[Federal Register Volume 78, Number 237 (Tuesday, December 10, 2013)]
[Rules and Regulations]
[Pages 74825-75200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28737]



[[Page 74825]]

Vol. 78

Tuesday,

No. 237

December 10, 2013

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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





Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment 
and Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Hospital Value-Based Purchasing Program; Organ Procurement 
Organizations; Quality Improvement Organizations; Electronic Health 
Records (EHR) Incentive Program; Provider Reimbursement Determinations 
and Appeals; Final Rule

Federal Register / Vol. 78 , No. 237 / Tuesday, December 10, 2013 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 419, 475, 476, 486, and 495

[CMS-1601-FC]
RIN 0938-AR54


Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Hospital Value-Based Purchasing Program; Organ 
Procurement Organizations; Quality Improvement Organizations; 
Electronic Health Records (EHR) Incentive Program; Provider 
Reimbursement Determinations and Appeals

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

ACTION: Final rule with comment period and final rules.

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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 2014 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 Hospital Value-Based 
Purchasing (VBP) Program.
    In the final rules in this document, we are finalizing changes to 
the conditions for coverage (CfCs) for organ procurement organizations 
(OPOs); revisions to the Quality Improvement Organization (QIO) 
regulations; changes to the Medicare fee-for-service Electronic Health 
Record (EHR) Incentive Program; and changes relating to provider 
reimbursement determinations and appeals.

DATES: Effective Dates: The final rule with comment period and final 
rules in this document are effective on January 1, 2014, with the 
exception of 42 CFR 412.167; 42 CFR 486.316 and 486.318; 42 CFR 475.1 
and 475.100 through 475.107; and 42 CFR 495.4 and 495.104, which are 
effective on January 27, 2014.
    Implementation Date: The implementation date for the policies 
specified under section II.A.2.e. of the final rule with comment period 
relating to comprehensive Ambulatory Payment Classification (APC) 
groups is January 1, 2015.
    Comment Period: We will consider comments on the payment 
classification 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 rule, received 
at one of the addresses provided in the ADDRESSES section no later than 
5 p.m. EST on January 27, 2014.
    Application Deadline--New Class of New Technology Intraocular 
Lenses: Request for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
3, 2014.

ADDRESSES: In commenting, please refer to file code CMS-1601-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-1601-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-1601-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.
    Applications for a new class of new technology intraocular lenses: 
Requests for review of applications for a new class of new technology 
intraocular lenses must be sent by regular mail to: ASC/NTIOL, Division 
of Outpatient Care, Mailstop C4-05-17, Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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, platelet rich plasma, and stereotactic radiosurgery 
services.
    Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory 
Surgical Center Quality Reporting (ASCQR) Program--Program 
Administration and Reconsideration Issues.
    Chuck Braver, (410) 786-9379, for issues related to the Advisory 
Panel on Hospital Outpatient Payment (HOP Panel).
    Erick Chuang, (410) 786-1816, for issues related to OPPS APC 
weights, mean calculation, copayments, wage index, outlier payments, 
cost-to-charge ratios (CCRs), and rural hospital payments.
    Diane Corning, (410) 786-8486, for issues related to the Conditions 
for Coverage for Organ Procurement Organizations (OPOs).
    Dexter Dickey, (410) 786-6856, or Dorothy Myrick, (410) 786-9671, 
for issues related to partial hospitalization and community mental 
health center (CMHC) issues.

[[Page 74827]]

    Roxanne Dupert-Frank, (410) 786-4827, for issues related to the 
Hospital Value-Based Purchasing (VBP) Program.
    Dan Duvall, (410) 786-4592, for issues related to comprehensive 
APCs.
    Shaheen Halim, (410) 786-0641, for issues related to the 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.
    James Hart, (410) 786-9520, for issues related to the Medicare fee-
for-service Electronic Health Record (EHR) Incentive Program.
    Jeneen Iwugo, (410) 786-1028, for issues related to the revisions 
of the Quality Improvement Organization (QIO) Regulations.
    Twi Jackson, (410) 786-1159, for issues related to blood products, 
device-dependent APCs, extended assessment and management composite 
APCs, hospital outpatient visits, inpatient-only procedures, and no 
cost/full credit and partial credit devices.
    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, 
and cardiac electrophysiologic evaluation and ablation composite APC.
    Ann Marshall, (410) 786-3059, for issues related to packaged items/
services, hospital outpatient supervision, proton beam therapy, therapy 
caps in CAHs, incident to physician or nonphysician practitioner 
services, and provider-based issues.
    Danielle Moskos, (410) 786-8866, or Michael Zleit, (410) 786-2050, 
for issues related to Provider Reimbursement Determination Appeals.
    James Poyer, (410) 786-2261, for issues related to the 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, new 
technology intraocular lenses (NTIOLs), 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 are published and 
available only on the CMS Web site. The Addenda relating to the OPPS 
are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the 
ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html.

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

AHA American Hospital Association
AMA American Medical Association
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, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 
106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
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
CfC [Medicare] Condition for coverage
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, Pub. L. 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, Pub. L. 92-463
FDA ood and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
FFY Federal fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education Reconciliation Act of 2010, Pub. L. 
111-152
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HEU Highly enriched uranium

[[Page 74828]]

HIPAA Health Insurance Portability and Accountability Act of 1996, 
Pub. L. 104-191
HITECH Health Information Technology for Economic and Clinical 
Health [Act] (found in the American Recovery and Reinvestment Act of 
2009, Pub. L. 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
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
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, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 
110-173
MPFS Medicare Physician Fee Schedule
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, Pub. L. 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPO Organ Procurement Organization
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PBD Provider-Based Department
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], Pub. L. 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
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 Document
    1. Purpose
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Legislative and Regulatory Authority for the Hospital OPPS
    C. Excluded OPPS Services and Hospitals
    D. Prior Rulemaking
    E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel 
or the Panel), 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 2014 OPPS/ASC 
Proposed Rule
    G. Public Comments Received on the CY 2013 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 Panel Regarding Data Development
    d. Calculation of Single Procedure APC Criteria-Based Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Brachytherapy Source Payment
    e. Establishment of Comprehensive APCs
    (1) Definitions and General Principles
    (2) Comprehensive APCs for Device-Dependent Services
    f. 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)
    3. Changes to Packaged Items and Services
    a. Summary of CY 2014 Final Packaging Policies
    b. Background
    c. Basis for New Packaging Policies for CY 2014
    d. New Packaging Policies for CY 2014
    (1) Drugs, Biologicals, and Radiopharmaceuticals That Function 
as Supplies When Used in a Diagnostic Test or Procedure
    (2) Drugs and Biologicals That Function as Supplies When Used in 
a Surgical Procedure
    (3) Clinical Diagnostic Laboratory Tests
    (4) Procedures Described by Add-On Codes
    (5) Ancillary Services (Status Indicator ``X'')
    (6) Diagnostic Tests on the Bypass List
    (7) Device Removal Procedures
    e. Clarification Regarding Supplies That Are Packaged in the 
OPPS
    f. Revision and Clarification of the Regulations at 42 CFR 
419.2(b) and 42 CFR 419.22
    g. Comment Solicitation on Increased Packaging for Imaging 
Services
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. Adjustment for Rural SCHs and EACHs under Section 
1833(t)(13)(B) of the Act
    F. OPPS Payment to Certain Cancer Hospitals Described by Section 
1886(d)(1)(B)(v) of the Act
    1. Background
    2. Payment Adjustment for Certain Cancer Hospitals for CY 2014
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Final Outlier Calculation
    H. Calculation of an Adjusted Medicare Payment from the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
    1. Background
    2. OPPS Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group

[[Page 74829]]

III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New CY 2013 Level II HCPCS and CPT Codes 
Effective April 1, 2013 and July 1, 2013 for Which We Solicited 
Public Comments in the CY 2014 OPPS/ASC Proposed Rule
    2. Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be 
Effective January 1, 2014 for Which We Are Soliciting Public 
Comments in this CY 2014 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. OPPS APC-Specific Policies
    1. Cardiovascular and Vascular Services
    a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)
    b. Subcutaneous Defibrillator (APC 0107)
    c. Thrombolytic Therapy (APC 0621)
    d. Vascular Ligation (APCs 0091 and 0092)
    2. Gastrointestinal Services
    a. Fecal Microbiota Transplantation (APC 0340)
    b. Transoral Incisionless Fundoplication (APC 0422)
    3. Genitourinary Services
    a. Percutaneous Renal Cryoablation (APC 0423)
    b. Anoscopy with Directed Submucosal Injection (APC 0150)
    4. Musculoskeletal Services
    a. Arthroplasty (APC 0425)
    b. Joint Stabilization (APC 0052)
    5. Nervous System Services
    a. Chemodenervation (APCs 0161 and 0204)
    b. Nerve Conduction Studies (APCs 0216 and 0218)
    c. Parasympathetic Function and Sympathetic Function (APC 0215)
    d. Epidural Lysis (APCs 0203 and 0207)
    e. Cerebrospinal Shunt Reprogramming (APC 0692)
    6. Ocular Services
    a. Retinal Prosthesis (APC 0672)
    b. Tear Film (APC 0230)
    7. Imaging
    a. Myocardial Sympathetic Innervation Imaging (APC 0398)
    b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)
    8. Radiology Oncology
    a. Intraoperative Radiation Therapy (IORT) Related Services 
(APCs 0028 and 0065)
    b. Proton Beam Therapy (APCs 0664 and 0667)
    c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)
    9. Respiratory Services
    a. Bronchial Thermoplasty (APC 0415)
    b. Direct Laryngoscopy (APC 0074)
    c. Pulmonary Rehabilitation Services (APC 0077)
    10. Other Services
    a. Balloon Sinus Dilation (APCs 0074 and 0075)
    b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)
    c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)
    d. Flow Cytometry (APC 0443)
    e. Hormone Pellet Implant (APC 0420)
    f. Peyronie Disease Injection Procedure (APC 0164)
    g. Negative Pressure Wound Therapy (NPWT) (APC 0016)
    h. Platelet Rich Plasma (PRP) (APC 0186)
    i. Payment for Radioisotopes Derived From Non-Highly Enriched 
Uranium (HEU) Sources (APC 1442)
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 2014 Policy
    2. Provisions for Reducing Transitional Pass-Through Payments to 
Offset Costs Packaged into APC Groups
    a. Background
    b. CY 2014 Policy
    3. Changes to Device Pass-Through Criteria: Integral and 
Subordinate Criterion
    B. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. Policy for CY 2014
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 
2013
    3. Drugs, Biologicals, and Radiopharmaceuticals with New or 
Continuing Pass-Through Status in CY 2014
    4. Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals; Contrast Agents; Drugs, 
Biologicals, and Radiopharmaceuticals That Function as Supplies When 
Used in a Diagnostic Test or Procedure; and Drugs and Biologicals 
That Function as Supplies When Used in a Surgical Procedure to 
Offset Costs Packaged into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    d. Payment Offset Policy for Products Packaged According to the 
Policy to Package Drugs, Biologicals, and Radiopharmaceuticals That 
Function as Supplies When Used in a Diagnostic Test or Procedure and 
Drugs and Biologicals That Function as Supplies When Used in a 
Surgical Procedure
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
without Pass-Through Status
    1. Background
    2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. 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 2014 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
    C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits
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. Payment for Hospital Outpatient Clinic and Emergency 
Department Visits
    C. Payment for Critical Care Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2014
    C. Discussion of Possible Future Initiatives, Request for Public 
Comments, and Summary of Public Comments Received
    D. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
X. Nonrecurring Policy Changes
    A. Supervision of Hospital Outpatient Therapeutic Services
    1. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
    2. Supervision Requirements for Observation Services
    B. Application of Therapy Caps in CAHs
    C. Requirements for Payment of Outpatient Therapeutic 
(``Incident to'') Hospital or CAH Services
    1. Overview
    2. Background
    3. Proposed and Final Policy
    4. Technical Correction
    D. Collecting Data on Services Furnished in Off-Campus Provider-
Based Departments
XI. CY 2014 OPPS Payment Status and Comment Indicators
    A. CY 2014 OPPS Payment Status Indicator Definitions
    B. CY 2014 Comment Indicator Definitions
XII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative History, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC

