugs and 
biologicals referred to as ``current,'' the transitional pass-through 
payment began on the first date the hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and 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.'' Under 
the statute, transitional pass-through payments for a drug or 
biological described in section 1833(t)(6)(C)(i)(II) of the Act can be 
made for 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 
Medicare Part B. Proposed CY 2013 pass-through drugs and biologicals 
and their designated APCs were assigned status indicator ``G'' in 
Addenda A and B to the proposed rule and in 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 CAP program has been postponed since CY 2009, and such a 
program has not been reinstated for CY 2013.
    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.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through 
payment amount for drugs and biologicals to be zero based on our 
interpretation that the ``otherwise applicable Medicare OPD fee 
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or 
section 1847B of the Act if the drug or biological is covered under a 
competitive acquisition contract). We concluded for those years that 
the resulting difference between these two rates would be zero. For CYs 
2008 and 2009, we estimated the OPPS pass-through payment amount for 
drugs and biologicals to be $6.6 million and $23.3 million, 
respectively. For CY 2010, we estimated the OPPS pass-through payment 
estimate for drugs and biologicals to be $35.5 million. For CY 2011, we 
estimated the OPPS pass-through payment for drugs and biologicals to be 
$15.5 million. For CY 2012, we estimated the OPPS pass-through payment 
for drugs and biologicals to be $19 million. Our OPPS pass-through 
payment estimate for drugs and biologicals in CY 2013 is $22 million, 
which is discussed in section VI.B. of this final rule with comment 
period.
    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/

[[Page 68363]]

HospitalOutpatientPPS/passthrough--payment.html.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2012
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45128), we proposed 
that the pass-through status of 23 drugs and biologicals would expire 
on December 31, 2012, as listed in Table 22 of the proposed rule (77 FR 
45129). 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, 2012. These drugs and biologicals were approved for pass-
through status on or before January 1, 2011. With the exception of 
those groups of drugs and biologicals that are always packaged when 
they do not have pass-through status, specifically diagnostic 
radiopharmaceuticals and contrast agents, 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 $80), as discussed further 
in section V.B.2. of this final rule with comment period. If the drug's 
or biological's estimated per day cost is less than or equal to the 
applicable OPPS drug packaging threshold, we would package payment for 
the drug or biological into the payment for the associated procedure in 
the upcoming calendar year. If the estimated per day cost of the drug 
or biological is greater than the OPPS drug packaging threshold, we 
would provide separate payment at the applicable relative ASP-based 
payment amount (which is ASP+6 percent for CY 2013, as discussed 
further in section V.B.3. of this final rule with comment period). 
Section II.A.3.e. of this final rule with comment period discusses the 
packaging of all nonpass-through contrast agents and diagnostic 
radiopharmaceuticals.
    Comment: Several commenters recommended that CMS continue pass-
through status for new drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, for 3 years. The commenters 
asserted that providing pass-through 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 status for drugs and 
biologicals on a quarterly as opposed to an annual basis. One commenter 
disagreed with a prior CMS proposal to begin the pass-through payment 
eligibility period on the date of first sale of the drug in the United 
States following FDA approval. The commenter however approved of the 
concurrent proposal made at that time that would require CMS to accept 
and expire pass-through applications for drugs and biologicals on a 
quarterly basis.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74287), 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 
but not more than 3 years, after the product's first payment as a 
hospital outpatient service under Medicare Part B. We continue to 
believe that this period of payment 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 status proposed and finalized through the annual rulemaking 
process. Each year, when proposing to expire the pass-through 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 policy, 
which has been generally supported by commenters, we begin pass-through 
payment on a quarterly basis that depends on when applications are 
submitted to us for consideration and because we expire pass-through 
status only on an annual basis, there is no way to ensure that all 
pass-through drugs and biologicals receive pass-through payment for a 
full 3 years, while also providing pass-though payment for no more than 
3 years as the statute requires. Further, we are confident that the 
period of time for which drugs, biologicals, contrast agents, and 
radiopharmaceuticals receive pass-through status, which is at least 2 
but no more than 3 years, is adequate for CMS to collect the sufficient 
amount of data to make a packaging determination.
    We further note that we are in full compliance with the 
requirements of the Act, which states that pass-through status is given 
for at least 2 but no more than 3 years. As noted in section V.A.1. of 
this final rule with comment period, when a product's pass-through 
status expires, it is either packaged into an APC if it is a relatively 
low-cost product that does not exceed the packaging threshold or is 
``policy packaged'', or if it is a relatively high-cost product, it is 
paid separately on the basis of the product's ASP (we refer readers to 
section V.B.3. of this final rule with comment period for more details 
regarding our payment policy for separately payable drugs). Because our 
policies for drugs with expiring pass-through status recognize 
products' relative costliness and establish either separate or bundled 
payment as appropriate, based on such costliness, we disagree with 
commenters that certain relatively high cost products currently 
receiving pass-through payment would not be adequately paid if taken 
off pass-through, and as a result should continue on such status. We 
expire pass-though status on an annual basis. Depending on when a drug 
is initially approved for pass-through status, the drug receives pass-
through payment for at least 2 but not more than 3 years.
    Comment: Commenters, including several medical societies, 
individual practitioners, and a manufacturer, requested that CMS 
appropriately pay for HCPCS code C9275 (Injection, hexaminolevulinate 
hydrochloride, 100 mg, per study dose). Some commenters believed that 
payment would be eliminated for HCPCS code C9275 and requested that CMS 
evaluate its statutory authority and establish appropriate payment as 
necessary. One commenter recommended that CMS either continue to pay 
separately for HCPCS code C9275 because, the commenter argued, an 
insufficient amount of claims data have been collected, or assign HCPCS 
code C9275 to a new technology APC with the accompanying blue light 
cystoscopy procedure until sufficient claims are gathered to determine 
assignment of an appropriate clinical APC category. The commenter 
further argued that because C9275 will always be used with the blue 
light cystoscopy procedure, packaging C9275 will result in zero payment 
for the imaging agent, since current cystoscopy APCs do not include 
costs of imaging agents.
    The commenter stated that if CMS chooses to not provide payment for 
HCPCS code C9275 as a separately billable product, CMS should use its 
``waiver authority'' under section 1833(t)(2)(E) of the Act to ensure 
that equitable payments are made under the OPPS for C9275. The 
commenter noted that, for CY 2013, CMS used this statutory authority to 
propose an

[[Page 68364]]

additional payment for radioisotopes derived from non-HEU sources.
    Response: We proposed for CY 2013 to package the payment, for all 
contrast agents, that are not on pass-through status, into the payment 
for the associated service. We continue to believe that all nonpass-
through contrast agents function effectively as supplies that are 
ancillary and supportive to an independent service. The product 
described by HCPCS code C9275 is a contrast agent that was approved for 
pass-through status beginning on January 1, 2011. For the CY 2013 OPPS/
ASC proposed rule (77 FR 45128 through 45129), we proposed to expire 
pass-through status for this product because it had received at least 2 
and no more than 3 years, as permitted by the Act in section 
1833(t)(6). We note that because we expire pass-through status on an 
annual basis and not a quarterly basis, we cannot extend the pass-
through status for HCPCS code C9275 for an additional number of years 
because it would be counter to our current policy. Therefore, we 
believe that our proposal to expire pass-through status for HCPCS code 
C9275 for CY 2013 is appropriate.
    We disagree with the commenter that a sufficient amount of data was 
not collected for HCPCS code C9275 during its period under pass-through 
status. As we stated previously, we believe this pass-through period of 
payment facilitates dissemination for new products into clinical 
practice and facilitates the collection of hospital claims data, 
reflective of their costs for future OPPS ratesetting. Each year, when 
proposing to expire the pass-through status of certain drugs and 
biologicals, we examine our claims data for these products. We observe 
that hospitals typically have incorporated these products, where the 
product is being used, into their chargemasters based on the 
utilization and costs observed in our claims data. We believe a 
sufficient amount of claims data has been collected in this case and we 
see no reason to exempt C9275 as an extraordinary case from our 
longstanding packaging policy to package payment for nonpass-through 
contrast agents.
    We also do not believe that it is appropriate to extend separate 
payment for HCPCS code C9275 based on section 1833(t)(2)(E) of the Act. 
We believe that all hospitals have the opportunity to bill for and 
receive equitable payment for HCPCS code C9275. Hospitals can bill for 
an appropriate unlisted code for the cystoscopy procedure and include 
the costs of the product currently reported by HCPCS code C9275 in that 
specific claim, in order to receive payment for the procedure and the 
product. Therefore, we do not believe that there is an inequity that 
should be adjusted. Additionally, we do not believe that an additional 
payment amount should be made for HCPCS code C9275, for the reasons 
given in this final rule with comment period, to ensure equitable 
payments are made to hospitals. Further, extending the pass-through 
status for HCPCS code C9275 beyond 3 years would not be permitted under 
the statutory requirements of section 1833(t)(6) of the Act.
    We believe that commenters have erroneously stated that payment 
will not be made under the OPPS or that an insufficient amount of 
payment will be given to the product described by HCPCS code C9275. We 
remind commenters that products that are packaged under the OPPS 
receive payment that is packaged into the payment for the associated 
procedure. Hospitals include HCPCS codes and charges for packaged 
services on their claims, and the estimated costs associated with those 
packaged services are then added to the costs of separately payable 
procedures on the same claims in establishing payment rates for the 
separately payable services. Payment for the packaged product is then 
included in the payment for the independent service. For HCPCS code 
C9275, hospitals may bill an unlisted code for the cystoscopy procedure 
and include the costs for HCPCS code C9275 on that claim. These costs 
will additionally be included in future ratesetting for these products.
    We continue to believe that packaging payment for ancillary and 
dependent services creates appropriate incentives for hospitals to 
seriously consider whether a new service or a new technology offers a 
benefit that is sufficient to justify the cost of the new service or 
new technology. Therefore, we believe that HCPCS code C9275 is 
appropriately packaged for CY 2013 and we are finalizing our proposal 
to expire pass-through status for C9275 and assign this HCPCS code to a 
status indicator of ``N'' for CY 2013.
    We note that comments pertaining to a potential future new 
technology APC assignment or new technology APC application for HCPCS 
code C9275 and the accompanying blue light cystoscopy procedure are 
outside the scope of this final rule with comment period.
    Comment: One commenter requested that CMS review the claims used in 
calculating the packaging status of HCPCS code J7183 (Injection, von 
willebrand factor complex (human), wilate, 1 i.u. vwf:rco) and assign 
HCPCS code J7183 to status indicator ``K'' as pass-through status has 
expired, but the cost per day exceeds $80.
    Response: We appreciate the commenter's diligence. HCPCS code J7183 
was erroneously assigned to a status indicator of ``N'' for the CY 2013 
OPPS/ASC proposed rule (77 FR 45129). The per day cost for HCPCS code 
J7183 for this final rule with comment period exceeds the $80 packaging 
threshold for CY 2013. Therefore, we are finalizing our proposal, with 
modification, to expire the pass-through status for HCPCS code J7183 
and assign it to a status indicator of ``K'' for CY 2013.
    After consideration of the public comments we received, we are 
finalizing our proposal, with modification as described above, to 
expire the pass-through status of the 23 drugs and biologicals listed 
in Table 31 below. We are assigning HCPCS code J7183 to status 
indicator ``K'' for CY 2013. Table 31 lists the drugs and biologicals 
for which pass-through status will expire on December 31, 2012, the 
status indicators, and the assigned APCs for CY 2013.
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3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2013
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45129), we proposed to 
continue pass-through status in CY 2013 for 21 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, 2012. These drugs and biologicals, which were approved for 
pass-through status between April 1, 2011 and July 1, 2012, were listed 
in Table 23 of the proposed rule (77 FR 45130 through 45131). The APCs 
and HCPCS codes for these drugs and biologicals approved for pass-
through status through April 1, 2012 were assigned status indicator 
``G'' in Addenda A and B of the proposed rule. Addenda A and B for the 
proposed rule were 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 believe it is consistent with the 
statute and we proposed to continue to provide payment for drugs and 
biologicals with pass-through status at a rate of ASP+6 percent in CY 
2013, the amount that drugs and biologicals receive under section 
1842(o) of the Act.
    Thus, for CY 2013, 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 2013. 
We proposed that a $0.00 pass-through payment amount would be paid for 
most pass-through drugs and biologicals under the CY 2013 OPPS because 
the difference between the amount authorized under section 1842(o) of 
the Act, which is ASP+6 percent, and the portion of the otherwise 
applicable OPD fee schedule that the Secretary determines is 
appropriate, proposed at ASP+6 percent, is $0.
    In the case of pass-through contrast agents and diagnostic 
radiopharmaceuticals, their pass-through payment amount would be equal 
to ASP+6 percent because, if not on pass-through status, payment for 
these products would be packaged into the associated procedure. 
Therefore, we proposed that the difference between ASP+6 percent and 
the ``policy-packaged'' drug APC offset amount for the associated 
clinical APC in which the drug or biological is utilized would be the 
CY 2013 pass-through payment amount for these policy-packaged products.
    In addition, we proposed to continue to update pass-through payment 
rates on a quarterly basis on the CMS Web site during CY 2013 if later 
quarter ASP submissions (or more recent WAC or AWP information, as 
applicable) indicate that adjustments to the payment rates for these 
pass-through drugs or biologicals are necessary. For a full description 
of this policy, we refer readers to the CY 2006 OPPS/ASC final rule 
with comment period (70 FR 42722 and 42723).
    As is our standard methodology, we annually review new permanent 
HCPCS codes and delete temporary HCPCS C-codes if an alternate 
permanent HCPCS code is available for purposes of OPPS billing and 
payment. We specifically reviewed drugs with pass-through status for CY 
2013 that will change from C-codes to J-codes for CY 2013. For our CY 
2013 review, we have determined that HCPCS code J1741 (Injection, 
ibuprofen, 100 mg) describes the product reported under HCPCS code 
C9279 (Injection, ibuprofen, 100 mg), HCPCS code J0485 (Injection, 
belatacept, 1 mg) describes the product reported under HCPCS code C9286 
(Injection, belatacept, 1 mg), HCPCS code J9042 (Injection, brentuximab 
vedotin, 1 mg) describes the code reported under HCPCS code C9287 
(Injection, brentuximab vedotin, 1 mg), HCPCS code J0716 (Injection, 
centruroides immune f(ab)2, up to 120 milligrams) describes the code 
reported under HCPCS code C9288 (Injection, centruroides (scorpion) 
immune f(ab)2 (equine), 1 vial), and HCPCS code J9019 (Injection, 
asparaginase (erwinaze), 1,000 iu) describes the code reported under 
HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 1,000 
international units (I.U.)).
    In CY 2013, as is consistent with our CY 2012 policy for diagnostic 
and therapeutic radiopharmaceuticals, we proposed to provide payment 
for both diagnostic and therapeutic radiopharmaceuticals that are 
granted pass-through status based on the ASP methodology. As stated 
above, for purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
status during CY 2013, 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 is ASP+6 percent. If 
ASP data are not available for a radiopharmaceutical, we