[[Page 74830]]

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 2013 and July 2013 for Which We Solicited 
Public Comments in the CY 2014 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 2014 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 2014 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 ASC Surgical Procedures 
Designated as Device-Intensive for CY 2014
    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 2014
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. ASC Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
2014
    c. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    d. Payment for Cardiac Resynchronization Therapy Services
    e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy 
Composite
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2014
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Application Cycle
    2. Requests to Establish New NTIOL Classes for CY 2015
    3. Payment Adjustment
    4. Announcement of CY 2014 Deadline for Submitting Requests for 
CMS Review of Applications for a New Class of NTIOLs
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. Calculation of the ASC Conversion Factor and the ASC Payment 
Rates
    1. Background
    2. Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2014 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of CY 2014 ASC Payment Rates
XIII. 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 Two Chart-Abstracted Measures from the Hospital 
OQR Program
    a. Removal of OP-19: Transition Record with Specified Elements 
Received by Discharged ED Patients
    b. Removal of OP-24: Cardiac Rehabilitation Measure: Patient 
Referral from an Outpatient Setting
    D. Quality Measures Previously Adopted for the CY 2014 and CY 
2015 Payment Determinations and Subsequent Years
    E. Quality Measures for the CY 2016 Payment Determination and 
Subsequent Years
    1. Influenza Vaccination Coverage Among Healthcare Personnel 
(NQF 0431)
    2. Complications Within 30 Days Following Cataract Surgery 
Requiring Additional Surgical Procedures (NQF 0564)
    3. Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval 
for Normal Colonoscopy in Average Risk Patients (NQF 0658)
    4. Endoscopy/Polyp Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659)
    5. Cataracts--Improvement in Patient's Visual Function Within 90 
Days Following Cataract Surgery (NQF 1536)
    F. Possible Hospital OQR Program Measure Topics for Future 
Consideration
    G. Payment Reduction for Hospitals That Fail to Meet the 
Hospital OQR Program Requirements for the CY 2014 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2014
    H. Requirements for Reporting of Hospital OQR Data for the CY 
2015 Payment Determination and Subsequent Years
    1. Administrative Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    2. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    a. Background
    b. Effects of Changes on Data Submission for CY 2015 and CY 2016 
Payment Determinations and Subsequent Years
    c. General Requirements
    d. Chart-Abstracted Measure Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    e. Claims-Based Measure Data Requirements for the CY 2015 
Payment Determination and Subsequent Years
    f. Data Submission Requirements for Measure Data Submitted via 
Web-Based Tool for the CY 2016 Payment Determination and Subsequent 
Years
    g. Data Submission Requirements for a Measure Reported via NHSN 
for the CY 2016 Payment Determination and Subsequent Years
    h. Population and Sampling Data Requirements for the CY 2015 
Payment Determination and Subsequent Years
    3. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2015 
Payment Determination and Subsequent Years
    a. Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2015 Payment Determination and 
Subsequent Years
    b. Targeting Criteria for Data Validation Selection for the CY 
2015 Payment Determination and Subsequent Years
    c. Methodology for Encounter Selection for the CY 2015 Payment 
Determination and Subsequent Years
    d. Medical Record Documentation Requests for Validation and 
Validation Score Calculation for the CY 2015 Payment Determination 
and Subsequent Years
    I. Hospital OQR Reconsideration and Appeals Procedures for the 
CY 2015 Payment Determination and Subsequent Years
    J. Extraordinary Circumstances Extension or Waiver for the CY 
2014 Payment Determination and Subsequent Years
XIV. Hospital Value-Based Purchasing (VBP) Program Updates
    A. Background
    B. Additional CMS Appeals Review Process
    1. Statutory Basis
    2. Independent CMS Review
    C. Performance and Baseline Periods for Certain Outcome Measures 
for the FY 2016 Hospital VBP Program
XV. 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. Regulatory 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 Adopted in Previous Rulemaking
    3. Additional ASCQR Program Quality Measures for the CY 2016 
Payment Determination and Subsequent Years

[[Page 74831]]

    a. Complications Within 30 Days Following Cataract Surgery 
Requiring Additional Surgical Procedures
    b. Endoscopy/Polyp Surveillance: Appropriate Follow-Up for 
Normal Colonoscopy in Average Risk Patients (NQR 0658)
    c. Endoscopy/Polyp Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659)
    d. Cataracts: Improvement in Patient's Visual Function within 90 
Days Following Cataract Surgery (NQF 1536)
    4. ASCQR Program Measure Topics for Future Consideration
    5. Technical Specification Updates and Data Publication
    C. 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 Each Payment Determination Year
    D. Administrative Requirements
    1. Requirements Regarding QualityNet Account and Security 
Administrator
    a. Background for the CY 2014 and CY 2015 Payment Determinations
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    2. Requirements Regarding Participation Status
    a. Background for the CY 2014 Payment Determination and 
Subsequent Years
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    3. Requirements Regarding Data Processing and Collection Periods 
for Claims-Based Measures for the CY 2014 Payment Determination and 
Subsequent Years
    4. Minimum Threshold, Minimum Case Volume, and Data Completeness 
for Claims-Based Measures Using QDCs
    a. Background for the CY 2014 Payment Determination and 
Subsequent Years
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    5. Requirements for Data Submitted Via a CMS Online Data 
Submission Tool
    a. Background for the CY 2015 Payment Determination and 
Subsequent Years
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years for Measures Currently Finalized
    c. Requirements for the CY 2016 Payment Determination and 
Subsequent Years for New Measures with Data Submission Via a CMS 
Web-Based Tool
    6. Data Submission Requirements for a Measure Reported Via the 
National Healthcare Safety Network (NHSN) for the CY 2016 Payment 
Determination
    a. Background for the CY 2016 Payment Determination
    b. Requirements for the CY 2016 Payment Determination
    7. ASCQR Program Validation of Claims-Based and CMS Web-Based 
Measures
    8. Extraordinary Circumstances Extensions or Waivers for the CY 
2014 Payment Determination and Subsequent Years
    a. Background
    b. Additional Criterion for Extraordinary Circumstance Waiver or 
Extension for CY 2014 and Subsequent Years
    9. ASCQR Program Reconsideration Procedures for the CY 2014 
Payment Determination and Subsequent Years
XVI. Final Rule: Changes to the Conditions for Coverage (CfCs) for 
Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G)
    A. Background
    B. Regulatory Changes
XVII. Final Rule: Revisions of the Quality Improvement Organization 
(QIO) Regulations
    A. Legislative History
    B. Basis for Proposals and Finalized Policies
    C. Changes to the Nomenclature and Regulations under 42 CFR 
Parts 475 and 476
    1. Nomenclature Changes
    2. Addition and Revision of Definitions
    3. Scope and Applicability of Subpart C of Part 475
    4. Eligibility Requirements for QIOs (Sec. Sec.  475.101 through 
475.106)
    a. Eligibility to be Awarded a QIO Contract (Sec.  475.101)
    b. Eligibility Requirements for QIOs to Perform Case Reviews and 
Quality Improvement Initiatives (Sec.  475.102 and Sec.  475.103)
    c. Prohibitions on Eligibility as a QIO (Sec. Sec.  475.105 and 
475.106)
    5. QIO Contract Awards (Sec.  475.107)
XVIII. Final Rule: Medicare Fee-for-Service Electronic Health Record 
(EHR) Incentive Program
    A. Incentive Payments for Eligible Professionals (EPs) 
Reassigning Benefits to Method II CAHs
    1. Background for Definition of EPs and EHR Incentive Payments 
to EPs
    2. Special Circumstances of EPs Reassigning Benefits to Method 
II CAHs
    B. Cost Reporting Periods for Interim and Final EHR Incentive 
Payments to Hospitals
    1. Background
    2. Special Circumstances
XIX. Medicare Program: Provider Reimbursement Determinations and 
Appeals: Final Rule
    A. Matters Not Subject to Administrative or Judicial Review 
(Sec.  405.1804)
    1. Background
    2. Technical Conforming Change
    B. Clarification of Reopening of Predicate Facts in Intermediary 
Determinations of Provider Reimbursement (Sec.  405.1885)
XX. Files Available to the Public Via the Internet
XXI. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. Changes to the Outcome Measure Requirement for OPOs
    2. Changes to the Medicare Fee-for-Service EHR Incentive Program
    C. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    a. Hospital OQR Program Requirements for the CY 2015 Payment 
Determinations and subsequent Years
    b. Chart-Abstracted Measures for the CY 2016 Payment 
Determination and Subsequent Years
    c. Web-Based Measures Submitted Directly to CMS for the CY 2016 
Payment Determination and Subsequent Years
    d. NHSN HAI Measure for the CY 2016 Payment Determination and 
Subsequent Years
    e. Hospital OQR Program Validation Requirements for the CY 2015 
Payment Determination and Subsequent Years
    f. Hospital OQR Program Reconsideration and Appeals Procedures
    2. ASCQR Program Requirements
    a. Claims-Based Measures for the CY 2014 Payment Determination
    b. Claims-Based and Web-Based Measures for the CY 2015 and CY 
2016 Payment Determinations
    c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstance and Extension or Waiver Requests; 
Reconsideration Requests
    3. Hospital VBP Program Requirements
XXII. Response to Comments
XXIII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for the OPPS and ASC Payment Provisions
    4. Detailed Economic Analyses
    a. Estimated Effects of Final 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 CY2014 ASC Payment System Final Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of CY2014ASC Payment System Final Policies 
on ASCs
    (3) Estimated Effects of ASC Payment System Final Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Accounting Statements and Tables
    d. Effects of Requirements for the Hospital OQR Program
    e. Effects of CY2014 Policies for the ASCQR Program
    f. Effects of Changes to the CfCs for OPOs Relating to the 
Outcome Measure Requirement for Recertification
    g. Effects of Revisions of the QIO Regulations
    h. Effects of Revised Policies Regarding Medicare Fee-for-
Service EHR Incentive Program
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIV. Federalism Analysis
XXV. Waiver of 60-Day Delay of Effective Date

[[Page 74832]]

Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In the final rule with comment period of this document, 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, 2014. 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 with 
comment period. In addition, the 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 Hospital Value-Based Purchasing (VBP) Program.
    In the final rules in this document, we are finalizing changes to 
the conditions for coverage (CfCs) for organ procurement organizations 
(OPOs); revisions to the Quality Improvement Organization (QIO) 
regulations; changes to the Medicare fee-for-service Electronic Health 
Record (EHR) Incentive Program; and changes relating to provider 
reimbursement determinations and appeals.
    After publication of our annual proposed rule for CY 2014, we 
discovered that in applying our established and proposed methodologies 
to develop the CY 2014 proposed OPPS and ASC payment rates, specific 
cost estimation errors occurred in the OPPS modeling process. The 
errors resulting from the cost modeling used to develop the CY 2014 
proposed OPPS payment rates were isolated to a few specific ambulatory 
payment classifications (APCs). However, because the OPPS is a budget 
neutral payment system, there was a resulting impact on other proposed 
OPPS payment rates. In addition, because the ASC payment rates are 
based on the OPPS relative payment weights for the majority of items 
and services that are provided at ASCs, corrections to the proposed CY 
2014 OPPS relative payment weights also had an impact on the proposed 
CY 2014 ASC relative payment weights and ASC payment rates. Therefore, 
we released corrected data files on August 28, 2013, and extended the 
comment period to September 16, 2013, on the technical corrections 
noted in the correcting document published in the Federal Register on 
September 6, 2013 (78 FR 54842). This final rule with comment period 
refers to the corrected OPPS and ASC information.
2. Summary of the Major Provisions
     OPPS Update: For CY 2014, we are increasing the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.7 percent. This increase is based on the 
final hospital inpatient market basket percentage increase of 2.5 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.5 percentage points, and minus a 0.3 percentage 
point adjustment required by the Affordable Care Act. Under this final 
rule with comment period, we estimate that total payments for CY 2014, 
including beneficiary cost-sharing, to the approximately 4,100 
facilities paid under the OPPS (including general acute care hospitals, 
children's hospitals, cancer hospitals, and community mental health 
centers (CMHCs)), will be approximately $50.4 billion, an increase of 
approximately $4.372 billion compared to CY 2013 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.
     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 2014, 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 0.89 will be used to 
determine the CY 2014 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 0.89 for each cancer hospital.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2014, 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.
     Packaging Policies: Beginning in CY 2014, we are 
unconditionally or conditionally packaging the following five 
categories of items and services and adding them to the list of OPPS 
packaged items and services in 42 CFR 419.2(b):
    (1) Drugs, biologicals, and radiopharmaceuticals used in a 
diagnostic test or procedure;
    (2) Drugs and biologicals when used as supplies in a surgical 
procedure;
    (3) Certain clinical diagnostic laboratory tests;
    (4) Procedures described by add-on codes; and
    (5) Device removal procedures.
    Further details are provided in section II.A.3. of this document.
     Establishing Comprehensive APCs: In order to improve the 
accuracy and transparency of our payment for certain device-dependent 
services, we are finalizing our policy to establish 29 comprehensive 
APCs to prospectively pay for the most costly hospital outpatient 
device-dependent services, but we are delaying implementation of this 
policy until CY 2015. We have defined a comprehensive APC as a 
classification for the provision of a primary service and all adjunct 
services provided to support the delivery of the primary service. For 
services that trigger a comprehensive APC payment, the comprehensive 
APC will treat all individually reported codes on the claim as 
representing components of the comprehensive service, resulting in a 
single prospective payment based on the cost of all individually 
reported codes on the claim. We will make a single payment for the 
comprehensive service based on all charges on the claim, excluding only 
charges for services that cannot be covered by Medicare Part B or that 
are not payable under the OPPS. We also have modified our methodology 
to make larger payments for many complex and costly multiple device 
procedures. Due to our decision to delay

[[Page 74833]]

implementation until CY 2015 for operational reasons, we are inviting 
comment on this section of the final rule. We have published tables in 
the rule to demonstrate how this policy would have been implemented in 
CY 2014, and we will be considering comments as we update the policy 
for CY 2015 to account for changes that may occur in the CY 2013 claims 
data.
     Payment of Hospital Outpatient Visits: For CY 2014, we are 
finalizing our proposal to replace the current five levels of visit 
codes for each clinic visit with a new alphanumeric Level II HCPCS code 
representing a single level of payment for clinic visits. We are 
finalizing our proposal to assign the new alphanumeric Level II HCPCS 
to newly created APC 0634 with CY 2014 OPPS payment rates based on the 
total mean costs of Level 1 through Level 5 clinic visit codes obtained 
from CY 2012 OPPS claims data. For CY 2014, we are not finalizing our 
proposal to replace the current five levels of visit codes for each 
Type A ED, and Type B ED visits with two new alphanumeric Level II 
HCPCS codes representing a single level of payment for two types of ED 
visits, respectively.
     OPPS Nonrecurring Policy Changes: The enforcement 
instruction for the supervision of outpatient therapeutic services 
furnished in CAHs and small rural hospitals will expire at the end of 
CY 2013. In addition, we are amending the conditions of payment for 
``incident to'' hospital or CAH outpatient services (sometimes referred 
to as hospital or CAH ``therapeutic'' services) to explicitly require 
that individuals furnishing these services be in compliance with State 
law. In the CY 2014 OPPS/ASC proposed rule, we solicited public 
comments regarding a potential new claims or other data element that 
would indicate that the services were furnished in an off-campus 
provider-based department, which we discuss in this final rule with 
comment period. Finally, we refer readers to the CY 2014 Medicare 
Physician Fee Schedule (MPFS) final rule (CMS-1600-F) to review 
Medicare's policies on application of the therapy caps and related 
provisions under section 1833(g) of the Act to physical therapy (PT), 
speech-language pathology (SLP) and occupational therapy (OT) 
(``therapy'') services that are furnished by a CAH, effective January 
1, 2014.
     Ambulatory Surgical Center Payment Update: For CY 2014, we 
are increasing payment rates under the ASC payment system by 1.2 
percent. This increase is based on a projected CPI-U update of 1.7 
percent minus a multifactor productivity adjustment required by the 
Affordable Care Act that is projected to be 0.5 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 2014 will be approximately $3.992 billion, an increase 
of approximately $143 million compared to estimated CY 2013 payments.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are adopting four new quality measures for 
the CY 2016 payment determination and subsequent years: Three where 
aggregate data (numerators, denominators, and exclusions) are collected 
and data submitted via an online Web-based tool located on a CMS Web 
page and one HAI measure submitted through the CDC's NHSN. We also are 
removing two measures and are codifying administrative procedures.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are adopting three new quality 
measures for the CY 2016 payment determination and subsequent years 
where data collection will begin in CY 2014. We are collecting 
aggregate data (numerators, denominators, and exclusions) on all ASC 
patients for these four chart-abstracted measures via an online Web-
based tool located on a CMS Web page. We also are adopting, for the CY 
2016 payment determination and subsequent years' payment 
determinations, requirements for a QualityNet account and security 
administrator, facility participation, a minimum threshold and minimum 
volume for claims-based measures, and data collection and submission 
for new measures and for certain previously finalized measures.
     Changes to Organ Procurement Organization (OPO) 
Regulations. In section XVI. of this document, we are finalizing our 
proposals to modify the current requirement that OPOs meet all three 
outcome measures set forth in 42 CFR 486.318. Specifically, the final 
rule provides that an OPO must meet two out of the three outcome 
measures. This change to the outcome measures requirement will allow 
those OPOs that fail only one outcome measure to avoid automatic 
decertification in the 2014 recertification cycle.
     Revisions to the Quality Improvement Organizations 
Regulations. We are updating the regulations at 42 CFR Parts 475 and 
476 based on the recently enacted Trade Adjustment Assistance Extension 
Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) whereby Congress 
authorized numerous changes to the original legislation and included 
additional flexibility for the Secretary in the administration of the 
QIO program. The existing regulations at 42 CFR Part 475 include 
definitions and standards governing eligibility and the award of 
contracts to QIOs. In this final rule with comment period, we are 
finalizing the partial deletion and revision of the regulations under 
42 CFR Parts 475 and 476, which relate to the QIO program, including 
the following: (1) Replace nomenclature in Parts 475 and 476 that has 
been amended by the TAAEA; (2) revise the existing definition for the 
term ``physician''; (3) add new definitions as necessary to support the 
new substantive provisions in Subpart C; and (4) replace some of the 
substantive provisions in Subpart C in their entirety to fully exercise 
the Secretary's authority for the program and update the contracting 
requirements to align with contemporary quality improvement.
     Changes to the Medicare Fee-for-Service Electronic Health 
Record (EHR) Incentive Program. We are revising the regulations to 
provide a special method for making hospital-based determinations for 
2014 only in the cases of those eligible professionals (EPs) who 
reassign their benefits to Method II CAHs. Previously, we have been 
unable to make EHR payments to these EPs for their CAH II claims, or to 
take those claims into consideration in making hospital-based 
determinations because of systems limitations. Finalizing the adoption 
of our method for 2014 will allow us to begin making payments based on 
CAH II one year earlier than we would be able to do under existing 
regulations. We also are adopting a minor clarification to the 
regulations concerning the cost reporting period to be used in 
determining final EHR payments for hospitals.
3. Summary of Costs and Benefits
    In sections XXIII. and XXIV. of this final rule with comment 
period, we set forth a detailed analysis of the regulatory and 
federalism impacts that the changes will have on affected entities and 
beneficiaries. Key estimated impacts are described below.
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
    Table 55 in section XXIII. of this final rule with comment period 
displays the distributional impact of all the OPPS changes on various 
groups of hospitals and CMHCs for CY 2014 compared to all