[[Page 68367]]

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 is also 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 status. A few 
commenters approved of the proposal to use the ASP methodology that 
would provide payment based on WAC if ASP information is not available, 
and payment at 95 percent of AWP if WAC information is not available. 
Another commenter requested that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through status. The 
commenter gave an example amount of ASP+10 percent. Finally, one 
commenter, in response to both the proposal to continue to pay for 
drugs and biologicals on pass-through status and those not on pass-
through status at ASP+6 percent, suggested that CMS explore alternative 
payment mechanisms that reward the pharmaceutical care provided by 
specialty trained pharmacists who ensure safe and effective medication 
use and provide for screening of drug interactions and 
contraindications.
    Response: As discussed above, the statutorily mandated pass-through 
payment for pass-through drugs and biologicals for CY 2013 generally 
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 2013) from the amount 
determined under section 1842(o) of the Act (ASP+6 percent).
    Regarding the comments that CMS should provide an additional 
payment for radiopharmaceuticals that are granted pass-through status, 
we note that for CY 2013, consistent with our CY 2012 payment policy 
for diagnostic and therapeutic radiopharmaceuticals, we proposed to 
provide payment for both diagnostic and therapeutic 
radiopharmaceuticals with pass-through 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, WAC if ASP is unavailable, and 95 percent of the 
radiopharmaceutical's most recent AWP if 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 status during CY 2013, 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 status in CY 2013, and that the 
payment rate of ASP+6 percent (or payment based on the ASP methodology) 
is appropriate to provide payment for both the 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, and readers may also refer to the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Finally, we note that the comment that suggested that CMS explore 
alternative payment mechanisms that reward the pharmaceutical care 
provided by specialty trained pharmacists who ensure safe and effective 
medication use and provide for screening of drug interactions and 
contraindications is outside the scope of this final rule with comment 
period.
    Comment: One commenter stated that HCPCS code J1572 (Injection, 
immune globulin (flebogamma/flebogamma dif), intravenous, non-
lyophilized (e.g. liquid), 500 mg) received an approval for a labeling 
change for the extraction process on January 20, 2012, but that this 
did not constitute the approval of a ``new drug.'' The commenter 
requested that CMS reevaluate the status indicator for HCPCS code J1572 
and assign it to a status indicator of ``K'' instead of ``G'' for CY 
2013, because the original FDA approval date for the product of 
December 15, 2003 does not meet the criteria for pass-through status.
    Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45129 
through 45131), we proposed to continue pass-through status for HCPCS 
code J1572 for the remainder of CY 2013. HCPCS code J1572 replaced 
HCPCS code Q4091 on January 1, 2008. The product described by HCPCS 
code J1572 also received FDA approval on December 15, 2003. When we 
reviewed the drug pass-through application for the product described by 
HCPCS code J1572, we concluded that the product described by HCPCS code 
J1572 had not previously received pass-through payment under the OPPS 
and had a cost that was not insignificant in relation to the OPD fee 
schedule amount. Therefore, we approved pass-through status for HCPCS 
code J1572 beginning on July 1, 2011. We believe that we appropriately 
assigned pass-through status to HCPCS code J1572 and we continue to 
believe that pass-through status should continue through CY 2013.
    We disagree with the commenter that HCPCS code J1572 does not meet 
the criteria for pass-through status because the original FDA approval 
date for this product was December 15, 2003. We note that section 
1833(t)(6)(A)(iv)(I) of the Act allows for pass-through payment for a 
device, drug, or biological as long as payment for such item was not 
being made as an outpatient hospital service as of December 31, 1996. 
Furthermore, we reiterate that the statute provides in section 
1833(t)(6)(B)(iii) of the Act that pass-through status shall be in 
effect for a period of at least 2 but no more than 3 years of pass-
through payment. Therefore, we believe continuing pass-through status 
for HCPCS code J1572 is appropriate.
    Comment: One commenter who responded to the CY 2012 OPPS/ASC final 
rule with comment period requested clarification on the dosage 
descriptor for HCPCS code J9179 (Injection, eribulin mesylate, 0.1 mg). 
The commenter noted that the final rule display version referenced 
inconsistent dosage size.
    Response: As displayed in Table 32 below, the correct dosage 
descriptor for HCPCS code J9179 is 0.1mg. HCPCS code J9179 will 
continue on pass-through status, with a status indicator of ``G,'' for 
CY 2013.
    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 status based on the ASP methodology. If a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
status during CY 2013, 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

[[Page 68368]]

percent, the equivalent payment provided to pass-through drugs and 
biologicals without ASP information. If WAC information is also 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.d. of this final rule 
with comment period, over the last 5 years, we implemented a policy 
whereby payment for all nonpass-through diagnostic radiopharmaceuticals 
and contrast agents is packaged into payment for the associated 
procedure. We proposed to continue the packaging of these items, 
regardless of their per day cost, in CY 2013. 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 either a 
diagnostic radiopharmaceutical or a contrast agent (identified as a 
``policy-packaged'' drug, first described in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68639)) would otherwise be packaged if 
the product did not have pass-through status, we believe the otherwise 
applicable OPPS payment amount would be equal to the ``policy-
packaged'' drug APC offset amount for the associated clinical APC in 
which the drug or biological is utilized. The calculation of the 
``policy-packaged'' drug APC offset amounts is described in more detail 
in section IV.A.2. 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 would also offset from 
payment for the drug or biological if a payment offset applies) of the 
total OPPS payment for those drugs and biologicals would, therefore, be 
accounted for in the copayment for the associated clinical APC in which 
the drug or biological is used.
    According to section 1833(t)(8)(E) of the Act, the amount of 
copayment associated with pass-through items is equal to the amount of 
copayment that would be applicable if the pass-through adjustment was 
not applied. Therefore, as we did in CY 2012, we proposed to continue 
to set the associated copayment amount for pass-through diagnostic 
radiopharmaceuticals and contrast agents that would otherwise be 
packaged if the item did not have pass-through status to zero for CY 
2013. Similarly, we proposed that the associated copayment amount for 
pass-through anesthesia drugs that would otherwise be packaged if the 
item did not have pass-through status would be zero for CY 2013. As 
discussed in further detail in section II.3.c.(2) of this final rule 
with comment period, we are clarifying that our general policy is to 
package drugs used for anesthesia, and that those anesthesia drugs with 
pass-through status will be packaged upon the expiration of pass-
through status.
    The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical, contrast agent, or anesthesia drug is 
not subject to a copayment according to the statute. Therefore, we 
proposed to not publish a copayment amount for these items in Addenda A 
and B to the proposed rule (which were available via the Internet on 
the CMS Web site).
    Comment: Commenters supported the CY 2013 proposal to continue to 
set 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 status to zero. The 
commenters noted that this policy is consistent with statutory 
requirements and provides cost-saving benefits to beneficiaries.
    Response: We appreciate the commenters' support of our proposal. As 
discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45129 through 
45130), 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. According to section 1833(t)(8)(E) of 
the Act, the amount of copayment associated with pass-through items is 
equal to the amount of copayment that would be applicable if the pass-
through adjustment was not applied. Therefore, 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 anesthesia drugs that would otherwise be packaged if the item 
did not have pass-through status.
    After consideration of the public comments received, we are 
finalizing our proposal, without modification, to continue to set the 
associated copayment amount for pass-through diagnostic 
radiopharmaceuticals and contrast agents that would otherwise be 
packaged if the item did not have pass-through status to zero for CY 
2013. We are also finalizing our proposal to extend this policy to 
anesthesia drugs that have pass-through status, and to set a copayment 
amount of zero for these drugs for CY 2013.
    The 26 drugs and biologicals that we are continuing on pass-through 
status for CY 2013 or have been granted pass-through status as of 
January 2013 are displayed in Table 32 below.
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BILLING CODE 4120-01-C
4. Provisions for Reducing Transitional Pass-Through Payments for 
Diagnostic Radiopharmaceuticals and Contrast Agents To Offset Costs 
Packaged Into APC Groups
a. Background
    Prior to CY 2008, diagnostic radiopharmaceuticals and contrast 
agents were paid separately under the OPPS if their mean per day costs 
were greater than the applicable year's drug packaging threshold. In CY 
2008 (72 FR 66768), we began a policy of packaging payment for all 
nonpass-through diagnostic radiopharmaceuticals and contrast agents as 
ancillary and supportive items and services into their associated 
nuclear medicine procedures. Therefore, beginning in 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 nonpass-
through diagnostic radiopharmaceuticals and contrast agents were 
packaged as a matter of policy. For CY 2013, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45131), we proposed to continue to package payment 
for all nonpass-through diagnostic radiopharmaceuticals and contrast 
agents, as discussed in section II.A.3.e. of the proposed rule and this 
final rule with comment period.
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. There is 
currently one radiopharmaceutical with pass-through status under the 
OPPS, HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, per study 
dose, up to 5 millicuries). This product, which is presently referred 
to using HCPCS code A9584, was granted pass-through status using HCPCS 
code C9406 beginning July 1, 2011, and we proposed that it continue 
receiving pass-through status in CY 2013. We currently apply the 
established radiopharmaceutical payment offset policy to pass-through 
payment for this product. As described earlier in section V.A.3. of 
this final rule with comment period, we proposed that new pass-through 
diagnostic radiopharmaceuticals would be paid at ASP+6 percent, while 
those without ASP information would be paid at WAC+6 percent or, if WAC 
is not available, payment would be based on 95 percent of the product's 
most recently published AWP.
    Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we deduct from the pass-
through payment for diagnostic radiopharmaceuticals an amount 
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.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 
through 60484), we finalized a policy to redefine ``policy-packaged'' 
drugs as only nonpass-through diagnostic radiopharmaceuticals and 
contrast agents, as a result of the policy discussed in sections V.A.4. 
and V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60471 through 60477 and 60495 through 60499, respectively) that 
treats nonpass-through implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) and implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) with newly 
approved pass-through status beginning in CY 2010 or later as devices, 
rather than drugs. To determine the actual APC offset amount for pass-
through diagnostic radiopharmaceuticals that takes into consideration 
the otherwise applicable OPPS payment amount, we multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the 
nuclear medicine procedure with which the pass-through diagnostic 
radiopharmaceutical is used and, accordingly, reduce the separate OPPS 
payment for the pass-through diagnostic radiopharmaceutical by this 
amount.
    Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71934 through 71936), we finalized a 
policy to require hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures when the diagnostic radiopharmaceutical is 
received at no cost/full credit. These

[[Page 68371]]