[[Page 74834]]

estimated OPPS payments in CY 2013. We estimate that the policies in 
this final rule will result in a 1.8 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 $4.372 billion in OPPS expenditures, including 
beneficiary cost-sharing, for CY 2014 compared to CY 2013 OPPS 
expenditures. We estimate that total OPPS payments, including 
beneficiary cost-sharing, will be $50.4 billion for CY 2014.
    We estimated the isolated impact of our OPPS policies on CMHCs 
because CMHCs are only paid for partial hospitalization services under 
the OPPS. Continuing the provider-specific structure that we adopted 
beginning in CY 2011 and basing payment fully on the type of provider 
furnishing the service, we estimate a 1.8 percent increase in CY 2014 
payments to CMHCs relative to their CY 2013 payments.
(2) Impacts of Policies Other Than Outpatient Laboratory Test Packaging
    We estimate that our final policies other than packaging outpatient 
laboratory tests will have a less significant impact than we proposed 
for CY 2014, as several proposed policies were not finalized. These 
final policies include packaging drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure (stress agents and Cysview), drugs and 
biologicals that function as supplies when used in a surgical procedure 
(skin substitutes), certain procedures described by add-on codes, and 
device removal procedures; new cost report data for estimating CT and 
MRI relative weights; and revisions to coding and APC structure for 
stereotactic radiosurgery.
(3) Impacts of Packaging Outpatient Laboratory Tests
    Packaging laboratory services modestly reduces payment to rural and 
major teaching hospitals, as they will no longer receive separate 
payment for common laboratory tests.
(4) Impacts of the Updated Wage Indices
    Adjustments to the wage indices other than the frontier State wage 
adjustment will not significantly affect most hospitals and CMHCs. The 
nonbudget neutral frontier wage index adjustment will result in payment 
increases to rural and urban hospitals in West North Central and 
Mountain States.
(5) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2014 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.
(6) Impacts of the OPD Fee Schedule Increase Factor
    We estimate that, for many hospitals, the application of the OPD 
fee schedule increase factor of 1.7 percent to the conversion factor 
for CY 2014 will mitigate the small negative impacts of the budget 
neutrality adjustments. While most classes of hospitals will receive an 
increase that is in line with the 1.7 percent overall increase after 
the update is applied to the budget neutrality adjustments, some 
hospitals will receive smaller but still generally positive overall 
increases.
b. Impacts of the ASC Payment Update
    For impact purposes, the procedures on the ASC list of covered 
surgical 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 2014 payment 
rates compared to estimated CY 2013 payment rates ranges between -11 
percent for ancillary items and services and 14 percent for respiratory 
system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our CY 2014 final policies to significantly affect 
the number of hospitals that do not receive a full annual payment 
update.
d. Impacts of the ASCQR Program
    We do not expect our CY 2014 final policies to significantly affect 
the number of ASCs that do not receive a full annual payment update 
beginning in CY 2015.
e. Impacts for the QIO Program Changes
    We estimate the effects of the QIO Program changes to be consistent 
with the Congressional Budget Office's 2011 Cost Estimate of the Trade 
Bill (H.R. 2832) which included a reduction in spending of $330 million 
over the 2012-2021 period. According to the CBO Estimate and 
subsequently the regulatory changes ``would modify the provisions under 
which CMS contracts with independent entities called [``]Quality 
Improvement Organizations (QIOs)[''] in Medicare. QIOs, generally 
staffed by health care professionals, review medical care, help 
beneficiaries with complaints about the quality of care, and implement 
care improvements. H.R. 2832 would make several changes to the 
composition and operation of QIOs, and would harmonize QIO contracts 
with requirements of the Federal Acquisition Regulation. Among those 
changes are a modification to expand the geographic scope of QIO 
contracts and a lengthening of the contract period. CBO estimates that 
those provisions would reduce spending by $330 million over the 2012-
2021 period.''

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Social Security Act was enacted, Medicare 
payment for hospital outpatient services was based on hospital-specific 
costs. In an effort to ensure that Medicare and its beneficiaries pay 
appropriately for services and to encourage more efficient delivery of 
care, the Congress mandated replacement of the reasonable cost-based 
payment methodology with a prospective payment system (PPS). The 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 
1833(t) to the Act authorizing implementation of a PPS for hospital 
outpatient services. The OPPS was first implemented for services 
furnished on or after August 1, 2000. Implementing regulations for the 
OPPS are located at 42 CFR Parts 410 and 419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. 
The following Acts made additional changes to the OPPS: The Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit 
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 
2006; the Medicare Improvements and Extension Act under Division B of 
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare, 
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), 
enacted on December 29, 2007; the Medicare Improvements

[[Page 74835]]

for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), 
enacted on July 15, 2008; the Patient Protection and Affordable Care 
Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), 
enacted on March 30, 2010 (These two public laws are collectively known 
as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 
2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut 
Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 
23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 
(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and the 
American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 
2, 2013.
    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 that are paid under Part B.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use (section 1833(t)(2)(B) of 
the Act). In accordance with section 1833(t)(2) of the Act, subject to 
certain exceptions, items and services within an APC group cannot be 
considered comparable with respect to the use of resources if the 
highest median cost (or mean cost, if elected by the Secretary) for an 
item or service in the APC group is more than 2 times greater than the 
lowest median cost (or mean cost, if elected by the Secretary) for an 
item or service within the same APC group (referred to as the ``2 times 
rule''). In implementing this provision, we generally use the cost of 
the item or service assigned to an APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
clinical information and cost data to appropriately assign them to a 
clinical APC group, we have established special APC groups based on 
costs, which we refer to as New Technology APCs. These New Technology 
APCs are designated by cost bands which allow 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 originally 
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 prospective payment system; 
and services and procedures that require an inpatient stay that are 
paid under the hospital IPPS. We set forth the services that are 
excluded from payment under the OPPS in regulations at 42 CFR 419.22. 
This final rule with comment period modifies 42 CFR 419.22 and includes 
in the OPPS some of these previously excluded services.
    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 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 
Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-
113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act and section 222 of the Public Health Service 
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory 
Payment

[[Page 74836]]

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). 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 meetings taking 
place on March 11, 2013 and August 26-27, 2013. Prior to each meeting, 
we publish a notice in the Federal Register to announce the meeting 
and, when necessary, to solicit nominations for Panel membership and to 
announce new members.
    The Panel has established an operational structure that, in part, 
currently includes the use of three subcommittees to facilitate its 
required review process. The three current subcommittees are the Data 
Subcommittee, the Visits and Observation Subcommittee, and the 
Subcommittee for APC Groups and Status Indicator (SI) Assignments.
    The Data Subcommittee is responsible for studying the data issues 
confronting the Panel and for recommending options for resolving them. 
The Visits and Observation Subcommittee reviews and makes 
recommendations to the Panel on all technical issues pertaining to 
observation services and hospital 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 at the August 2013 meeting that the subcommittees continue. 
We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
March 2013 and August 2013 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 2014 OPPS/ASC 
Proposed Rule

    We received approximately 2,677 timely pieces of correspondence on 
the CY 2014 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 19, 2013 (78 FR 43534) and the correcting document 
published in the Federal Register on September 6, 2013 (78 FR 54842). 
This final rule with comment period refers to the corrected information 
wherever applicable. 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 to the proposed rule and the correcting document 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 2013 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 27 timely pieces of correspondence on the 
CY 2013 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 15, 2012 (77 FR 68210), some of which 
contained comments on the interim APC assignments and/or status 
indicators of HCPCS codes identified with comment indicator ``NI'' in 
Addenda B, AA, and BB 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.

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 2014 OPPS/ASC proposed rule (78 FR 43544), for the CY 
2014 OPPS, we proposed to recalibrate the APC relative payment weights 
for services furnished on or after January 1, 2014, and before January 
1, 2015 (CY 2014), using the same basic methodology that we described 
in the CY 2013 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