instructions are contained within the I/OCE CMS specifications on the 
CMS Web site at http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/index.html.
    For CY 2013 and future years, we proposed to continue to require 
hospitals to append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic radiopharmaceutical is received at no 
cost/full credit. In addition, we proposed to continue to require that 
when a hospital bills with an ``FB'' modifier with the nuclear medicine 
scan, the payment amount for procedures in the APCs listed in Table 24 
of the proposed rule (77 FR 45132) would be reduced by the full 
``policy-packaged'' offset amount appropriate for diagnostic 
radiopharmaceuticals. Finally, we also proposed to continue to require 
hospitals to report a token charge of less than $1.01 in cases in which 
the diagnostic radiopharmaceutical is furnished without cost or with 
full credit.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our policy, without modification, to continue 
requiring hospitals to append modifier ``FB'' to specified nuclear 
medicine procedures when the diagnostic radiopharmaceutical is received 
at no cost/full credit in CY 2013 and future years. In addition, we 
will continue to reduce the payment amount for procedures in the APCs 
listed in Table 33 in this final rule with comment period by the full 
``policy-packaged'' offset amount appropriate for diagnostic 
radiopharmaceuticals. Finally, we also will continue to require 
hospitals to report a token charge of less than $1.01 in cases in which 
the diagnostic radiopharmaceutical is furnished without cost or with 
full credit.
    For CY 2012, we finalized a policy to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described above. For CY 2013, we 
proposed to continue to apply the diagnostic radiopharmaceutical offset 
policy to payment for pass-through diagnostic radiopharmaceuticals.
    Comment: Commenters recommended that CMS continue to apply 
radiopharmaceutical edits for nuclear medicine procedures using 
radiopharmaceuticals as long as diagnostic radiopharmaceuticals are 
packaged. The commenters noted that the proposed rule was silent on 
whether CMS will continue this policy for CY 2013 and they requested 
that CMS confirm in the final rule that it will continue to apply the 
radiopharmaceutical edits and use only claims with a 
radiopharmaceutical code in determining nuclear medicine APC rates.
    Response: Beginning in CY 2008, we implemented nuclear medicine 
procedure-to-radiolabeled product claims processing edits in the I/OCE 
that required a diagnostic radiopharmaceutical to be present on the 
same claim as a nuclear medicine procedure for payment under the OPPS 
to be made. These edits ensure that hospitals submit correctly coded 
claims that report the HCPCS codes for the products and their charges 
that are necessary for performance of nuclear medicine procedures. 
Although we do not discuss our policy regarding nuclear medicine-to-
radiolabeled product claims processing edits in this final rule with 
comment period, we will continue to annually update and implement this 
list in accordance with our original finalized policy. We refer readers 
to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60384 
through 60390) for a detailed discussion of the nuclear medicine 
procedure-to-radiolabeled product edits and the evolution of our edit 
policy. In addition, specific instructions for the nuclear medicine 
procedure-to-radiolabeled product claims processing edits are contained 
within the I/OCE CMS specifications on the CMS Web site at http://www.cms.gov/OutpatientCodeEdit/02OCEQtrReleaseSpecs.asp#TopOfPage.
    Comment: A few commenters recommended that CMS publish preliminary 
offset amounts for diagnostic radiopharmaceuticals and contrast agents 
with the proposed rule to allow for meaningful assessment of and public 
comment on the data.
    Response: The exact data used to calculate all of the proposed and 
final payment rates, including the associated offset amounts, for the 
CY 2013 OPPS are available for purchase under a CMS data use agreement 
through the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HhospitalOutpatientPPS/index.html. This Web site 
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-CMS diagnosis codes 
and revenue code payment amounts. We do not post the offset amounts by 
APC until publication of the final rule with comment period because we 
assign services to APCs based on our estimate of their full resource 
cost, including, but not limited to, packaged diagnostic 
radiopharmaceuticals and contrast agents. The offset amount is the 
portion of each APC payment rate that could reasonably be attributed to 
the cost of predecessor diagnostic radiopharmaceuticals and contrast 
agents when considering a new diagnostic radiopharmaceutical and 
contrast agent for pass-through payment and has no bearing on APC 
assignment.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to apply the 
diagnostic radiopharmaceutical offset policy to payment for pass-
through diagnostic radiopharmaceuticals, as described in the CY 2013 
OPPS/ASC proposed rule (77 FR 45131).
    Table 33 below displays the APCs to which nuclear medicine 
procedures will be assigned in CY 2013 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.
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BILLING CODE 4120-01-C
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. There currently 
are no contrast agents with pass-through status under the OPPS. As 
described in section V.A.3. of the proposed rule, we proposed that new 
pass-through contrast agents would be paid at ASP+6 percent, while 
those without ASP information would be paid at WAC+6 percent or, if WAC 
is not available, payment would be based on 95 percent of the product's 
most recently published AWP.
    Although there are no contrast agents with pass-through status, we 
believe that a payment offset is necessary in the event that a new 
contrast agent is approved for pass-through status during CY 2013, in 
order to provide an appropriate transitional pass-through payment for 
them because all of these items are packaged when they do not have 
pass-through status. In accordance with our standard offset 
methodology, in the CY 2013 OPPS/ASC proposed rule (77 FR 45132), we 
proposed for CY 2013 to deduct from the payment for new pass-through 
contrast agents that are approved for pass-through status as a drug or 
biological during CY 2013, an amount that reflects the portion of the 
APC payment associated with predecessor contrast agents, in order to 
ensure no duplicate contrast agent payment is made.
    In CY 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). For CY 2013, as we 
did in CY 2012, we proposed to continue to apply this same policy to 
contrast agents. Specifically, we proposed to utilize the ``policy-
packaged'' drug offset fraction for clinical APCs calculated as 1 minus 
(the cost from single procedure claims in the APC after removing the 
cost for ``policy-packaged'' drugs divided by the cost from single 
procedure claims in the APC). In CY 2010, we finalized a policy to 
redefine ``policy-packaged'' drugs as only nonpass-through diagnostic 
radiopharmaceuticals and contrast agents (74 FR 60495 through 60499). 
To

[[Page 68373]]

determine the actual APC offset amount for pass-through contrast agents 
that takes into consideration the otherwise applicable OPPS payment 
amount, we proposed to multiply the ``policy-packaged'' drug offset 
fraction by the APC payment amount for the procedure with which the 
pass-through contrast agent is used and, accordingly, reduce the 
separate OPPS payment for the pass-through contrast agent by this 
amount. We proposed to continue to apply this methodology for CY 2013 
to recognize that when a contrast agent with pass-through status is 
billed with any procedural APC listed in Table 25 of the proposed rule 
(77 FR 45132 through 45133), a specific offset based on the procedural 
APC would be applied to payments for the contrast agent to ensure that 
duplicate payment is not made for the contrast agent.
    As we proposed, for this final rule with comment period, 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, 
including contrast agents, 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.
    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 33 above, and these APCs are displayed in Table 34 below. The 
methodology used to determine a 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 (70 FR 60483 through 60484). 
For CY 2013, we proposed to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 25 of the proposed rule (77 FR 45132 through 45133), 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.
    Comment: One commenter urged CMS to publish the proposed offset 
amount for contrast agents in the proposed rule to allow interested 
stakeholders the opportunity to review the data and comment on the 
amount of the offset.
    Response: As we stated previously, the exact data used to calculate 
all of the proposed and final payment rates, including the associated 
offset amounts, for the CY 2013 OPPS are available for purchase under a 
CMS data use agreement through the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. This Web site 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-CMS diagnosis codes and revenue code payment amounts. We do not 
post the offset amounts by APC until publication of the final rule 
because we assign services to APCs based on our estimate of their full 
resource cost, including, but not limited to, packaged contrast agents. 
The offset amount is the portion of each APC payment rate that could 
reasonably be attributed to the cost of a predecessor contrast agent 
when considering a new diagnostic radiopharmaceutical and contrast 
agent for pass-through payment and has no bearing on APC assignment.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2013 without modification.
BILLING CODE 4120-01-P

[[Page 68374]]

[GRAPHIC] [TIFF OMITTED] TR15NO12.050

BILLING CODE 4120-01-C

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

1. Background
    Under the CY 2012 OPPS, we currently pay for drugs, biologicals, 
and radiopharmaceuticals that do not have pass-through status in one of 
two ways: As a packaged payment included in the payment for the 
associated service, or as a separate payment (individual APCs). We 
explained in the April 7, 2000 OPPS final rule with comment period (65 
FR 18450) that we generally package the cost of drugs and 
radiopharmaceuticals into the APC payment 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

[[Page 68375]]

packaged items and supplies whose costs are recognized and paid within 
the national OPPS payment rate for the associated procedure or service. 
(Transmittal A-01-133, issued on November 20, 2001, explains in greater 
detail the rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
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 
$60 for CYs 2008 and 2009. For CY 2010, we set the packaging threshold 
at $65; for CY 2011, we set the packaging threshold at $70; and for CY 
2012, we set the packaging threshold at $75.
    Following the CY 2007 methodology, for the CY 2013 OPPS/ASC 
proposed rule (77 FR 45133), 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 2013 and 
rounded the resulting dollar amount ($81.59) to the nearest $5 
increment, which yielded a figure of $80. 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 note that we did not propose a change 
to the PPI that is used to calculate the threshold for CY 2013; rather, 
this change in terminology reflects a change to the BLS naming 
convention for this series.) We refer below to this series generally as 
the PPI for Prescription Drugs.
    We chose this PPI as it reflects price changes associated with the 
average mix of all pharmaceuticals in the overall economy. In addition, 
we chose this price series because it is publicly available and 
regularly published, improving public access and transparency. 
Forecasts of the PPI for Prescription Drugs are developed by IHS Global 
Insight, Inc., a nationally recognized economic and financial 
forecasting firm. As actual inflation for past quarters replaced 
forecasted amounts, the PPI estimates for prior quarters have been 
revised (compared with those used in the CY 2007 OPPS/ASC final rule 
with comment period) and have been incorporated into our calculation. 
Based on the calculations described above, we proposed a packaging 
threshold for CY 2013 of $80. (For a more detailed discussion of the 
OPPS drug packaging threshold and the use of the PPI for Prescription 
Drugs, we refer readers to the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68085 through 68086).)
b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45134), to determine 
the proposed CY 2013 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, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals (collectively called 
``threshold-packaged'' drugs) that had a HCPCS code in CY 2011 and were 
paid (via packaged or separate payment) under the OPPS. We used data 
from CY 2011 claims processed before January 1, 2012 for this 
calculation. However, we did not perform this calculation for those 
drugs and biologicals with multiple HCPCS codes that include different 
dosages as described in section V.B.2.c. of this final rule with 
comment period or for diagnostic radiopharmaceuticals, contrast agents, 
and implantable biologicals that we proposed to continue to package in 
CY 2013, as discussed in section V.B.2.d. of this final rule with 
comment period.
    In order to calculate the per day costs for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals to determine their 
proposed packaging status in CY 2013, we used the methodology that was 
described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 
through 42724) and finalized in the CY 2006 OPPS final rule with 
comment period (70 FR 68636 through 70 FR 68638). For each drug and 
nonimplantable 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 nonimplantable biologicals for CY 2013, as discussed 
in more detail in section V.B.3.b. of this final rule with comment 
period) to calculate the CY 2013 proposed rule per day costs. We used 
the manufacturer submitted ASP data from the fourth quarter of CY 2011 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2012) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2013 we proposed to use 
payment rates based on the ASP data from the fourth quarter of CY 2011 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
was 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 were also the bases for drug payments in 
the physician's office setting, effective April 1, 2012. 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 
2011 hospital claims data to determine their per day cost.
    We proposed to package items with a per day cost less than or equal 
to $80, and identify items with a per day cost greater than $80 as 
separately payable. Consistent with our past practice, we crosswalked 
historical OPPS claims data from the CY 2011 HCPCS codes that were 
reported to the CY 2012 HCPCS codes that we displayed in Addendum B of 
the proposed rule (which was available via the Internet on the CMS Web 
site) for payment in CY 2013.
    Comment: The majority of commenters objected to the proposed 
increase in the OPPS packaging threshold to $80 for CY 2013. The

[[Page 68376]]

commenters recommended that CMS consider either eliminating the drug 
packaging threshold and providing separate payment for all drugs with 
HCPCS codes or freezing the packaging threshold at $75 for CY 2013. 
Many commenters objected to the use of a packaging threshold under the 
OPPS when one is not used for physician's office payment. These 
commenters argued for parity across the payment systems and they 
expressed concern that the packaging threshold may impede beneficiary 
access to lower cost packaged drugs in the HOPD setting. A few 
commenters suggested that CMS limit increases in the packaging 
threshold amount to the hospital update factor for the year, reflective 
of all statutory adjustments. One commenter believed that these dollar 
figures are arbitrary and recommended that CMS tie the threshold for 
separate payment to the annual market basket rather than randomly 
assigning thresholds for separate payment for these products.
    One commenter noted that increasing the packaging threshold could 
have the unintended impact of undermining conversion to LEU sources of 
diagnostic radiopharmaceuticals if CMS adopts a proposal to unbundle 
diagnostic radiopharmaceuticals from the APC rate under the policy 
packaging rule without also waiving the dollar threshold for 
radiopharmaceuticals produced from LEU sources.
    Response: As discussed in detail in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66758 through 66767), the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68643), the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60485 through 60487), the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71940 through 71943), 
and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74300 
through 74301), we continue to believe that unpackaging payment for all 
drugs, biologicals and radiopharmaceuticals is inconsistent with the 
concept of a prospective payment system and that such a change could 
create an additional reporting burden for hospitals. The OPPS and the 
MPFS (which applies to physician's services) are fundamentally 
different payment systems with essential differences in their payment 
policies and structures. Specifically, the OPPS is a prospective 
payment system based on the concept of payment for groups of services 
that share clinical and resource characteristics. Payment is made under 
the OPPS according to prospectively established payment rates that are 
related to the relative costs of hospital resources for services. When 
physician's services are furnished in an office setting, they are paid 
under the MPFS, which is a fee schedule based on the relative value of 
each component. Under the MPFS, separate payment is made for each 
service provided in the physician's office; when individual drugs are 
administered to beneficiaries in the physician's office, they are 
generally paid under the ASP methodology. In contrast, the OPPS 
includes various drugs within a prospective payment system, where 
payment for certain drugs is packaged into the associated procedure 
payment for the APC group. Given the fundamental differences in the way 
payment is made in an HOPD and a physician's office setting for these 
drugs, differences in payment are to be expected.
    In general, we do not believe that our packaging methodology under 
the OPPS results in limited beneficiary access to drugs because 
packaging is a fundamental component of a prospective payment system 
that accounts for the cost of certain items and services in larger 
payment bundles, recognizing that some cases may be more costly and 
others less costly, but that, on average, OPPS payment is appropriate 
for the services provided. The growing utilization associated with 
packaged drugs and biologicals in our claims data suggests Medicare 
beneficiaries have sufficient access to these items.
    We note that, in CYs 2005 and 2006, the statutorily mandated drug 
packaging threshold was set at $50, and we continue to believe that it 
is appropriate to continue a drug packaging threshold for the CY 2013 
OPPS for the reasons set forth below. As 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 packaging these items does not lead to beneficiary access 
issues and does not create a problematic site of service differential, 
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 of our continued belief that 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 the 
commenters' recommendations to pay separately for all drugs, 
biologicals, and radiopharmaceuticals for CY 2013 or to eliminate or to 
freeze the packaging threshold at $75.
    We disagree with the commenters who suggested that CMS should limit 
increases in the outpatient drug packaging threshold amount to the 
hospital update factor for the year, reflective of all statutory 
adjustments or the market basket update. As stated above, we continue 
to believe that updating the $50 threshold is consistent with industry 
and government practices and that the PPI for Prescription Drugs is an 
appropriate mechanism to gauge Part B drug inflation. As we stated in 
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085), we 
believe that the PPI for Prescription Drugs reflects price changes at 
the wholesale or manufacturer stage. Because OPPS payment rates for 
drugs and biologicals are generally based on the ASP data that are 
reported by their manufacturers, we believe that the PPI for 
Prescription Drugs is an appropriate price index to use to update the 
packaging threshold for CY 2007 and beyond.
    In contrast, the market basket update contains numerous price 
proxies, including, but not limited to, proxies for wages and salaries, 
utilities, and nonlabor-related expenses, that are not related to price 
increases for prescription drugs. Therefore, we believe that the market 
basket as a whole is not an appropriate mechanism for determining the 
outpatient drug packaging threshold amount. Within the calculation of 
the market basket update, we use the PPI for Prescription Drugs 
specifically to measure the price growth for prescription drugs, but 
price changes for prescription drugs are only one component of price 
changes for the numerous items and services hospitals purchase.
    Additionally, we strongly disagree with the commenter who suggested 
that our methodology for updating the packaging threshold is arbitrary 
and recommended that CMS tie the threshold for separate payment to the 
annual market basket rather than randomly assigning thresholds for 
separate payment for these products. As we have stated above, the PPI 
for Prescription Drugs reflects price changes at the wholesale or 
manufacturer stage. Because OPPS payment rates for drugs and 
biologicals are generally based on the ASP data that are reported by 
their manufacturer, we believe that the PPI for Prescription Drugs is 
an appropriate price index to use to update the packaging threshold for 
CY 2007 and subsequent years. Therefore, we believe that our continued 
methodology of updating the