[[Page 74837]]

construct a database for calculating APC group weights. Therefore, for 
the purpose of recalibrating the proposed APC relative payment weights 
for CY 2014, we used approximately 146 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, 2012, and before January 1, 2013. For 
this final rule with comment period, for the purpose of recalibrating 
the final APC relative payment weights for CY 2014, we used 
approximately 158 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, 2012, and before 
January 1, 2013. For exact counts of claims used, we refer readers to 
the claims accounting narrative under supporting documentation for the 
CY 2014 OPPS/ASC proposed rule and this final rule with comment period 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately 158 million final action claims for services 
provided in hospital outpatient settings used to calculate the CY 2014 
OPPS payment rates for this final rule with comment period, 
approximately 125 million claims were the type of bill potentially 
appropriate for use in setting rates for OPPS services (but did not 
necessarily contain services payable under the OPPS). Of the 
approximately 125 million claims, approximately 6 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 119 million claims, we created approximately 125 million 
single records, of which approximately 80 million were ``pseudo'' 
single or ``single session'' claims (created from approximately 31 
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 124 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.
    The final APC relative weights and payments for CY 2014 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 
2012 that were processed through June 30, 2013. While prior to CY 2013 
we had historically based the payments on median hospital costs for 
services in the APC groups, beginning with the CY 2013 OPPS, we 
established the cost-based relative payment weights for the OPPS using 
geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68259 through 68271). For the CY 2014 OPPS, 
we proposed and are using this same methodology, basing payments on 
geometric mean costs. Under this methodology, we select claims for 
services paid under the OPPS and match these claims to the most recent 
cost report filed by the individual hospitals represented in our claims 
data. We continue to believe that it is appropriate to use the most 
current full calendar year claims data and the most recently submitted 
cost reports to calculate the relative costs underpinning the APC 
relative payment weights and the CY 2014 payment rates.
b. Use of Single and Multiple Procedure Claims
    For CY 2014, in general, as we proposed, we are continuing 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 
are continuing 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 2013 OPPS/
ASC final rule with comment period (77 FR 68227 through 68229). In 
addition, for CY 2008 (72 FR 66614 through 66664), we increased 
packaging and created the first composite APCs, and continued those 
policies through CY 2013. 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 2013, and 
as we proposed, we are continuing this policy for CY 2014. In addition, 
as we proposed, we are further expanding our packaging policies for CY 
2014. We refer readers to section II.A.2.f. of this final rule with 
comment period for a discussion of the use of claims in modeling the 
costs for composite APCs and to section II.A.3. of this final rule with 
comment period for a discussion of our packaging policies for CY 2014.
    As we proposed, we are continuing to apply these processes to 
enable us to use as much claims data as possible for ratesetting for 
the CY 2014 OPPS. This methodology enabled us to create, for this final 
rule with comment period, approximately 80 million ``pseudo'' single 
procedure claims, including

[[Page 74838]]

multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.f.(5) of this final rule with comment period for 
further discussion), to add to the approximately 43 million ``natural'' 
single procedure claims.
    For CY 2014, we proposed to bypass 179 HCPCS codes that were 
identified in Addendum N to the CY 2014 OPPS/ASC proposed rule (which 
is available via the Internet on the CMS Web site). Since the inception 
of the bypass list, which is the list of codes to be bypassed to 
convert multiple procedure claims to ``pseudo'' single procedure 
claims, we have calculated the percent of ``natural'' single 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 2014, data available for the March 11, 2013 meeting 
of the Advisory Panel on Hospital Outpatient Payment (the Panel) from 
CY 2012 claims processed through September 30, 2012, and CY 2011 claims 
data processed through June 30, 2012, used to model the payment rates 
for CY 2013) to determine whether it would be appropriate to add 
additional codes to the previous year's bypass list. For CY 2014, we 
proposed to continue to bypass all of the HCPCS codes on the CY 2013 
OPPS bypass list, with the exception of HCPCS codes that we proposed to 
delete for CY 2014, which were listed in Table 1 of the proposed rule 
(78 FR 43546). We also proposed to remove HCPCS codes that are not 
separately paid under the OPPS because the purpose of the bypass list 
is to obtain more data for those codes relevant to ratesetting. Some of 
the codes we proposed to remove from the CY 2014 bypass list are 
affected by the CY 2014 packaging final policy, discussed in section 
II.A.3. of this final rule with comment period. In addition, we 
proposed to add to the bypass list for CY 2014 HCPCS codes not on the 
CY 2013 bypass list that, using either the CY 2013 final rule data (CY 
2011 claims) or the March 11, 2013 Panel data (first 9 months of CY 
2012 claims), met the empirical criteria for the bypass list that are 
summarized below. Finally, to remain consistent with the CY 2014 final 
policy to continue to develop OPPS relative payment weights based on 
geometric mean costs, we also proposed that the packaged cost criterion 
continue to be based on the geometric mean cost. The entire list 
proposed for CY 2014 (including the codes that remain on the bypass 
list from prior years) was open to public comment in the CY 2014 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, as we did for CY 2013, we proposed to continue to 
establish the CY 2014 OPPS relative payment weights based on geometric 
mean costs. To remain consistent in the metric used for identifying 
cost patterns, we proposed to use the geometric mean cost of packaging 
to identify potential codes to add to the bypass list.
    In response to public comments on the CY 2010 OPPS/ASC proposed 
rule requesting that the packaged cost threshold be updated, we 
considered whether it would be appropriate to update the $50 packaged 
cost threshold for inflation when examining potential bypass list 
additions. As discussed in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60328), the real value of this packaged cost threshold 
criterion has declined due to inflation, making the packaged cost 
threshold more restrictive over time when considering additions to the 
bypass list. Therefore, adjusting the threshold by the market basket 
increase would prevent continuing decline in the threshold's real 
value. Based on the same rationale described for the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68221), we proposed for CY 2014 
to continue to update the packaged cost threshold by the market basket 
increase. By applying the final CY 2013 market basket increase of 1.8 
percent to the prior nonrounded dollar threshold of $53.76 (77 FR 
68221), we determined that the threshold remains for CY 2014 at $55 
($54.73 rounded to $55, the nearest $5 increment). Therefore, we 
proposed to set the geometric mean packaged cost threshold on the CY 
2012 claims at $55 for a code to be considered for addition to the CY 
2014 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 believe have minimal associated 
packaging based on their clinical assessment of the complete CY 2014 
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) to the bypass list (73 
FR 68513).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one

[[Page 74839]]

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).
    Comment: One commenter supported the CY 2014 proposal to remove 
certain codes from the bypass list, in particular for the anatomic 
pathology procedures, suggesting that the bypass list undervalues 
codes, and artificially lowers their estimated costs, as evidenced by 
the estimated increase in payment for some of those services in the 
proposed CY 2014 OPPS.
    Response: We appreciate the commenter's support. The bypass list 
process is used to extract more data from claims that would otherwise 
be unusable. We use a variety of information in identifying codes that 
could be potentially added to the bypass list each year, including 
codes selected based on the empirical criteria, CMS medical advisor 
recommendations, and commenter requests. In doing so, we attempt to 
ensure that the amount of packaged cost being redistributed as a result 
of the process is limited.
    As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43545 
through 43546), we proposed to remove the bypass codes listed in Table 
1 of the proposed rule, several of which were affected by the CY 2014 
proposed packaging policy. Codes that would not be separately paid in 
the prospective year, whether because of prospective packaging policies 
or deletions prior to the claims year, would not be appropriately 
applied to the bypass process. Bypassing packaged codes would 
potentially remove costs that would otherwise be used in calculating 
payment weights for other separately payable procedures, which would be 
inappropriate. We note that OPPS payment rates may fluctuate from year 
to year based on a variety of other factors, including updated data, 
APC recalibration, and increased packaging.
    Comment: Several commenters believed that an inconsistency existed 
in the application of the bypass policy and the E&M codes. They noted 
that visit codes 99211 and 99215 were not included on the proposed CY 
2014 OPPS bypass list, and that because those codes were part of the 
proposed new visit APC 0634 (Hospital Clinic Visits), which also would 
be used in calculating the OPPS relative payment weights, an error had 
occurred.
    Response: We acknowledge that the proposed CY 2014 OPPS bypass list 
did not include several of the E&M codes. With the exception of CPT 
code 99205, which we proposed to add to the CY 2014 OPPS bypass list, 
the other visit codes already had been on the bypass list in prior 
years based on the empirical criteria previously described. Applying 
those empirical criteria would continue to exclude the remaining E&M 
codes from the bypass list. Therefore, we do not believe that those 
exclusions are an error. While we recognize that there are interactions 
between the visits policy discussed in section VII. of this final rule 
with comment period and the bypass process to derive more information, 
those interactions allow for policy interpretations based on the 
individual rules and goals being applied. In developing the proposed CY 
2014 OPPS bypass list, we tried to retain the principles and guidelines 
we have used in the past while accommodating other proposals where they 
might interact, such as with the CY 2014 OPPS proposed packaging 
policy. We appreciate the meaningful policy comments that stakeholders 
provide, especially where these policy intersections occur. We will 
continue to review the codes on the bypass list and their 
appropriateness, especially in the context of the packaging policies 
described in section II.A.3. of this final rule with comment period.
    We note that while we proposed that the new CY 2014 visit APC 0634 
would be the new base APC on which the scaled weights would be 
calculated, it was selected as a baseline because clinic visits are one 
of the most frequently performed services in the hospital outpatient 
setting, similar to APCs 0606 and 0601 in prior years. However, 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 
the weights are scaled for budget neutrality. Therefore, any potential 
miscalculations or policy issues related to an APC would generally be 
concentrated in those APCs because, for scaling purposes, it would be 
similar to selecting any number as a baseline, which would later be 
budget neutralized through a weight scaler. The CY 2014 OPPS weight 
scaler is discussed in section II.A.4. of this final rule with comment 
period.
    Comment: One commenter noted that many of the codes on the bypass 
list may no longer be appropriate because the proposed CY 2014 
packaging policy would potentially cause many of the natural single 
major claims, to which CMS applies the empirical criteria, to exceed 
the packaged cost thresholds.
    Response: We appreciate the issue that the commenter has raised 
regarding the application of the bypass list and its interaction with 
our proposed CY 2014 policies. In prior years, we generally continued 
bypassing codes that were on the previous year's bypass list under the 
assumption that packaging, billing, and clinical patterns would 
generally remain similar from year to year. As the commenter noted, 
under the proposed CY 2014 OPPS packaging policies, the data on which 
we identify codes potentially added to the bypass list may change. We 
will continue to examine the cost patterns for codes which may be 
appropriately added or removed from the bypass list.
    After consideration of the public comments we received, we are 
adopting as final the proposed ``pseudo'' single claims process. As 
discussed earlier in this section, there are interactions between the 
application of a bypass list and various other OPPS payment policies. 
As a result of modifications to the packaging policies described in 
section III. of this final rule with comment period, we are adding 
codes that we had originally proposed to remove from the CY 2014 bypass 
list back on the CY 2014 final OPPS bypass list. Addendum N to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site) includes the list of bypass codes for CY 2014.
    The list of bypass codes contains codes that were reported on 
claims for services in CY 2012 and, therefore, includes codes that were 
in effect in CY 2012 and used for billing but were deleted for CY 2013. 
We retained these deleted bypass codes on the CY 2014 bypass list 
because these codes existed in CY 2012 and were covered OPD services in 
that period, and CY 2012 claims data are used to calculate CY 2014 
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