[[Page 68377]]

CY 2005 $50 packaging threshold for inflation based on the PPI for 
Prescription Drugs is not arbitrary in nature nor does it have the 
effect of randomly assigning a payment threshold for drugs. Our 
methodology continues to be an accurate way to apply an annual 
inflation adjustment factor that is consistent with the practices of 
many health care payment policy areas, and many other areas of 
government policy, that acknowledge real costs by using an inflation 
adjustment factor instead of a static dollar value.
    Finally, we disagree with commenters that increasing the packaging 
threshold could have the unintended impact of undermining conversion to 
LEU sources. As we discuss in section II.A.3.e. of this final rule with 
comment period, we are finalizing our proposals for CY 2013 to continue 
to package payment for all nonpass-through diagnostic 
radiopharmaceuticals. Therefore, diagnostic radiopharmaceuticals will 
not be subject to the packaging threshold and will instead be packaged 
regardless of their per day cost. Additionally, as we discuss in 
section III.A.C.3., removing the diagnostic radiopharmaceutical so that 
this cost is passed through directly to Medicare is not consistent with 
the fundamental concept of packaging under the OPPS. Moreover, the 
diagnostic radiopharmaceutical is never separately billed, being a 
supply in the diagnostic procedure it supports, so the true cost cannot 
be captured by single service claims. Most significantly from the 
standpoint of payment for non-HEU sources, however, a separate payment 
for the diagnostic radiopharmaceutical does not unbundle the cost of 
the isotope from the much larger cost of the drug component, nor does 
it differentiate between HEU and non-HEU sources, so it does not create 
a differential payment to further the CMS goals of payment equity or 
the Administration's goal of promoting non-HEU conversion.
    Comment: Several commenters suggested that CMS reinstate its policy 
of separate payment for 5-HT3 antiemetics, which are a class of drugs 
often used as part of an anticancer treatment regiment to treat nausea. 
One commenter believed that CMS packaged all 5-HT3 antiemetic drugs 
(HCPCS codes J1260 (Injection, dolasetron mesylate, 10 mg), J1626 
(Injection, granisetron hydrochloride, 100 mcg), J2405 (Injection, 
ondansetron hydrochloride, per 1 mg), J2469 (Injection, palonosetron 
hcl, 25 mcg), Q0166 (Granisetron hydrochloride, 1 mg, oral, FDA-
approved prescription anti-emetic, for use as a complete therapeutic 
substitute for an iv anti-emetic at the time of chemotherapy treatment, 
not to exceed a 24 hour dosage regimen), Q0180 (Dolasetron mesylate, 
100 mg, oral, FDA-approved prescription antiemetic, for use as a 
complete therapeutic substitute for an iv anti-emetic at the time of 
chemotherapy treatment, not to exceed a 24 hour dosage regimen)). The 
commenter opposed the packaging of these drugs.
    Response: We continue to believe that use of these antiemetics is 
an integral part of an anticancer treatment regimen and that OPPS 
claims data demonstrate their increasingly common hospital outpatient 
utilization. As we stated in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60488), we no longer believe that a specific 
exemption to our standard drug payment methodology is necessary to 
ensure access to the most appropriate antiemetic products for Medicare 
beneficiaries. We continue to believe that our analysis conducted in 
the CY 2010 OPPS/ASC proposed rule on 5-HT3 antiemetics (74 FR 35320), 
along with the historical stability in prescribing patterns for these 
products and the availability of generic alternatives for several of 
these products, allows us to continue our policy of not specifically 
exempting these products from the OPPS drug packaging threshold.
    Additionally, we clarify that we did not propose to assign a 
packaged payment status indicator to all 5-HT3 antiemetic codes in the 
CY 2013 OPPS/ASC proposed rule. HCPCS code J2469 (Injection, 
palonosetron hcl, 25 mcg) had a per day cost above the proposed $80 
packaging threshold and was assigned a separately payable status 
indicator of ``K'' for the proposed rule. HCPCS code J2469 has a CY 
2013 estimated per day cost, from the CY 2011 claims data, above the CY 
2013 drug packaging threshold and therefore will receive separate 
payment in CY 2013.
    Comment: One commenter recommended that CMS not package any drugs 
used in anticancer regimens.
    Response: We disagree with the commenter for the reasons mentioned 
above. We believe that packaging certain items, including items used in 
anticancer regimens, is a fundamental component of a prospective 
payment system, and is an essential feature that distinguishes a 
prospective payment system from a fee schedule. We do not believe that 
packaging drugs used in an anticancer regimen or in outpatient 
treatment of other significant disease leads to beneficiary access 
issues. This finding is confirmed by our analysis of hospital claims 
data in which we have found that beneficiaries appear to have adequate 
access to cancer treatments, as is signified by ongoing volume growth 
in cancer-related APCs and stability in prescribing products for 
anticancer drugs such as 5-HT3 antiemetics, for which CMS has continued 
to observe volume growth, even after we ended our multiyear exemption 
from the packaging threshold for these products. In summary, after 
consideration of the public comments we received, we are not providing 
any exceptions to the standard drug packaging methodology for any class 
of drugs, including anticancer therapies, for CY 2013.
    Since publication of the CY 2013 OPPS/ASC proposed rule, consistent 
with our policy of updating the packaging threshold with more recently 
available data for the final rule, we have again followed the CY 2007 
methodology for CY 2013 and used updated four quarter moving average 
PPI index levels provided by the CMS Office of the Actuary to trend the 
$50 threshold forward from the third quarter of CY 2005 to the third 
quarter of CY 2013. We then rounded the resulting updated dollar amount 
($81.91) to the nearest $5 increment, which yielded a figure of $80. 
Therefore, after consideration for 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 
2013 packaging threshold of $80. Our policy during previous cycles of 
the OPPS has been to use updated ASP and claims data to make final 
determinations of the packaging status of HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals for 
the 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 nonimplantable biologicals in this CY 2013 OPPS/ASC final rule with 
comment period, we proposed to use ASP data from the first quarter of 
CY 2012, 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, 2012, along with updated hospital claims 
data from CY

[[Page 68378]]

2011. We note that we also proposed to use these data for budget 
neutrality estimates and impact analyses for this CY 2013 OPPS/ASC 
final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
nonimplantable biologicals included in Addenda A and B to this final 
rule with comment period are based on ASP data from the second quarter 
of CY 2012. These data are the basis for calculating payment rates for 
drugs and biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2012. These physician's office 
payment rates will then be updated in the January 2013 OPPS update, 
based on the most recent ASP data to be used for physician's office and 
OPPS payment as of January 1, 2013. For items that do not currently 
have an ASP-based payment rate, we proposed to recalculate their mean 
unit cost from all of the CY 2011 claims data and updated cost report 
information available for this CY 2013 final rule with comment period 
to determine their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in 
this CY 2013 OPPS/ASC final rule with comment period may be different 
from the same drug HCPCS code's packaging status determined based on 
the data used for the proposed rule. 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 
2013 OPPS drug packaging threshold and the drug's payment status 
(packaged or separately payable) in CY 2012. Specifically, for CY 2013, 
consistent with our historical practice, we proposed to apply the 
following policies to these HCPCS codes for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals whose relationship to 
the proposed $80 drug packaging threshold changes based on the updated 
drug packaging threshold and on the final updated data:
     HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2012 and that were proposed for separate 
payment in CY 2013, and that then have per day costs equal to or less 
than $80, based on the updated ASPs and hospital claims data used for 
this CY 2013 final rule with comment period, would continue to receive 
separate payment in CY 2013.
     HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2012 and that are proposed for separate payment in 
CY 2013, and that then have per day costs equal to or less than $80, 
based on the updated ASPs and hospital claims data used for this CY 
2013 final rule with comment period, would remain packaged in CY 2013.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we proposed packaged payment in CY 2013 but then have per day 
costs greater than $80, based on the updated ASPs and hospital claims 
data used for this CY 2013 final rule with comment period, would 
receive separate payment in CY 2013.
    We did not receive any public comments on our proposal 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 2013 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2012. 
Therefore, we are finalizing our proposal, without modification, for CY 
2013.
    We note that HCPCS codes J2700 (Injection, oxacillin sodium, up to 
250 mg) and J9218 (Leuprolide acetate, per 1 mg) were paid separately 
for CY 2012 and were proposed for separate payment in the CY 2013 OPPS/
ASC proposed rule and had final per day costs of less than the $80 drug 
packaging threshold, based on updated ASPs and the CY 2011 hospital 
claims data available for this CY 2013 final rule with comment period. 
Therefore, HCPCS codes J2700 and J9218 will continue to be paid 
separately in CY 2013 according to the established methodology set 
forth above.
    In addition, we proposed to package HCPCS codes J0365 (Injection, 
aprotonin, 10,000 kiu), J1460 (Injection, gamma globulin, 
intramuscular, 1 cc), J1560 (Injection, gamma globulin, intramuscular, 
over 10 cc), J7183 (Injection, von willebrand factor complex (human), 
wilate, 1 i.u. vwf:rco), and Q4105 (Integra dermal regeneration 
template (drt), per square centimeter) for CY 2013. Using updated ASPs 
and the CY 2011 hospital claims data available for this final rule with 
comment period, HCPCS codes J0365, J1460, J1560, J7183, and Q4105 now 
have per day costs greater than $80. In accordance with our established 
policy for such cases, for CY 2013 we will pay for HCPCS codes J0365, 
J1460, J1560, J7183, and Q4105 separately.
    Finally, because we did not have claims data for HCPCS codes J1452 
(Injection, fomivirsen sodium, intraocular, 1.65 mg) and J1835 
(Injection, itraconazole, 50 mg) in the CY 2013 OPPS/ASC proposed rule, 
we had proposed a status indicator of ``E'' for these products in CY 
2013. However, since publication of the proposed rule, we have received 
claims data and the per day cost for these products are more than the 
$80 CY 2013 packaged threshold. These products will be paid separately 
and will be assigned a status indicator of ``K'' for CY 2013.
c. Packaging Determination for HCPCS Codes That Describe the Same Drug 
or Biological but Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HCPCS code to the associated newly recognized 
code(s), reflecting the packaged or separately payable status of the 
new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66775), we explained that once claims data were available for these 
previously unrecognized HCPCS codes, we would determine the packaging 
status and resulting status indicator for each HCPCS code according to 
the general, established HCPCS code-specific methodology for 
determining a code's packaging status for a given update year. However, 
we also stated that we planned to closely follow our claims data to 
ensure that our annual packaging determinations for the different HCPCS 
codes describing the same drug or biological did not create 
inappropriate payment incentives for hospitals to report certain HCPCS 
codes instead of others.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 
through 60491), we finalized a policy to make a single packaging 
determination for a drug, rather than an individual HCPCS code, when a 
drug has multiple HCPCS codes describing different dosages. We analyzed 
CY 2008 claims data for the HCPCS codes describing different dosages of 
the same drug or biological that were newly recognized in CY 2008 and 
found that our claims data would result in several different

[[Page 68379]]

packaging determinations for different codes describing the same drug 
or biological. Furthermore, we found that our claims data included few 
units and days for a number of newly recognized HCPCS codes, resulting 
in our concern that these data reflected claims from only a small 
number of hospitals, even though the drug or biological itself may be 
reported by many other hospitals under the most common HCPCS code. 
Based on these findings from our first available claims data for the 
newly recognized HCPCS codes, we believed that adopting our standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes 
instead of others, particularly because we do not currently require 
hospitals to report all drug and biological HCPCS codes under the OPPS 
in consideration of our previous policy that generally recognized only 
the lowest dosage HCPCS code for a drug or biological for OPPS payment.
    For CY 2013, we continue to believe that adopting the standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes for 
drugs instead of others. Making packaging determinations on a drug-
specific basis eliminates these incentives 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 2013 OPPS/ASC proposed rule (77 FR 45135), 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 
2013.
    For CY 2013, 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 2011 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 
this CY 2013 OPPS/ASC final rule and, as is our current policy for 
determining the packaging status of other drugs, we used the mean unit 
cost available from the fourth quarter CY 2011 claims data to make the 
packaging determinations for these drugs: HCPCS codes J3472 (Injection, 
hyaluronidase, ovine, preservative free, per 1000 usp units), Q0171 
(Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription 
antiemetic, for use as a complete therapeutic substitute for an IV 
antiemetic at the time of chemotherapy treatment, not to exceed a 48-
hour dosage regimen), Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, 
FDA approved prescription anti-emetic, for use as a complete 
therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen), Q0175 
(Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for 
use as a complete therapeutic substitute for an IV anti-emetic at the 
time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen), Q0176 (Perphenazine, 8 mg, oral, FDA approved prescription 
anti-emetic, for use as a complete therapeutic substitute for an IV 
anti-emetic at the time of chemotherapy treatment, not to exceed a 48-
hour dosage regimen), Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA 
approved prescription anti-emetic, for use as a complete therapeutic 
substitute for an IV anti-emetic at the time of chemotherapy treatment, 
not to exceed a 48-hour dosage regimen), and Q0178 (Hydroxyzine 
pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as 
a complete therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen).
    For all other drugs and biologicals that have HCPCS codes 
describing different dosages, we then multiplied the weighted average 
ASP+6 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 $80 (whereupon all HCPCS codes for the same drug 
or biological would be packaged) or greater than $80 (whereupon all 
HCPCS codes for the same drug or biological would be separately 
payable).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2013 proposal, without modification. The 
packaging status of each drug and biological HCPCS code to which this 
methodology would apply is displayed in Table 35 below.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
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'' is a covered outpatient drug, as 
defined in section 1927(k)(2) of the Act, for which a separate APC has 
been established and that either is a radiopharmaceutical agent or is a 
drug or biological for which payment was made on a pass-through basis 
on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs,'' known as SCODs. 
These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, 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.

[[Page 68383]]

    Section 1833(t)(14)(E) of the Act provides for an adjustment in 
OPPS payment rates for overhead and related expenses, such as pharmacy 
services and handling costs. Section 1833(t)(14)(E)(i) of the Act 
required MedPAC to study pharmacy overhead and 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)(I) 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 
choice rather than a statutory requirement. In the CY 2013 OPPS/ASC 
proposed rule, we proposed to apply section 1833(t)(14)(A)(iii)(II) of 
the Act to all separately payable drugs and biologicals. Although we 
did not distinguish SCODs in that discussion, we note that we are 
required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, 
but we are choosing to apply it to other separately payable drugs and 
biologicals, consistent with our history of using the same payment 
methodology for all separately payable drugs and biologicals.
    In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we 
discussed the June 2005 report by MedPAC regarding pharmacy overhead 
costs in HOPDs and summarized the findings of that study. In response 
to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 
42729), we discussed our belief that, because of the varied handling 
resources required to prepare different forms of drugs, it would be 
impossible to exclusively and appropriately assign a drug to a certain 
overhead category that would apply to all hospital outpatient uses of 
the drug. Therefore, our CY 2006 OPPS proposal included a proposal to 
establish three distinct Level II HCPCS C-codes and three corresponding 
APCs for drug handling categories to differentiate overhead costs for 
drugs and biologicals (70 FR 42730). We also proposed: (1) To combine 
several overhead categories recommended by MedPAC; (2) to establish 
three drug handling categories, as we believed that larger groups would 
minimize the number of drugs that may fit into more than one category 
and would lessen any undesirable payment policy incentives to utilize 
particular forms of drugs or specific preparation methods; (3) to 
collect hospital charges for these HCPCS C-codes for 2 years; and (4) 
to ultimately base payment for the corresponding drug handling APCs on 
CY 2006 claims data available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal regarding pharmacy overhead and 
urged us not to finalize this policy, as it would be administratively 
burdensome for hospitals to establish charges for HCPCS codes for 
pharmacy overhead and to report them. Therefore, we did not finalize 
this proposal for CY 2006. Instead, we established payment for 
separately payable drugs and biologicals at ASP+6 percent, which we 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). 
Hereinafter, we refer to this methodology as our standard drug payment 
methodology. We concluded that payment for drugs and biologicals and 
pharmacy overhead at a combined ASP+6 percent rate would serve as an 
acceptable proxy for the combined acquisition and overhead costs of 
each of these products.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we finalized our proposed policy to provide a single payment of 
ASP+6 percent for the hospital's acquisition cost for the drug or 
biological and all associated pharmacy overhead and handling costs. The 
ASP+6 percent rate that we finalized was higher than the equivalent 
average ASP-based amount calculated from claims of ASP+4 percent 
according to our standard drug payment methodology, but we adopted 
payment at ASP+6 percent for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD and awaited the 
accumulation of CY 2006 data as discussed in the prior year's rule.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead costs while continuing our 
efforts to improve the available data. We also proposed to instruct 
hospitals to remove the pharmacy overhead charge for both packaged and 
separately payable drugs and biologicals from the charge for the drug 
or biological and report the pharmacy overhead charge on an uncoded 
revenue code line on the claim. We believed that this would provide us 
with an avenue for collecting pharmacy handling cost data specific to 
drugs in order to package the overhead costs of these items into the 
associated procedures, most likely drug administration services. 
Similar to the public response to our CY 2006 pharmacy overhead 
proposal, the overwhelming majority of commenters did not support our 
CY 2008 proposal and urged us to not finalize this policy (72 FR 
66761). At its September 2007 meeting, the APC Panel recommended that 
hospitals not be required to separately report charges for pharmacy 
overhead and handling and that payment for overhead be included as part 
of drug payment. The APC Panel also recommended that CMS continue to 
evaluate alternative methods to standardize the capture of pharmacy 
overhead costs in a manner that is simple to implement at the 
organizational level (72 FR 66761). Because of concerns expressed by 
the APC Panel and public commenters, we did not finalize the proposal 
to instruct hospitals to separately report pharmacy overhead charges 
for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66763), we finalized a policy of providing payment for 
separately payable drugs and biologicals and their pharmacy overhead at 
ASP+5 percent as a transition from their CY 2007 payment of ASP+6 
percent to payment based on the equivalent average ASP-based payment 
rate calculated from hospital claims according to our standard drug 
payment methodology, which was ASP+3 percent for the CY 2008 OPPS/ASC 
final rule with comment period. Hospitals continued to include charges 
for pharmacy overhead costs in the line-item charges for the associated 
drugs reported on claims.
    For CY 2009, we proposed to pay separately payable drugs and 
biologicals at ASP+4 percent, including both SCODs and other drugs 
without CY 2009 OPPS pass-through status, based on our standard drug 
payment methodology. We also continued to explore mechanisms to improve 
the available data. We proposed to split the

[[Page 68384]]

``Drugs Charged to Patients'' cost center into two cost centers: One 
for drugs with high pharmacy overhead costs and one for drugs with low 
pharmacy overhead costs (73 FR 41492). We noted that we expected that 
CCRs from the proposed new cost centers would be available in 2 to 3 
years to refine OPPS drug cost estimates by accounting for differential 
hospital markup practices for drugs with high and low overhead costs. 
After consideration of the public comments received and the APC Panel 
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide 
payment for separately payable nonpass-through drugs and biologicals 
based on costs calculated from hospital claims at a 1-year transitional 
rate of ASP+4 percent, in the context of an equivalent average ASP-
based payment rate of ASP+2 percent calculated according to our 
standard drug payment methodology from the final rule claims data and 
cost report data. We did not finalize our proposal to split the single 
standard ``Drugs Charged to Patients'' cost center into two cost 
centers largely due to concerns raised by hospitals about the 
associated administrative burden. Instead, we indicated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68659) that we would 
continue to explore other potential approaches to improve our drug cost 
estimation methodology, thereby increasing payment accuracy for 
separately payable drugs and biologicals.
    In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, 
a group of pharmacy stakeholders (hereinafter referred to as the 
pharmacy stakeholders), including some cancer hospitals, some 
pharmaceutical manufacturers, and some hospital and professional 
associations, commented that CMS should pay an acquisition cost of 
ASP+6 percent for separately payable drugs, should substitute ASP+6 
percent for the packaged cost of all packaged drugs and biologicals on 
procedure claims, and should redistribute the difference between the 
aggregate estimated packaged drug cost in claims and payment for all 
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They indicated that 
this approach would preserve the aggregate drug cost observed in the 
claims data, while significantly increasing payment accuracy for 
individual drugs and procedures by redistributing drug cost from 
packaged drugs. Their suggested approach would provide a separate 
overhead payment for each separately payable drug or biological at one 
of three different levels, depending on the pharmacy stakeholders' 
assessment of the complexity of pharmacy handling associated with each 
specific drug or biological (73 FR 68651 through 68652). Each 
separately payable drug or biological HCPCS code would be assigned to 
one of the three overhead categories, and the separate pharmacy 
overhead payment applicable to the category would be made when each of 
the separately payable drugs or biologicals was paid.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we 
acknowledged the limitations of our data and our availability to find a 
method to improve that data in a way that did not impose unacceptable 
administrative burdens on providers. Accepting that charge compression 
was a reasonable but unverifiable supposition, we proposed to 
redistribute between one-third and one-half of the estimated overhead 
cost associated with coded packaged drugs and biologicals with an ASP, 
which resulted in our proposal to pay for the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals that did not 
have pass-through payment status at ASP+4 percent. We calculated 
estimated overhead cost for coded packaged drugs and biologicals by 
determining the difference between the aggregate claims cost for coded 
packaged drugs and biologicals with an ASP and the ASP dollars (ASP 
multiplied by the drug's or biological's units in the claims data) for 
those same coded drugs and biologicals; this difference was our 
estimated overhead cost for coded packaged drugs and biologicals. In 
our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR 
35326 through 35333), we stated that we believed that approximately 
$150 million of the estimated $395 million total in pharmacy overhead 
cost, specifically between one-third and one-half of that cost, 
included in our claims data for coded packaged drugs and biologicals 
with reported ASP data should be attributed to separately payable drugs 
and biologicals and that the $150 million serves as the adjustment for 
the pharmacy overhead costs of separately payable drugs and 
biologicals. As a result, we also proposed to reduce the costs of coded 
drugs and biologicals that are packaged into payment for procedural 
APCs to offset the $150 million adjustment to payment for separately 
payable drugs and biologicals. In addition, we proposed that any 
redistribution of pharmacy overhead cost that may arise from the CY 
2010 final rule data would occur only from some drugs and biologicals 
to other drugs and biologicals, thereby maintaining the estimated total 
cost of drugs and biologicals that we calculate based on the charges 
and costs reported by hospitals on claims and cost reports. As a result 
of this approach, no redistribution of cost would occur from other 
services to drugs and biologicals or vice versa.
    While we had no way of assessing whether this current distribution 
of overhead cost to coded packaged drugs and biologicals with an ASP 
was appropriate, we acknowledged that the established method of 
converting billed charges to costs had the potential to ``compress'' 
the calculated costs to some degree. Further, we recognized that the 
attribution of pharmacy overhead costs to packaged or separately 
payable drugs and biologicals through our standard drug payment 
methodology of a combined payment for acquisition and pharmacy overhead 
costs depends, in part, on the treatment of all drugs and biologicals 
each year under our annual drug packaging threshold. Changes to the 
packaging threshold may result in changes to payment for the overhead 
cost of drugs and biologicals that do not reflect actual changes in 
hospital pharmacy overhead cost for those products. For these reasons, 
we stated that we believed some portion, but not all, of the total 
overhead cost that is associated with coded packaged drugs and 
biologicals (the difference between aggregate cost for those drugs and 
biologicals on the claims and ASP dollars for the same drugs and 
biologicals), based on our standard drug payment methodology, should, 
at least for CY 2010, be attributed to separately payable drugs and 
biologicals.
    We acknowledged that the observed combined payment for acquisition 
and pharmacy overhead costs of ASP-2 percent for separately payable 
drugs and biologicals may be too low and ASP+247 percent for coded 
packaged drugs and biologicals with reported ASP data in the CY 2010 
claims data may be too high (74 FR 35327 and 35328). Therefore, we 
stated that a middle ground would represent the most accurate 
redistribution of pharmacy overhead cost. Our assumption was that 
approximately one-third to one-half of the total pharmacy overhead cost 
currently associated with coded packaged drugs and biologicals in the 
CY 2008 claims data offered a more appropriate allocation of drug and 
biological cost to separately payable drugs and biologicals (74 FR 
35328). One-third of the $395 million of pharmacy overhead cost 
associated with