[[Page 74840]]

codes'' that were members of the 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 
2014 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 2014 bypass list for CY 2014 (78 FR 
43546). Table 1 below contains the list of codes that we are removing 
from the final CY 2014 bypass list because these codes were either 
deleted from the HCPCS before CY 2012 (and therefore were not covered 
OPD services in CY 2012) or were not separately payable codes under the 
CY 2014 OPPS because these codes are not used for ratesetting through 
the bypass process. The list of codes for removal from the bypass list 
includes those that will be affected by the CY 2014 OPPS packaging 
policy described in section II.A.3. of this final rule with comment 
period.
[GRAPHIC] [TIFF OMITTED] TR10DE13.261

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43547), 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 2014 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 2012 claims data from the most recent 
available hospital cost reports, in most cases, cost reports beginning 
in CY 2011. For the CY 2014 OPPS proposed rates, we used the set of 
claims processed during CY 2012. 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 2012 
(the year of claims data we used to calculate the proposed CY 2014 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2012 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 2012 before determining whether the CCRs for 
such hospitals were valid.
    We then calculated the CCRs for each cost center and the overall 
ancillary CCR for each hospital for which we had claims data. We did 
this using hospital-specific data from the Hospital Cost Report 
Information System (HCRIS). We used the most recent available cost 
report data, which, in most cases, were from cost reports with cost 
reporting periods beginning in CY 2011. 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 2014 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

[[Page 74841]]

longstanding methodology for the calculation of costs for CY 2014.
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher cost services and a higher charge markup to 
lower cost services. As a result, the cost-based weights may reflect 
some aggregation bias, undervaluing high-cost items and overvaluing 
low-cost items when an estimate of average markup, embodied in a single 
CCR, is applied to items of widely varying costs in the same cost 
center. This issue was evaluated in a report by the Research Triangle 
Institute, International (RTI). The RTI final report can be found on 
RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_ratios_200807_Final.pdf. For a 
complete discussion of the RTI recommendations, public comments, and 
our responses, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68519 through 68527).
    We addressed the RTI finding that there was aggregation bias in 
both the IPPS and the OPPS cost estimation of expensive and inexpensive 
medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 
45467). Specifically, we created one cost center for ``Medical Supplies 
Charged to Patients'' and one cost center for ``Implantable Devices 
Charged to Patients,'' essentially splitting the then current cost 
center for ``Medical Supplies Charged to Patients'' into one cost 
center for low-cost medical supplies and another cost center for high-
cost implantable devices in order to mitigate some of the effects of 
charge compression. In determining the items that should be reported in 
these respective cost centers, we adopted commenters' recommendations 
that hospitals should use revenue codes established by the AHA's NUBC 
to determine the items that should be reported in the ``Medical 
Supplies Charged to Patients'' and the ``Implantable Devices Charged to 
Patients'' cost centers. For a complete discussion of the rationale for 
the creation of the new cost center for ``Implantable Devices Charged 
to Patients,'' a summary of public comments received, and our responses 
to those public comments, we refer readers to the FY 2009 IPPS final 
rule.
    The cost center for ``Implantable Devices Charged to Patients'' has 
been available for use for cost reporting periods beginning on or after 
May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we 
determined that a significant volume of hospitals were utilizing the 
``Implantable Devices Charged to Patients'' cost center. Because a 
sufficient amount of data from which to generate a meaningful analysis 
was available, we established in the CY 2013 OPPS/ASC final rule with 
comment period a policy to create a distinct CCR using the 
``Implantable Devices Charged to Patients'' cost center (77 FR 68225). 
For the CY 2014 OPPS, as we proposed, we are continuing 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.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 
50080), we finalized our proposal to create new standard cost centers 
for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging (MRI),'' 
and ``Cardiac Catheterization,'' and to require that hospitals report 
the costs and charges for these services under these new cost centers 
on the revised Medicare cost report Form CMS 2552-10. As we discussed 
in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI 
also found that the costs and charges of CT scans, MRIs, and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
concluded that both the IPPS and the OPPS relative payment weights 
would better estimate the costs of those services if CMS were to add 
standard costs centers for CT scans, MRIs, and cardiac catheterization 
in order for hospitals to report separately the costs and charges for 
those services and in order for CMS to calculate unique CCRs to 
estimate the cost from charges on claims data. We refer readers to the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more 
detailed discussion on the reasons for the creation of standard cost 
centers for CT scans, MRIs, and cardiac catheterization. The new 
standard cost centers for CT scans, MRIs, and cardiac catheterization 
were effective for cost report periods beginning on or after May 1, 
2010, on the revised cost report Form CMS-2552-10.
    Using the December 2012 HCRIS update which we used to estimate 
costs in the CY 2014 OPPS ratesetting process, as discussed in the CY 
2014 OPPS/ASC proposed rule (78 FR 43549), we were able to calculate a 
valid implantable device CCR for 2,936 hospitals, a valid MRI CCR for 
1,853 hospitals, a valid CT scan CCR for 1,956 hospitals, and a valid 
Cardiac Catheterization CCR for 1,367 hospitals. We believed that there 
was a sufficient amount of data in the Form CMS 2552-10 cost reports 
from which to generate a meaningful analysis of the impact on CCRs 
associated with using the new MRI, CT, and cardiac catheterization cost 
centers. We provided the data analyses in Tables 2 and 3 of the 
proposed rule (and are republishing them below) demonstrating the 
changes as a result of including the distinct CCRs calculated from the 
new standard cost centers into the CY 2014 OPPS ratesetting process.
BILLING CODE 4120-01-P

[[Page 74842]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.262


[[Page 74843]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.263

BILLING CODE 4120-01-C
    In our CY 2014 OPPS/ASC proposed rule discussion, we noted that the 
estimated changes in geometric mean estimated APC cost of using data 
from the new standard cost centers for CT scans and MRIs appeared 
consistent with RTI's analysis of cost report and claims data in the 
July 2008 final report (pages 5 and 6). RTI concludes that ``in 
hospitals that aggregate data for CT scanning, MRI, or nuclear medicine 
services with the standard line for Diagnostic Radiology, costs for 
these services all appear substantially overstated, while the costs for 
plain films, ultrasound and other imaging procedures are 
correspondingly understated.'' We also noted that there were limited 
additional impacts in the implantable device-related APCs from adopting 
the new cost report form CMS 2552-10 because we had used data from the 
standard cost center for implantable medical devices in CY 2013 OPPS 
ratesetting, as discussed above.
    As we have indicated in prior rulemaking (77 FR 68223 through 
68225), once we have determined that cost report data for the new 
standard cost centers were sufficiently available, we would analyze 
that data and, if appropriate, we would propose to use the distinct 
CCRs for new standard cost centers described above in the calculation 
of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43550), we have conducted our analysis and 
concluded that we should develop distinct CCRs for each of the new cost 
centers and use them in ratesetting. Therefore, beginning in the CY 
2014 OPPS, we proposed to calculate the OPPS relative payment weights 
using distinct CCRs for cardiac catheterization, CT scan, and MRI and 
to continue using a distinct CCR for implantable medical devices. 
Section XXIII. of this final rule with comment period includes the 
impacts of calculating the CY 2014 OPPS relative payment weights using 
these new standard cost centers.
    Comment: Commenters generally supported the proposals to implement 
the standard cost center CCRs for implantable devices and cardiac 
catheterization. However, many commenters requested that CMS reconsider 
the impact of distinct CCRs for MRI and CT scan cost centers before 
adopting them. Various commenters opposed the implementation of 
distinct MRI and CT scan CCRs, expressing concern that doing so would 
result in very low CCRs for these services because of gross hospital 
cost reporting practices that allocate capital costs for MRIs and CT 
scans across the entire hospital, rather than to the appropriate CT 
scan and MRI cost centers. Specifically, commenters reported that some 
hospitals currently use an imprecise ``square feet'' allocation 
methodology for the costs of large moveable equipment like CT scan and 
MRI machines. They indicated that while CMS recommends using two 
alternative allocation methods, ``direct assignment'' or ``dollar 
value,'' as a more accurate methodology for directly assigning 
equipment costs, industry analysis suggests that approximately only 
half of the reported cost centers for CT scans and MRIs rely on these 
preferred methodologies. The commenters expressed concern that ``square 
feet'' allocation results in CCRs that lack face validity because the 
proposed CCRs for CT scans and MRIs are less than the proposed CCR for 
general diagnostic radiology, inaccurately reflecting the higher 
resources used for MRIs and CT scans relative to the less expensive 
plain film x-rays. These commenters also noted that, under the CY 2014 
OPPS proposed policy of using standard CT and MRI cost center data from 
the Medicare cost report Form CMS 2552-10, payment for certain x-rays 
would be similar to that

[[Page 74844]]