[[Page 68385]]

packaged drugs and biologicals was $132 million, whereas one-half was 
$198 million.
    Within the one-third to one-half parameters, we proposed 
reallocating $150 million in drug and biological cost observed in the 
claims data from coded packaged drugs and biologicals with an ASP to 
separately payable drugs and biologicals for CY 2010 for their pharmacy 
overhead costs. Based on this redistribution, we proposed a CY 2010 
payment rate for separately payable drugs and biologicals of ASP+4 
percent.
    In the CY 2010 OPPS final rule with comment period, we adopted a 
transitional payment rate of ASP+4 percent based on a pharmacy overhead 
adjustment methodology for CY 2010 that redistributed $200 million from 
packaged drug and biological cost to separately payable drug cost (74 
FR 60499 through 60518). This $200 million included the proposed $150 
million redistribution from the pharmacy overhead cost of coded 
packaged drugs and biologicals for which an ASP is reported and an 
additional $50 million dollars from the total uncoded drug and 
biological cost to separately payable drugs and biologicals as a 
conservative estimate of the pharmacy overhead cost of uncoded packaged 
drugs and biologicals that should be appropriately associated with the 
cost of separately payable drugs and biologicals (74 FR 60517). We 
stated that this was an intentionally conservative estimate as we could 
not identify definitive evidence that uncoded packaged drug and 
biological cost included a pharmacy overhead amount comparable to that 
of coded packaged drugs and biologicals with an ASP. We stated that we 
could not know the amount of overhead associated with these drugs 
without making significant assumptions about the amount of pharmacy 
overhead cost associated with the drugs and biologicals captured by 
these uncoded packaged drug costs (74 FR 60511 through 60513). In 
addition, as in prior years, we reiterated our commitment to continue 
in our efforts to refine our analyses.
    For CY 2011, we continued the CY 2010 pharmacy overhead adjustment 
methodology (74 FR 60500 through 60512). Consistent with our 
supposition that the combined payment for average acquisition and 
pharmacy overhead costs under our standard methodology may understate 
the cost of separately payable drugs and biologicals and related 
pharmacy overhead for those drugs and biologicals, we redistributed 
$150 million from the pharmacy overhead cost of coded packaged drugs 
and biologicals with an ASP and redistributed $50 million from the cost 
of uncoded packaged drugs and biologicals, for a total redistribution 
of $200 million from costs for coded and uncoded packaged drugs to 
separately payable drugs and biologicals, with the result that we pay 
separately paid drugs and biologicals at ASP+5 percent for CY 2011. The 
redistribution amount of $150 million in overhead cost from coded 
packaged drugs and biologicals with an ASP and $50 million in costs 
from uncoded packaged drugs and biologicals without an ASP were within 
the parameters established in the CY 2010 OPPS/ASC final rule. In 
addition, as in prior years, we described some of our work to improve 
our analyses during the preceding year, including an analysis of 
uncoded packaged drug and biological cost and our evaluation of the 
services with which uncoded packaged drug cost appears in the claims 
data. We conducted this analysis in an effort to assess how much 
uncoded drugs resemble coded packaged drugs (75 FR 71966). We stated 
that, in light of this information, we were not confident that the 
drugs captured by uncoded drug cost are the same drugs captured by 
coded packaged drug cost, and therefore, we did not believe we could 
assume that they are the same drugs, with comparable overhead and 
handling costs. Without being able to calculate the ASP for these 
uncoded packaged drugs and biologicals and without being able to gauge 
the magnitude of overhead complexity associated with these drugs and 
biologicals, we did not believe that we should have assumed that the 
same amount of proportional overhead should be redistributed between 
coded and uncoded packaged drugs, and therefore, we redistributed $50 
million from uncoded packaged drugs and $150 million from coded 
packaged drugs (75 FR 71966). We reiterated our commitment to continue 
to refine our drug pricing methodology and noted that we would continue 
to pursue the most appropriate methodology for establishing payment for 
drugs and biologicals under the OPPS and continue to evaluate the 
appropriateness of this methodology when we establish each year's 
payment for drugs and biologicals under the OPPS (75 FR 71967).
    For CY 2012, we continued our overhead adjustment methodology of 
redistributing \1/3\ to \1/2\ of allocated overhead for coded packaged 
drugs or $150 million plus an additional $50 million in allocated 
overhead for uncoded packaged drugs. Additionally, we finalized a 
policy to update these amounts by the PPI for pharmaceuticals and 
redistributed $161 million in allocated overhead from coded packaged 
drugs and $54 million from uncoded packaged drugs. We further finalized 
a policy to hold the redistributed proportion of packaged drugs 
constant between the proposed and the final rule, which increased the 
final redistribution amount in the CY 2012 final rule to $240.3 million 
($169 million from coded packaged drugs and $71.3 million from uncoded 
packaged drugs). This approach resulted in a final payment rate of 
ASP+4 percent for separately payable drugs.
b. CY 2013 Payment Policy
    In reexamining our current drug payment methodology for the CY 2013 
OPPS/ASC proposed rule, we reviewed our past efforts to determine an 
appropriate payment methodology for drugs and biologicals, as described 
above. Since the inception of the OPPS, we have remained committed to 
establishing a drug payment methodology that is predictable, accurate, 
and appropriate. Pharmacy stakeholders and the hospital community have 
also, throughout the years, continually emphasized the importance of 
both predictable and accurate payment rates for drugs, noting that a 
payment methodology that emphasizes predictability and accuracy leads 
to appropriate payment rates that reflect the cost of drugs and 
biologicals (including overhead) in HOPDs. Pertinent stakeholders also 
have noted that predictable and accurate payment rates minimize the 
effect of anomalies in the claims data that may incorrectly influence 
the future payment for services. We understand that, with predictable 
payment rates, hospitals are better able to plan for the future.
    As discussed above, 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

[[Page 68386]]

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). As we previously stated, we refer to this methodology as our 
standard drug payment methodology.
    In CY 2010, 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'' (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 overhead adjustment methodology through CY 2012, and 
further refined our overhead adjustment methodology by finalizing a 
policy to update the redistribution amount for inflation and keep the 
redistribution ratio constant between the proposed rule and the final 
rule.
    Application of the standard drug payment methodology, with the 
overhead adjustment, has always yielded a finalized payment rate in the 
range of ASP+4 percent to ASP+6 percent for nonpass-through separately 
payable drugs. We believe that the historic ASP+4 to ASP+6 percentage 
range is an appropriate payment rate for separately payable drugs and 
biologicals administered within the HOPD, including acquisition and 
pharmacy overhead and related expenses. However, 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, we are concerned that the continued 
use of our current 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), section 
1847A, or section 1847B of the Act, as calculated and adjusted by the 
Secretary as necessary. Considering stakeholder and provider feedback, 
continued limitations of the hospital claims and cost data on drugs and 
biologicals, and Panel recommendations, in the CY 2013 OPPS/ASC 
proposed rule (77 FR 45140), we proposed 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, hereinafter referred to as 
the statutory default.
    As noted above, 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, physician 
Part B drugs are paid at ASP+6 percent. We believe that proposing the 
statutory default of ASP+6 percent is appropriate at this time as it 
yields increased predictability in payment for separately payable drugs 
and biologicals under the OPPS. We believe that ASP+6 percent is an 
appropriate payment amount because it is consistent with payment 
amounts yielded by our drug payment methodologies over the past 7 
years. 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 for CY 2013.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45140), we 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 strongly supported CMS' proposal to pay for 
separately payable drugs and biologicals based on the statutory default 
rate of ASP+6 percent. The commenters stated that ASP+6 percent is 
administratively simple, improves stability of drug and biological 
payments, and better covers the costs of drug acquisition and pharmacy 
overhead than the payment rates CMS has finalized in previous years. 
The commenters noted that, by contrast, the current payment methodology 
involves complex calculations and an annual overhead adjustment in 
which costs are redistributed from packaged drugs to separately payable 
drugs. Another commenter supported CMS' proposal to pay for separately 
payable drugs and biologicals because it believed that this change in 
the payment methodology will prevent the inappropriate shifting of 
overhead costs from contrast agents. One commenter also expressed 
support for the proposal and noted the importance of finalizing the 
proposal, as more hospitals seek to access preferred drug pricing under 
the 340B program.
    One commenter noted that the implementation of the survey of 
hospital drug costs required by section 1833(t)(14)(D)(iii), instead of 
the proposed statutory default rate of ASP+6 percent, would impose a 
costly administrative burden on both hospitals and CMS without 
demonstrating an equivalent benefit compared to the use of the average 
sales price that is based on the certified sales price of the drugs and 
biologicals. Other commenters supported CMS' proposal to pay for drugs 
and biologicals at ASP+6 percent because neither the GAO nor CMS have 
conducted the periodic surveys required by the statute since CY 2005 on 
average acquisition costs. They argued that, in the absence of current 
survey data on average acquisition costs, the statute requires that 
payment be set at the statutory default rate of ASP+6 percent and that 
an additional adjustment for overhead be made.
    Several commenters agreed with CMS and noted that this proposal 
allowed for stable and predictable payment rates for separately paid 
drugs and biologicals while removing the need to address charge 
compression and other issues. One commenter noted, in particular, that 
the proposal eliminates the issues related to the inclusion of 340B 
sales in the rate calculation. The commenter further recommended that 
CMS continue its policy of paying 340B and non-340B hospitals at the 
same rate for separately paid drugs and biologicals. Other commenters 
noted that payment for the acquisition and overhead costs of drugs and 
biologicals at ASP+6 percent will help to protect patients' access to 
care in the most clinically appropriate setting. The commenters also 
argued that this payment rate would create parity with the physician 
office setting.
    Finally, many of the comments supported CMS' goal to establish a 
payment methodology that accurately and predictably estimates 
acquisition and overhead costs for separately paid drugs and 
biologicals.
    Response: We appreciate the commenters' support. For several years, 
we have attempted to identify a methodology for paying for the average 
acquisition cost and pharmacy overhead costs for SCODs in a manner that 
is both appropriate and that is not burdensome

[[Page 68387]]

to hospitals. After several years of refining a payment methodology, 
which has included the standard payment methodology and the overhead 
adjustment methodology, we determined in the CY 2013 OPPS/ASC proposed 
rule (77 FR 45140) that, 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, the continued use of our current 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. Therefore, we 
proposed to pay for separately payable drugs and biologicals at the 
statutory default rate of ASP+6 percent, as is consistent with section 
1833(t)(14)(iii)(II) of the Act which 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 the payment 
rates established under the methodology described in section 1842(o), 
section 1847A, or section 1847B of the Act, as calculated and adjusted 
by the Secretary as necessary.
    In the past, commenters, pertinent stakeholders, and the HOP Panel 
(previously known as the APC Panel) have strongly advocated for the use 
of the statutory default payment rate of ASP+6 percent. As we stated in 
the proposed rule, we believe that our proposal is consistent with 
these previous comments and we agree with the commenters that proposing 
a payment rate of ASP+6 percent based on the statutory default for 
separately payable drugs and biologicals is appropriate at this time. 
We agree with commenters that the statutory default obviates both the 
need to utilize complex calculations for acquisition and overhead costs 
and the requirement to collect data from hospital surveys, which would 
prove to be burdensome to both hospitals and to CMS. Additionally, we 
agree with commenters that the statutory default payment rate of ASP+6 
percent eliminates the 340B program concerns many commenters have 
expressed in the past. Therefore, we believe that the statutory default 
payment rate of ASP+6 percent is appropriate for CY 2013.
    Comment: Several commenters supported CMS' proposal of ASP+6 
percent but stated their concerns that this level of payment is not 
sufficient to cover both drug acquisition and pharmacy overhead cost. 
The commenters stated that they considered this an improvement over the 
rate used in previous years and that this payment rate should be the 
minimum level of payment, or the payment floor, necessary to cover 
acquisition costs alone. Therefore, the commenters recommended that CMS 
finalize ASP+6 percent as the payment rate for acquisition costs alone 
and provide an additional, separate payment for hospital pharmacy 
overhead costs. One commenter also expressed concern whether ASP+6 
percent is sufficient to cover both acquisition and handling. However, 
the commenter stated that the ASP+6 percent proposed payment rate is 
preferable to CMS continuing to attempt to determine what level of 
redistribution from packaged drugs to separately payable drugs should 
occur on an annual basis. One commenter reaffirmed the notion that 
ASP+6 percent should be the minimum level of payment that should be 
provided to cover hospitals' drug acquisition costs but the commenter 
recommended that CMS reconsider ASP+6 percent to be the minimum payment 
level to cover drug acquisition costs in both the physician's office 
and the hospital outpatient setting. The commenter argued that this 
would create payment parity and also enable the creation of a 
supplemental system to make a separate and additional ASP plus 
percentage amount to hospitals to cover their significant overhead 
costs.
    One commenter supported CMS' proposal and stated that if CMS should 
finalize its policy to pay for separately payable drugs and biologicals 
at ASP+6 percent, CMS should not pay for pharmacy overhead, which is 
permitted but not required by section 1833(t)(14)(E)(iii) of the Act, 
in addition to the ASP+6 percent payment because payment at ASP+6 
percent already includes payment for pharmacy overhead equal to 5 
percent of ASP (the difference between ASP+6 percent and the ASP+1 
percent that the OIG found to be the average acquisition cost of 
hospital drugs and biologicals in a study conducted by the OIG in 2010) 
(https://oig.hhs.gov/oei/reports/oei-03-09-00420.pdf). Moreover, the 
commenter further noted that payment for separately payable drugs and 
biologicals under section 1842(o) of the Act at 106 percent of ASP 
includes payment for the services of the pharmacy from which the 
physician purchases the drugs and biologicals. Therefore, the commenter 
further noted, if CMS pays hospitals ASP+6 percent for separately paid 
drugs and biologicals, it is also paying for the associated pharmacy 
overhead and should pay nothing more.
    Response: We disagree with the commenters who stated that ASP+6 
percent should be the payment for the acquisition cost alone and that 
separate payment for overhead should be made. We note that while the 
statute states that payment for SCODs under section 
1833(t)(14)(A)(iii)(II) of the Act equals the payment rates established 
in the physician's office, subject to any adjustment for overhead 
costs, the statute does not mandate that such an adjustment for 
overhead be made. We believe that the payment rate of ASP+6 percent 
includes a sufficient amount for overhead costs for separately payable 
drugs and biologicals and we see no further evidence that any 
additional adjustment for overhead is required. As we stated in the 
proposed rule, we believe that the historic ASP+4 to ASP+6 percentage 
range is an appropriate payment rate for separately payable drugs and 
biologicals administered within the HOPD, including acquisition and 
pharmacy overhead and related expenses, and we have not seen any 
evidence to indicate that these rates have limited beneficiary access 
to drugs, insufficiently paid for acquisition and overhead costs for 
drugs administered in the HOPD, or caused a migration of care from the 
hospital outpatient setting to the physician's office. To the contrary, 
we continue to see increases in the utilization of drugs and 
biologicals administered in the outpatient department in our claims 
data, even at payment rates of ASP+4 or 5 percent. Therefore, we 
believe that ASP+6 percent is an appropriate payment rate for 
separately payable drugs and biologicals.
    Additionally, we agree with the commenter who cited the OIG study 
conducted in 2010, which used first quarter 2009 Medicare payment 
amounts compared to first quarter 2009 hospital acquisition costs for 
33 separately payable drugs. The OIG concluded that, in the aggregate, 
Medicare payments were 1 percent higher than acquisition costs amounts 
for the responding non-340B hospitals for the selected separately 
payable drugs. This study supports our position that the ASP+6 
percentage amount proposed for CY 2013 sufficiently pays for overhead 
and acquisition costs for drugs and requires no further adjustment.
    We continue to believe that ASP+6 percent based on the statutory 
default is appropriate for hospitals for CY 2013 and that this 
percentage amount

[[Page 68388]]

includes payment for acquisition and overhead cost. Furthermore, many 
hospitals and major hospital associations supported our proposed ASP+6 
percent for CY 2013 and made no request for additional payment for 
overhead costs in their comments to the CY 2013 OPPS/ASC proposed rule. 
Therefore, we believe that a payment rate of ASP+6 percent is 
appropriate for CY 2013.
    Comment: 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: As we stated above, we continue to believe that ASP+6 
percent based on the statutory default is appropriate for hospitals for 
CY 2013 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 2013.
    Comment: One commenter remained concerned that the comparison of 
ASP to cost is not an ``apple to apples'' comparison because the cost 
data incorporate data from hospitals that receive 340B program 
discounts from drugs they purchase. The commenter further stated that 
the ASP calculation excludes 340B program sales, which underestimates 
the aggregate costs of drugs for most hospitals and the ASP-based rate 
that CMS produces by comparing aggregate costs to ASP is too low. The 
commenter asked that CMS review its cost calculation to ASP to ensure 
that 340B program drugs are not artificially reducing the CMS 
calculation.
    Response: For CY 2013, we proposed to pay for separately payable 
drugs and biologicals at ASP+6 percent based on the statutory default 
established in section 1833(t)(14)(A)(iii)(II) of the Act. While we 
understand that commenters were previously concerned about the impact 
of 340B hospital data on our previous standard and overhead adjustment 
methodology calculations, we did not in fact propose to continue these 
methodologies for CY 2013.
    Comment: One commenter supported CMS' proposal to increase the 
payment rate for SCODs to ASP+6 percent for CY 2013. However, the 
commenter believed that the law requires that SCOD payment rates, other 
than the ASP+6 percent default rate, must be set on a drug by drug 
basis, as mandated by section 1833(t)(14)(A)(iii)(I) of the Act. 
Therefore, the commenter recommended that CMS perform an 
individualized, drug by drug determination for the payment rate for 
each SCOD.
    Response: Section 1833(t)(14)(A)(iii)(I) 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, subject to any 
adjustment of overhead costs. If hospital acquisition cost data are not 
available, section 1833(t)(14)(A)(iii)(II) of the Act 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. 
Previously under the standard methodology and the overhead adjustment 
methodology, we established ASP as a proxy for the average acquisition 
cost. However, we did not propose to use the authority given under 
section 1833(t)(14)(A)(iii)(I) of the Act to pay for SCODs for CY 2013. 
For CY 2013, we instead proposed to pay for separately payable drugs 
and biologicals based on the statutory authority established in section 
1833(t)(14)(A)(iii)(II) of the Act.
    Comment: One commenter recommended that CMS design a payment 
strategy that would maintain one formula for health care prescribers, 
but develop a multi-tiered reimbursement strategy that would encourage 
the use of generic drugs over their branded counterparts, using ASP+6 
percent as an appropriate base for the most expensive drugs and 
providing additional reimbursement for multi-source generic drugs. 
Another commenter recommended that CMS adopt a new policy of assigning 
each ``branded prescription drug'' a unique HCPCS code, so that Part B 
utilization of these drugs can be accurately determined.
    Response: We made no such proposal to develop a multi-tiered 
payment strategy that would encourage the use of generic drugs over 
their branded counterparts, using ASP+6 percent as an appropriate base 
for the most expensive drugs and providing additional payment for 
multi-source generic drugs. The commenters' recommendation to assign a 
unique HCPCS code for each ``branded prescription drug'' is outside the 
scope of this final rule with comment period.
    Comment: One commenter asked that, for CY 2014, CMS consider paying 
for influenza and PPV vaccines at 106 percent of ASP.
    Response: This comment is outside the scope of the CY 2013 OPPS/ASC 
final rule. However, we plan to address this issue in an upcoming 
rulemaking cycle.
    Comment: One commenter supported CMS' proposal to pay for 
separately payable drugs at ASP+6 percent, but the commenter urged CMS 
to consider the effect of its coding practices on brand manufacturers' 
annual fee payment under section 9008 of the Patient Protection and 
Affordable Care Act (ACA) and asked that CMS support the exclusion of 
wholesaler prompt pay discounts from the ASP calculations of separately 
payable drugs.
    Response: Comments about individual ASP calculations for drugs and 
biologicals, or the inclusion or exclusion of prompt pay discounts in 
these calculations, are outside the scope of this final rule with 
comment period.
    At its February 2012 Panel meeting, the Panel made four 
recommendations on drugs and biologicals paid under the OPPS. First, 
the Panel recommended that CMS require hospitals to bill all drugs that 
are described by Healthcare Common Procedure Coding System (HCPCS) 
codes under revenue code 0636. While we agree that drugs and 
biologicals may be reported under revenue code 0636, we believe that 
drugs and biologicals may also be appropriately reported in revenue 
code categories other than revenue code 0636, including but not limited 
to, revenue codes 025x and 062x. As we stated in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71966), we recognize that 
hospitals may carry the costs of drugs and biologicals in multiple cost 
centers and that it may not be appropriate to report the cost of all 
drugs and biologicals in one specified revenue code. Additionally, we 
generally require hospitals to follow National Uniform Billing 
Committee (NUBC) guidance for the choice of an appropriate revenue code 
that is also appropriate for the hospital's internal accounting 
processes. Therefore, we are not accepting the Panel's recommendation 
to require hospitals to bill all drugs that are described by HCPCS 
codes under revenue code 0636. However, we continue to believe that 
OPPS ratesetting is most accurate when hospitals report charges for all 
items and services that have HCPCS codes using those HCPCS codes, 
regardless of whether payment for the items and services is packaged. 
It is our standard ratesetting methodology to rely on hospital cost 
report and charge information as it is reported to us through the 
claims data. We continue to believe that more complete data from 
hospitals identifying the specific drugs that were provided during an 
episode of care may improve payment accuracy for

[[Page 68389]]

drugs in the future. Therefore, we continue to encourage hospitals to 
change their reporting practices if they are not already reporting 
HCPCS codes for all drugs and biologicals furnished, when specific 
HCPCS codes are available for those drugs and biologicals.
    Comment: Some commenters recommended that CMS require hospitals to 
bill all drugs with HCPCS codes under revenue code 0636 in order to 
improve its data on packaged drugs. One commenter recommended that CMS 
not require hospitals to report the HCPCS code for each drug and 
biological in revenue code 0636 because to do so would impose an 
unreasonable burden on hospitals without a commensurate benefit to the 
accuracy of Medicare payment for drugs and biologicals under the OPPS 
if CMS finalizes its proposal to pay separately paid drugs at ASP+6 
percent. Moreover, the commenter continued, in the case of packaged 
drugs and biologicals, the charges that are reported with revenue codes 
but without HCPCS codes are reduced to costs by application of the CCR 
for the cost center that applies to the revenue code under which the 
charges are reported and are packaged into the cost of the service. The 
commenter further stated that, therefore, to require that all drugs and 
biologicals be reported under any specific revenue code would require 
hospitals to revise their cost accounting systems to accommodate such a 
change because the revenue code in which charges are reported must 
correspond to the cost center in which the costs are reported on the 
cost report for the cost report to be completed correctly and for the 
cost of packaged drugs and biologicals to be calculated correctly.
    Response: We do not accept the commenter's recommendation that CMS 
require drugs and biologicals to be reported under revenue code 0636. 
We do agree with the commenter who recommended that CMS not require 
hospitals to report the HCPCS code for each drug and biological in 
revenue code 0636 because doing so would impose an unreasonable burden 
on hospitals. Further, we agree that charges that are reported with 
revenue codes but without HCPCS codes are reduced to costs by 
application of the CCR for the cost center that applies to the revenue 
code under which the charges are reported and are packaged into the 
cost of the service. As we stated in the CY 2013 OPPS/ASC proposed 
rule, we believe that drugs and biologicals may also be appropriately 
reported in revenue code categories other than revenue code 0636, 
including, but not limited to, revenue codes 025x and 062x. As we 
stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71966), we recognize that hospitals may carry the costs of drugs and 
biologicals in multiple cost centers and that it may not be appropriate 
to report the cost of all drugs and biologicals in one specified 
revenue code. Additionally, we generally require hospitals to follow 
National Uniform Billing Committee (NUBC) guidance for the choice of an 
appropriate revenue code that is also appropriate for the hospital's 
internal accounting processes. Therefore, we are not accepting the 
Panel's recommendation to require hospitals to bill all drugs that are 
described by HCPCS codes under revenue code 0636.
    However, we are reiterating once again in this CY 2013 OPPS/ASC 
final rule with comment period that the OPPS ratesetting as a whole, 
not just for drugs and biologicals, is most accurate when hospitals 
report charges for all items and services that have HCPCS codes using 
those HCPCS codes, regardless of whether payment for the items and 
services is packaged. Therefore, we continue to encourage hospitals to 
report a charge for each service they furnish, either by billing the 
HCPCS code and a charge for that service if separate reporting is 
consistent with CPT and CMS instructions or by reporting the charge for 
the packaged service with an appropriate revenue code but without a 
HCPCS code, when specific HCPCS codes are unavailable.
    Second, the Panel recommended that CMS exclude data from hospitals 
that participate in the 340B program from its ratesetting calculations 
for drugs. Under the proposed statutory default payment rate of ASP+6 
percent, hospitals' 340B status does not affect the drug payment rate.
    Third, the Panel recommended that CMS freeze the packaging 
threshold at $75 until the drug payment issue is more equitably 
addressed. The OPPS is based on the concept of payment for groups of 
services that share clinical and resource characteristics. We believe 
that the packaging threshold is reasonable based on the initial 
establishment in law of a $50 threshold for the CY 2005 OPPS, that 
updating the $50 threshold 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, we are not 
accepting the Panel's recommendation to freeze the packaging threshold 
at $75 until the drug payment issue is more equitably addressed. 
Instead, as discussed in section V.B.2. of the proposed rule and this 
final rule with comment period, we proposed and are finalizing an OPPS 
drug packaging threshold for CY 2013 of $80. However, we do believe 
that we have addressed the drug payment issue by proposing to pay for 
separately paid drugs and biologicals at ASP+6 percent for CY 2013 
based upon the statutory default.
    Finally, the Panel recommended that CMS pay hospitals for 
separately payable drugs at a rate of ASP+6 percent. This Panel 
recommendation is consistent with our CY 2013 proposed payment rate 
based upon the statutory default under section 1833(t)(14)(A)(iii)(II) 
of the Act, which authorizes us to pay for drugs and biologicals under 
the OPPS at ASP+6 percent, when hospital acquisition cost data are not 
available.
    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, hereinafter referred to as 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 2013. As we stated in the proposed rule 
(77 FR 45140), our goals continue to be to develop a methodology that 
accurately and predictably estimates acquisition and overhead costs for 
separately payable drugs and biologicals in order to pay for them 
appropriately. If a better payment methodology is developed in the 
future then the proposed policy to pay ASP+6 percent according to the 
statutory default would be an interim step in the development of this 
payment policy. We recognize the challenges in doing so given the 
current data sources and the object of maintaining the smallest 
administrative burden possible.
    In addition, we are finalizing our proposal which states 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, which 
illustrate the final CY 2013 payment of ASP+6 percent for separately 
payable nonpass-

[[Page 68390]]

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, 2012, or WAC, AWP or mean unit cost 
from 2011 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 2013 payment rates. 
This is because payment rates for drugs and biologicals with ASP 
information for January 2013 will be determined through the standard 
quarterly process where ASP data submitted by manufacturers for the 
third quarter of 2012 (July 1, 2012 through September 30, 2012) are 
used to set the payment rates that are released for the quarter 
beginning in January 2013 near the end of December 2012. 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 2012 are based on mean unit cost in the available 
CY 2011 claims data. If ASP information becomes available for payment 
for the quarter beginning in January 2013, 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 2012 ASP data) that do not have ASP information 
available for the quarter beginning in January 2013. These drugs and 
biologicals will then be paid based on mean unit cost data derived from 
CY 2011 hospital claims. Therefore, the payment rates listed in Addenda 
A and B to this final rule with comment period are not for January 2013 
payment purposes and are only illustrative of the CY 2013 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 2012, we established a 
policy to pay for separately paid therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. We allow manufacturers to submit the ASP data in a 
patient-specific dose or patient-ready form in order to properly 
calculate the ASP amount for a given HCPCS code. If ASP information is 
unavailable for a therapeutic radiopharmaceutical, then 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 2013. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 
45141), we proposed for CY 2013 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. We proposed to continue to set payment rates for therapeutic 
radiopharmaceuticals based on ASP information, if available, for a 
``patient ready'' dose and updated on a quarterly basis for products 
for which manufacturers report ASP data. For a full discussion of how a 
``patient ready'' dose is defined, 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 2011 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).
    Comment: Commenters supported CMS' proposal to pay for separately 
payable therapeutic radiopharmaceuticals under the statutory default 
payment rate of ASP+6 percent, if ASP data is submitted to CMS. The 
commenters also supported CMS' proposal to continue to set payment 
rates for therapeutic radiopharmaceuticals based on ASP information, if 
available, for a ``patient ready'' dose. One commenter recommended that 
CMS use its discretion and continue to pay on the basis of hospital 
specific reasonable cost-finding where ASP information is not 
available.
    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 would 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. In addition, we do not believe that we 
should provide payment at charges reduced to cost or reasonable cost 
when ASP data are not available. We have stated previously, in the CY 
2008 OPPS/ASC final rule with comment period, that we continue to 
believe that payment on a claims-specific basis is not consistent with 
the payment of times and services on a prospective basis under the OPPS 
and may lead to extremely high or low payment to hospitals for 
radiopharmaceuticals, even when those products would be expected to 
have relatively predictable and consistent acquisition and holding 
costs across individual clinical cases and hospitals. For CY 2013, 
Medicare pays for only a few outpatient services at reasonable cost. 
These services include, but are not limited to, corneal tissue 
acquisition and influenza vaccines, and are paid at reasonable cost in 
part because the input costs for future years are highly unpredictable 
and to set a prospective payment rate for them may result in payment 
that is so deficient that hospitals would not be able to provide the 
services and the general public could be denied the benefits. In 
particular, it is not possible to forecast with confidence what the 
cost of