of CT imaging services, despite their belief that CT services would 
cost significantly more to perform. Other commenters suggested that if 
CMS were to finalize the new CCRs, CMS should only use cost report data 
that meet minimum data quality standards, such as only including: (1) 
Cost report data based on dollar value or direct assignment cost 
allocation methods; (2) ``plausible'' costs for CT and MRI cost 
centers; and (3) data when there is evidence of reclassified costs from 
diagnostic radiology to standard CT and MRI cost centers. Commenters 
also raised concerns with CMS' analysis and indicated that similarity 
of the APC payment impacts in the CY 2014 OPPS proposed rule and those 
in the RTI report did not confirm the validity of the proposed CCRs. 
Commenters asserted that more time is needed by hospitals to modify 
their cost reporting practices, while other commenters suggested that 
it was unrealistic to expect hospitals to adopt cost allocation methods 
that would improve the accuracy of the cost data at all, due to the 
significant expenses involved and the limited benefit to each 
individual hospital.
    Commenters also noted that the Deficit Reduction Act (DRA) of 2005 
sets the technical component (TC) of advanced imaging services under 
the Medicare Physician Fee Schedule (MPFS) to the lesser of: (1) The 
payment under the MPFS; or (2) the payment under the OPPS. The 
commenters stated that, as proposed, the separate cost centers for MRI 
and CT scans would result in significant cuts to the MPFS technical 
component payments and that such payment cuts could affect beneficiary 
access to care. The commenters urged CMS not to use the proposed CCRs 
for MRIs and CT scans until the payment effects have been thoroughly 
analyzed.
    Response: We appreciate the comments regarding the use of standard 
cost center CCRs for implantable devices, MRIs, CT scans, and cardiac 
catheterization. We appreciate the support for our proposal to use 
distinct CCRs for implantable devices and cardiac catheterization. We 
have reviewed the comments objecting to implementation of distinct CCRs 
for MRIs and CT scans. We note that the new standard cost centers for 
CT scans, MRIs, and cardiac catheterization have been in effect since 
cost reporting periods beginning on or after May 1, 2010, on the 
revised Medicare cost report Form CMS-2552-10. Therefore, the cost 
reports that we are using to develop the CY 2014 OPPS relative payment 
weights were either the first or the second opportunity for hospitals 
to submit cost reports with the new CT scan and MRI cost centers (lines 
57 and 58 of Worksheets A and C, Part I of the Form CMS-2552-10), 
depending on the hospital's cost reporting period. Simultaneous with 
implementing the new CT scan and MRI cost centers, in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50077) and the CY 2011 OPPS/ASC final rule 
(75 FR 71824), we also notified hospitals of the need and importance of 
properly reporting the capital costs of moveable equipment on the 
Medicare cost report.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078), we explained 
that, in accordance with Section 104 of CMS Pub. 15-1, Chapter 1, CT 
scans and MRIs are major moveable equipment, and the costs should be 
reported together with the rest of the hospital's major moveable 
equipment cost in the Capital-Related Costs--Moveable Equipment cost 
centers on Worksheet A (lines 2 and 4 on the Form CMS-2552-96 and line 
2 on the Form CMS-2552-10). The costs in these cost centers are 
allocated to all the hospital's cost centers that use major moveable 
equipment (including CT and MRI), using ``dollar value'' (which is the 
``recommended'' or default statistical basis, in accordance with the 
cost reporting instructions contained in Section 4095 of CMS Pub. 15-2, 
for the Form CMS-2552-10). Alternatively, the hospital may have 
obtained the contractor's approval under Section 2313 of CMS Pub. 15-1 
to use the simplified cost allocation methodology known as ``square 
feet.'' However, a hospital that historically has been using ``square 
feet'' and is concerned that this method of allocation may result in 
inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and 
other ancillary cost centers may request contractor approval in 
accordance with Section 2307 of the CMS Pub. 15-1 to use the ``direct 
assignment'' allocation method, and directly assign the cost of 
moveable equipment to all of the hospital's cost centers that use 
moveable equipment, including CT scans and MRIs, using the provider's 
routine accounting process. This would ensure that the cost of the CT 
scanning and MRI equipment would be reflected in the CCR that would be 
calculated for those departments and that would be used to estimate the 
cost of CT scan and MRI services. In any case, hospitals should correct 
their cost reporting practices to come into compliance with CMS' 
longstanding policy regarding the ``Capital-Related Costs--Moveable 
Equipment'' cost center, by either using the recommended statistical 
allocation method of ``dollar value'' for costs in Worksheet A, Column 
2 for Capital- Related Costs--Moveable Equipment or by requesting 
contractor approval in accordance with Section 2307 of CMS Pub. 15-1 to 
use the ``direct assignment'' allocation method. In the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53283), we reiterated this policy, and added 
that ``Hospitals that still need to correct their cost reporting 
practices in this regard should do so soon'' so that distinct CT and 
MRI cost center CCRs would accurately reflect the costs associated with 
providing those services.
    In the CY 2014 OPPS/ASC proposed rule, we provided information 
about the CT and MRI cost center CCRs and the estimated effects on APC 
payment of adopting those cost centers. We noted the similarities 
between our estimations and the RTI report results not only to 
demonstrate that they were generally consistent with each other, but to 
again note that any concerns and criticisms of the data and its 
corresponding impact on the payment rates would be the same as were 
expected when the report was initially published in July 2008, absent 
any improvements in cost reporting practice. We further note that some 
of the concerns that commenters described related to differentials in 
payment for plain film x-rays based on proposed CY 2014 OPPS payment 
rates being similar to those of the CT and MRI services have abated 
because the ancillary services and diagnostic tests on the bypass list 
packaging proposals are not being finalized for CY 2014. Various 
packaged items and services under those proposals may have created some 
of the estimated increase in service cost for plain film x-rays.
    While some commenters believe that it is unrealistic for hospitals 
to adopt cost allocation methods that improve data and payment 
accuracy, we believe that those recommended changes are critical in the 
shared goal of developing OPPS relative payment weights that accurately 
reflect service costs. We also believe that because approximately half 
of hospitals reporting either the new CT scan or MRI standard cost 
center thus far have adopted one of the more accurate cost allocation 
methods, other hospitals also should be able to do so. Of the 1,961 
hospitals reporting a new CT scan standard cost center, 1,055 hospitals 
reported using either ``direct assignment'' or ``dollar value'' as the 
cost allocation method. Similarly, of the 1,871 hospitals reporting a 
new MRI standard cost center, approximately 985 hospitals report using 
either ``direct assignment'' or ``dollar value'' as the

[[Page 74845]]

cost allocation method. Commenters have previously recognized the 
significant impact that the CT scan and MRI standard cost center data 
would have on multiple payment systems, and we believe that the 
significant effects of these data on payment should inherently 
encourage more accurate cost reporting (75 FR 71824). Standard cost 
centers for CT and MRI services were developed in the revised Medicare 
cost report Form CMS-2552-10 to more accurately capture the costs 
associated with providing these important services. Not including the 
cost report data derived from these cost centers in ratesetting with no 
future indication of improvement would be contrary to their purpose and 
our goal to develop OPPS relative payment weights that accurately 
reflect service costs.
    We have considered the public comments recommending that if CMS 
does finalize distinct CCRs for CT scans and MRIs for the OPPS relative 
payment weights, CMS adopt certain minimum quality standards, such as 
using only cost report data of hospitals that use either direct 
assignment or the dollar value statistical allocation method, have at 
least $250,000 of cost in the CT scan or MRI cost center, and have 
reclassified overhead costs from the diagnostic radiology cost center 
to the CT scan and/or MRI cost centers. We appreciate the commenters' 
shared concern surrounding the goal of using the best available 
information to estimated costs associated with these new standard cost 
centers.
    For the FY 2014 IPPS/LTCH PPS final rule, we did not agree with the 
adoption of commenters' suggested minimum data standards because doing 
so would have ignored the fact that many hospitals have chosen (at 
least up to this point) to employ the square feet statistical 
allocation methodology, perhaps for reasons unrelated to the costs of 
MRIs and CT scans, and, therefore, those data reflect, in large part, 
the best available data that we have. It also is not administratively 
feasible for CMS to determine, using HCRIS data, whether hospitals have 
reclassified overhead costs from the diagnostic radiology cost center 
to the CT scan and/or MRI cost centers. However, in the FY 2014 IPPS/
LTCH PPS final rule, we recognized that while only a fraction of the 
negative impact would be manifested in the IPPS MS-DRGs, the OPPS 
relative payment weights would be more significantly affected by the 
adoption of the new standard cost center CCRs (78 FR 50521).
    We took note of the many comments regarding the ramifications of 
developing distinct CT scan and MRI CCRs on beneficiary access to care 
and other payment systems. We understand that any such change could 
have significant payment impacts under the MPFS where the TC payment 
for many imaging services is capped at the OPPS payment. These 
significant payment effects based on adoption of the new CT scan and 
MRI standard cost center CCRs further underscore the need for accurate 
cost reporting for ratesetting purposes. Although these payment effects 
are significant, we do not believe that they would likely significantly 
affect beneficiary access to imaging because imaging is readily 
available at different sites of service and the magnitude of the 
payment effects are not so drastic that providers and suppliers of 
imaging would likely discontinue offering CT and MRI services.
    We appreciate the concerns expressed by the commenters related to 
payment changes of implementing these cost center CCRs, and the 
importance of not providing an incentive for hospitals to furnish, or 
not furnish, certain services. However, we are not convinced that 
further delay or further trimming of CCR values is necessary in order 
to implement all of the proposed CCRs. Although hospitals have been 
permitted to use the alternative basis cost allocation (that is, 
``square feet'') under Section 2313 of CMS Pub. 15-1, this methodology 
does not ensure precise CCRs for CT scans and MRIs. Therefore, we 
encouraged hospitals over the past several years to use the most 
precise cost reporting methods in response to the new cost report 
lines. Specifically, the longstanding cost report instructions 
contained in Section 4020 (previously Section 3617) of CMS Pub. 15-2 
state that ``The statistical basis shown at the top of each column on 
Worksheet B-1 is the recommended basis of allocation of the cost center 
indicated which must be used by all providers completing this form 
(Form CMS-2552-10), even if a basis of allocation other than the 
recommended basis of allocation was used in the previous iteration of 
the cost report (Form CMS-2552-96).'' Under Table 1 of the Medicare 
cost report, which lists the Record Specifications for the cost centers 
on Worksheet B-1, ``dollar value'' is specified as the recommended 
statistical allocation method for Column 2, Capital-Related Costs--
Moveable Equipment. While the ``dollar value'' statistical allocation 
method is more precise than ``square feet,'' to ensure even more 
precise CCRs for CT scans and MRIs, 90 days prior to the beginning of 
their next cost reporting period, hospitals may request permission from 
their Medicare contractors in accordance with Section 2307 of CMS Pub. 
15-1 to use the ``direct assignment'' allocation method on Worksheet B, 
Part II, Column 0. Although ``direct assignment'' is the preferred and 
most precise allocation method, hospitals that do not have the 
resources to directly assign the costs of every cost center are 
strongly encouraged to instead use the ``dollar value'' statistical 
allocation method. (We note that, under Section 2313 of CMS Pub. 15-1, 
hospitals not currently using ``dollar value'' should notify their 
contractor of their intention to switch their statistical allocation 
basis to ``dollar value'' at least 90 days prior to the end of a cost 
reporting period.) We also intend to communicate with the Medicare 
contractors to facilitate approval of hospitals' requests to switch 
from the square feet statistical allocation method to the ``direct 
assignment'' or ``dollar value'' allocation method for the costs of 
major moveable equipment. We believe that, by adopting more refined 
CCRs, we are fostering more careful cost reporting. Therefore, we 
generally do not believe that the concerns expressed by the commenters 
warrant further delay in implementing the proposed CCRs for CT scans 
and MRIs for use in OPPS ratesetting.
    However, we recognize the commenters' concerns with regard to the 
application of the new CT and MRI standard cost center CCRs and their 
use in OPPS ratesetting. As compared to the IPPS, there is increased 
sensitivity to the cost allocation method being used on the cost report 
forms for these new standard imaging cost centers under the OPPS due to 
the limited size of the OPPS payment bundles and because the OPPS 
applies the CCRs at the departmental level for cost estimation 
purposes. As a means of addressing the commenters' concerns related to 
the new CT and MRI standard cost centers, when calculating the CT and 
MRI cost center CCRs used to estimate costs for the CT and MRI APCs 
listed in Table 4 below, we removed all claims from providers that use 
``square feet'' as a cost allocation method. We identified providers 
using ``square feet'' as the cost allocation method by extracting HCRIS 
data on Worksheet B-1. Table 4 displays information about the relative 
effect on CT and MRI APC payments after removing cost data for 
providers that report CT and MRI standard cost centers using ``square 
feet'' as the cost allocation method. Table 5 below provides 
statistical values based on the CT and MRI standard cost center CCRs