[[Page 68391]]

influenza vaccine would be a year in advance because the composition of 
the vaccine is not constant from year to year. In contrast, however, 
the input costs of therapeutic radiopharmaceuticals are not hugely 
unpredictable. Therefore, we do not believe that therapeutic 
radiopharmaceuticals should be paid in the same manner as the few 
outpatient services paid at reasonable cost. We continue to believe 
that when ASP data are unavailable, therapeutic radiopharmaceutical 
payment based on mean unit cost is an appropriate proxy for hospitals' 
acquisition and handling data.
    Comment: One commenter requested that CMS create a HCPCS J-code for 
tositumomab, currently provided under a radioimmunotherapy regimen and 
billed as part of HCPCS code G3001 (Administration and supply of 
tositumomab, 450 mg). The commenter argued that because tositumomab is 
approved by the FDA as part of the BEXXAR[supreg] regimen and has its 
own National Drug Code (NDC), it should be recognized as a drug and, 
therefore, be paid as other drugs are paid under the OPPS methodology, 
instead of having a payment rate determined by hospital claims data. 
The commenter recommended that payment for all of the BEXXAR[supreg] 
drug components be paid as a SCOD.
    Response: We have consistently noted that unlabeled tositumomab is 
not approved as either a drug or a radiopharmaceutical. It is a supply 
that is required as part of the radioimmunotherapy treatment regimen 
(as noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68658), the CY 2008 OPPS final rule with comment period (72 FR 66765), 
the CY 2006 OPPS final rule with comment period (70 FR 68654), and the 
CY 2004 OPPS final rule with comment period (68 FR 63443)). We do not 
make separate payment for supplies used in services provided under the 
OPPS. Payments for necessary supplies are packaged into payments for 
the separately payable services provided by the hospital. Payment for 
unlabeled tositumomab is included in the payment for the administration 
procedure (described by HCPCS code G3001). Therefore, we do not agree 
with the commenter's recommendation that we should assign a separate 
HCPCS code to unlabeled tositumomab, which is a packaged supply.
    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 
based on ASP information, if available, for a ``patient ready'' dose 
and updated on a quarterly basis for products for which manufacturers 
report ASP data. For CY 2013, therapeutic radiopharmaceuticals will be 
paid based on the statutory default payment rate of ASP+6 percent. The 
final CY 2013 payment rates for nonpass-through separately payable 
therapeutic radiopharmaceuticals are included in Addenda A and B to the 
proposed rule (which is available via the Internet on the CMS Web 
site).
5. Payment for Blood Clotting Factors
    For CY 2012, we provided payment for blood clotting factors under 
the same methodology as other nonpass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee. That is, for CY 2012, we provided payment for blood 
clotting factors under the OPPS at ASP+4 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 2012 updated furnishing fee is $0.181 per unit.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45141), 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, and 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/McrPartBDrugAvgSalesPrice/index.html.
    Comment: Commenters supported CMS' proposal to continue to apply 
the furnishing fee for blood clotting factors provided in the OPD. One 
commenter stated that the furnishing fee helps ensure patient access to 
blood clotting factors by increasing the payment rate for these items. 
These commenters also supported CMS' proposal to pay for separately 
payable drugs at ASP+6 percent based on the statutory default, for CY 
2013.
    Response: We appreciate the commenters' support. We continue to 
believe that applying the furnishing fee for blood clotting factors is 
appropriate for CY 2013. In addition, because we recognize that there 
is additional work involved in acquiring the product that is neither 
acquisition cost nor pharmacy overhead, we believe that it continues to 
be appropriate to pay a furnishing fee for blood clotting factors under 
the OPPS as is done in the physician's office setting and the inpatient 
hospital setting. Additionally, for the reasons discussed in section 
V.B.3. of this final rule with comment period, we agree with the 
commenters that ASP+6 percent based on the statutory default is an 
appropriate payment rate for CY 2013.
    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.
6. Payment for Nonpass-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 after for drugs, biologicals, and radiopharmaceuticals that have 
assigned HCPCS codes, but that do not have a reference AWP or approval 
for payment as pass-through drugs or biologicals. Because there is no 
statutory provision that dictated payment for such drugs,

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biologicals, and radiopharmaceuticals in CY 2005, and because we had no 
hospital claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a 
policy to provide payment for new drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals) and biologicals (excluding implantable 
biologicals for CY 2009) with HCPCS codes, but which did not have pass-
through status and were without OPPS hospital claims data, at ASP+5 
percent and ASP+4 percent, respectively, consistent with the final OPPS 
payment methodology for other separately payable drugs and biologicals. 
New therapeutic radiopharmaceuticals were paid at charges adjusted to 
cost based on the statutory requirement for CY 2008 and CY 2009 and 
payment for new diagnostic radiopharmaceuticals was packaged in both 
years.
    For CY 2010, we continued to provide payment for new drugs 
(excluding contrast agents) and nonimplantable biologicals with HCPCS 
codes that do not have pass-through status and are without OPPS 
hospital claims data at ASP+4 percent, consistent with the CY 2010 
payment methodology for other separately payable nonpass-through drugs 
and nonimplantable biologicals. We also finalized a policy to extend 
the CY 2009 payment methodology to new therapeutic radiopharmaceutical 
HCPCS codes, consistent with our final policy in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60581 through 60526), providing 
separate payment for therapeutic radiopharmaceuticals that do not 
crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and 
are without OPPS hospital claims data at ASP+4 percent. This policy was 
continued in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71970 through 71973), paying for new drugs, nonimplantable biologicals, 
and radiopharmaceuticals that do not crosswalk to CY 2010 HCPCS codes, 
do not have pass-through status, and are without OPPS hospital claims 
data at ASP+5 percent and the CY 2012 OPPS/ASC final rule with comment 
period at ASP+4 percent (76 FR 74330 through 74332).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45142), we proposed to 
provide payment for new CY 2013 drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals), nonimplantable biologicals, and 
therapeutic radiopharmaceuticals, at ASP+6 percent, consistent with the 
proposed CY 2013 payment methodology for other separately payable 
nonpass-through drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals to pay at ASP+6 percent based on the statutory 
default. We believe this proposed policy would ensure that new nonpass-
through drugs, nonimplantable biologicals and therapeutic 
radiopharmaceuticals would be treated like other drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals under the OPPS.
    We also proposed to continue to package payment for all new 
nonpass-through diagnostic radiopharmaceuticals and contrast agents 
with HCPCS codes but without claims data (those new CY 2013 diagnostic 
radiopharmaceuticals, contrast agents, and implantable biological HCPCS 
codes that do not crosswalk to predecessor HCPCS codes). This is 
consistent with the proposed policy packaging all existing nonpass-
through diagnostic radiopharmaceuticals and contrast agents, as 
discussed in more detail in section II.A.3.g. of this final rule with 
comment period.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2013, we proposed to continue the policy we implemented 
beginning in CY 2005 of using the WAC for the product to establish the 
initial payment rate for new nonpass-through drugs and biologicals with 
HCPCS codes, but which are without OPPS claims data and are not 
diagnostic radiopharmaceuticals and contrast agents. 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'' (for separately paid nonpass-through drugs and 
nonimplantable biologicals, including therapeutic radiopharmaceuticals) 
to HCPCS codes for new drugs and nonimplantable biologicals without 
OPPS claims data and for which we have not granted pass-through status. 
With respect to new, nonpass-through drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals 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 finalized ASP-based amount (proposed for CY 2013 at ASP+6 
percent) for items that have not been granted pass-through status. This 
proposed policy, which utilizes the ASP methodology that requires us to 
use WAC data when ASP data are unavailable and 95 percent of AWP when 
WAC and ASP data are unavailable, 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, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals would 
be treated like other drugs, nonimplantable biologicals, and 
therapeutic radiopharmaceuticals under the OPPS, unless they are 
granted pass-through status.
    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 are also 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 2013 we proposed to 
announce any changes to the payment amounts for new drugs and 
biologicals in this CY 2013 OPPS/ASC final rule with comment period and 
also on a quarterly basis on the CMS Web site during CY 2013 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

[[Page 68393]]

rates for new therapeutic radiopharmaceuticals would also be changed 
accordingly based on later quarter ASP submissions. We note that the 
new CY 2013 HCPCS codes for drugs, biologicals and therapeutic 
radiopharmaceuticals were not available at the time of development of 
the proposed rule. However, these agents are included in Addendum B to 
this CY 2013 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 
2013 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2011 and/or CY 2012 for which we did not have CY 2011 
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. We note that there are currently no therapeutic 
radiopharmaceuticals in this category. In order to determine the 
packaging status of these products for CY 2013, we calculated an 
estimate of the per day cost of each of these items by multiplying the 
payment rate of each product based on ASP+6 percent, similar to other 
nonpass-through drugs and biologicals paid separately under the OPPS, 
by an estimated average number of units of each product that would 
typically be furnished to a patient during one day in the hospital 
outpatient setting. This rationale was first adopted in the CY 2006 
OPPS/ASC final rule with comment period (70 FR 68666 and 68667).
    We did not receive any public comments on our proposal to use 
estimated per day costs for these drugs and biologicals or on the 
resulting packaging status of these drugs and biologicals. Therefore, 
for the reasons described in our proposed rule, we are finalizing our 
CY 2013 proposal, with modification, to use the estimated number of 
units per day included in Table 37 below to determine estimated per day 
costs for the corresponding drugs and biologicals for CY 2013. For 
those drugs and biologicals without CY 2011 claims data that we 
determine to be separately payable in CY 2013, payment will be made at 
ASP+6 percent. If ASP information is not available, payment will be 
based on WAC, or 95 percent of the most recently published AWP if WAC 
is not available.
    The proposed estimated units per day and status indicators for 
these items were displayed in Table 27 of the proposed rule (77 FR 
45143).
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45143), we proposed to 
package items for which we estimated the per day administration cost to 
be less than or equal to $80, which is the general packaging threshold 
that we proposed for drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals in CY 2013. We proposed to pay separately for 
items with an estimated per day cost greater than $80 (with the 
exception of diagnostic radiopharmaceuticals and contrast agents, which 
we proposed to continue to package regardless of cost as discussed in 
more detail in section II.A.3.d. of this final rule with comment 
period) in CY 2013. We proposed that the CY 2013 payment for separately 
payable items without CY 2011 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. However, we note that if the WAC is also unavailable, we 
would make payment at 95 percent of the most recent AWP available.
    Although 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. For more information 
regarding payment for separately payable drugs, including general 
public comments and our responses, we refer readers to section V.B.3.b. 
of this final rule with comment period. In addition, commenters 
responding to the CY 2013 OPPS/ASC proposed rule objected to packaging 
payment for diagnostic radiopharmaceuticals and contrast agents in 
general, but these comments were not directed to new diagnostic 
radiopharmaceuticals or contrast agent with HCPCS codes but without 
OPPS claims data. We summarize these comments and provide our response 
in section II.A.3.e. of this final rule with comment period. We are 
finalizing our CY 2013 proposal, without modification, as follows: 
Payment for new drugs (excluding contrast agents and diagnostic 
radiopharmaceuticals), nonimplantable biologicals, and therapeutic 
radiopharmaceuticals with HCPCS codes that do not crosswalk to CY 2012 
HCPCS codes, but which do not have pass-through status and for which we 
do not have OPPS hospital claims data, will be made at ASP+6 percent 
for CY 2013, consistent with the final CY 2013 payment methodology for 
other new separately payable nonpass-through drugs, nonimplantable 
biologicals and therapeutic radiopharmaceuticals, described in section 
V.B.3.b. of this final rule with comment period. In cases where ASP 
information is not available, payment will be made using WAC, and, if 
WAC is also unavailable, payment will be made at 95 percent of the 
product's most recent AWP. Further, payment for all new nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals with HCPCS codes but for which we do not have OPPS claims 
data will be packaged for CY 2013. Finally, we are assigning status 
indicator ``K'' to HCPCS codes for new drugs and nonimplantable 
biologicals for which we do not have OPPS claims data and for which we 
have not granted pass-through status for CY 2012. With respect to new 
items for which we do not have ASP data, once their ASP data become 
available in later quarterly submissions, their payments will be 
adjusted so that the rates will be based on the ASP methodology and set 
to the finalized ASP amount of ASP+4 percent. This policy will ensure 
that payment is made for actual acquisition cost and pharmacy overhead 
for these new products.
    For CY 2013, we also proposed to continue our CY 2012 policy to 
base payment for new therapeutic radiopharmaceuticals with HCPCS codes, 
but which do not have pass-through status and for which we do not have 
claims data, on the WACs for these products if ASP data for these 
therapeutic radiopharmaceuticals are not available. If the WACs are 
also unavailable, we proposed to make payment for a new therapeutic 
radiopharmaceutical at 95 percent of the product's most recent AWP 
because we would not have mean costs from hospital claims data upon 
which to base payment. Analogous to 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.
    We did not receive any public comments specific to our proposal for

[[Page 68394]]

new therapeutic radiopharmaceuticals with HCPCS codes but without pass-
through status. However, commenters responding to the CY 2013 OPPS/ASC 
proposed rule were generally supportive of the ASP methodology for 
payment for therapeutic radiopharmaceuticals in the HOPD, and we are 
finalizing an ASP payment methodology for separately payable 
therapeutic radiopharmaceuticals for CY 2013, as discussed in section 
V.B.3.c. of this final rule with comment period.
    We are finalizing our CY 2013 proposals, without modification, to 
provide payment based on WAC for new therapeutic radiopharmaceuticals 
with HCPCS codes but without pass-through status and for which we do 
not have claims data, if ASP data for the