[[Page 74846]]

using the different cost allocation methods.
[GRAPHIC] [TIFF OMITTED] TR10DE13.264

    As we have stated in prior rulemaking (77 FR 53281 through 53283 
and 77 FR 68224), once we determined that a sufficient amount of cost 
report data were available from which to generate a meaningful 
analysis, we would propose, and finalize if appropriate, the use of the 
distinct CCRs described above in the calculation of the OPPS relative 
payment weights. We believe that the analytic findings described in the 
proposed rule, and the volume of hospitals that have ``valid'' CCRs 
described above, computed using the July 2013 HCRIS update, support our 
original decision to create new cost centers and distinct CCRs for 
implantable devices, MRIs, CT scans,

[[Page 74847]]

and cardiac catheterization, and we see no reason to further delay 
implementation of the CCRs of each of these cost centers for the OPPS. 
Therefore, we are finalizing a policy for the CY 2014 OPPS to remove 
claims from providers that use a cost allocation method of ``square 
feet'' to calculate CCRs used to estimate costs associated with the CT 
and MRI APCs identified in Table 4. This change allows hospitals 
additional time to use one of the more accurate cost allocation 
methods, and thereby improve the accuracy of the CCRs on which the OPPS 
relative payment weights are developed. As part of this transitional 
policy to estimate the CT and MRI APC relative payment weights using 
only cost data from providers that do not use ``square feet'' as the 
cost allocation statistic, we will sunset this policy in 4 years once 
the updated cost report data become available for ratesetting purposes. 
We believe that 4 years is sufficient time for hospitals that have not 
done so to transition to a more accurate cost allocation method and for 
the related data to be available for ratesetting purposes. Therefore, 
in CY 2018, we will estimate the CT and MRI APC relative payment 
weights using cost data from all providers, regardless of the cost 
allocation statistic employed.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to use data from the 
``Implantable Devices Charged to Patients'' and ``Cardiac 
Catheterization'' cost centers to create distinct CCRs for use in 
calculating the OPPS relative payment weights for CY 2014. For the 
``Magnetic Resonance Imaging (MRI)'' and ``Computed Tomography (CT) 
Scan'' APCs identified in Table 4 earlier in this section, we are 
modifying our proposal so that the final policy will remove claims from 
cost modeling for those providers using ``square feet'' as the cost 
allocation statistic.
2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the OPPS payment rates for CY 2014. 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 2012 claims that were used to 
calculate the final payment rates for the CY 2014 OPPS.
    In the history of the OPPS, we have traditionally established the 
scaled relative weights on which payments are based using APC median 
costs, which is a process described in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74188). However, as discussed in more detail 
in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68259 through 68271), we finalized the use of geometric 
mean costs to calculate the relative weights on which the CY 2013 OPPS 
payment rates were based. While this policy changed the cost metric on 
which the relative payments are based, the data process in general 
remained the same, under the methodologies that we used to obtain 
appropriate claims data and accurate cost information in determining 
estimated service cost. For CY 2014, as we proposed, we are continuing 
to use geometric mean costs to calculate the relative weights on which 
the CY 2014 OPPS payments rates are based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.f. of this final rule with comment period to calculate the costs 
we used to establish the relative weights used in calculating the OPPS 
payment rates for CY 2014 shown in Addenda A and B to this final rule 
with comment period (which are available via the Internet on the CMS 
Web site). We refer readers to section II.A.4. of 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. One commenter 
suggested a ``dampening policy'' that would limit declines in payment 
service from year to year.
    Response: As previously discussed in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68225), 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, changes in hospital costs and charges each year resulting in 
changes to the CCRs, reassignments of HCPCS codes, changes to OPPS 
payment policy (for example, changes to packaging policies), 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. 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 2012 
hospital outpatient claims processed through June 30, 2013, to 
calculate the geometric mean costs of APCs that underpin the relative 
payment weights for CY 2014. (For the proposed rule, we used CY 2012 
hospital outpatient claims processed through December 31, 2012.) To 
begin the calculation of the relative payment weights for CY 2014, we 
pulled all claims for outpatient services furnished in CY 2012 from the 
national claims history file. This is not the population of claims paid 
under the OPPS, but all outpatient claims (including, for example, 
critical access hospital (CAH) claims and hospital claims for clinical 
laboratory tests for persons who are neither inpatients nor outpatients 
of the hospital).

[[Page 74848]]

    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 125 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community 
Mental Health Center). Other bill types are not paid under the OPPS; 
therefore, these claims were not used to set OPPS payment.
    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.
    Prior to CY 2013, our payment policy for nonpass-through separately 
paid drugs and biologicals was based on a redistribution methodology 
that accounted for pharmacy overhead by allocating cost from packaged 
drugs to separately paid drugs. This methodology typically would have 
required us to reduce the cost associated with packaged coded and 
uncoded drugs in order to allocate that cost. However, for CY 2013, we 
paid for separately payable drugs and biologicals under the OPPS at 
ASP+6 percent, based upon the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not 
redistribute the pharmacy overhead costs from packaged drugs to 
separately paid drugs. For the CY 2014 OPPS, as we proposed, we are 
continuing the CY 2013 payment policy for separately payable drugs and 
biologicals. We refer readers to section V.B.3. of this final rule with 
comment period for a complete discussion of our CY 2014 final payment 
policy for separately paid drugs and biologicals.
    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 2013 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 2014, as we proposed, we are continuing the policy we 
implemented for CY 2013 to exclude line-item data for pass-through 
drugs and biologicals

[[Page 74849]]

(status indicator ``G'' for CY 2012) and nonpass-through drugs and 
biologicals (status indicator ``K'' for CY 2012) 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 2013 OPPS/ASC final rule with comment period (77 FR 68226) 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 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.
    For the CY 2014 OPPS, as part of our packaging of certain clinical 
diagnostic laboratory tests, we also apply the line item trim to these 
services if they did not receive payment in the claims year. Removing 
these lines ensures that, in establishing the CY 2014 OPPS relative 
payments weights, we appropriately allocate the costs associated with 
packaging these services. For a more detailed discussion of the final 
policy to package certain clinical diagnostic laboratory tests, we 
refer readers to section II.A.3.b.(3) of this final rule with comment 
period.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2014 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.) We note that, under the final CY 2014 OPPS packaging policy, we 
are not deleting status indicator ``X'' and not revising the title and 
description of status indicator ``Q1'' to reflect that deletion, as 
discussed in sections II.A.3. and XI. of this final rule with comment 
period. For CY 2014, as we proposed, we are continuing our current 
policy of defining major procedures as any HCPCS code having a status 
indicator of ``S,'' ``T,'' or ``V''; 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 2014, we had originally proposed to delete 
status indicator ``X'' as part of our proposal to package ancillary 
services under that status indicator. However, as discussed in section 
II.A.3. of this final rule with comment period, we are not establishing 
that policy in CY 2014 and may reexamine that policy in the future. 
Therefore, for CY 2014, we are defining HCPCS codes having a status 
indicator of ``X'' as major procedure, due to the retention of the 
status indicator. For CY 2014, 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 2014 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.f. 
of this final rule with comment period.
    Specifically, 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.

[[Page 74850]]

    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment, and do not contain a 
code for a separately payable or packaged OPPS service. Non-OPPS claims 
include claims for therapy services paid sometimes under the OPPS but 
billed, in these non-OPPS cases, with revenue codes indicating that the 
therapy services would be paid under the Medicare Physician Fee 
Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``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).
    As proposed, 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 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 2014 
``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.f.(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 2014 OPPS relative 
payment weights are based. Having identified ``single session'' claims 
for the imaging composite APCs, we reassessed the claim to determine 
if, after removal of all lines for bypass codes, including the 
``overlap bypass codes,'' a single unit of a single separately payable 
code remained on the claim. If so, we attributed the packaged costs on 
the claim to the single unit of the single remaining separately payable 
code other than the bypass code to create a ``pseudo'' single procedure 
claim. We also identified line-items of overlap bypass codes as a 
``pseudo'' single procedure claim. This allowed us to use more claims 
data for ratesetting purposes.
    As we proposed, we also examined the multiple procedure minor 
claims to determine whether we could create ``pseudo'' single procedure 
claims. Specifically, where the claim contained multiple codes with 
status indicator ``Q1'' (``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 2013 relative payment weight, and set the units to one on 
that HCPCS code to reflect our policy of paying only one unit of a code 
with a status indicator of ``Q1.'' We then packaged all costs for the 
following into a single cost for the ``Q1'' HCPCS code that had the 
highest CY 2013 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 2013 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 2013 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 2013 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 2013 relative payment weight; other codes with status 
indicator ``Q2''; and other packaged HCPCS codes and packaged revenue

[[Page 74851]]

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 2013 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 2013 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 
2013 relative payment weights. If a status indicator ``Q1'' HCPCS code 
had a higher CY 2013 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 XI.A. of this final 
rule with comment period.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to multiple procedure minor claims. As has 
been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral 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.
    We proposed to continue to apply the methodology described above 
for the purpose of creating ``pseudo'' single procedure claims for the 
CY 2014 OPPS.
    We did not receive any public comments on this proposal, and 
therefore are finalizing our proposal to continue to apply the 
methodology described above for the purpose of creating ``pseudo'' 
single procedure claims for the CY 2014 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 6 below 
that appeared on the claim without a HCPCS code into the cost of the 
single major procedure remaining on the claim. For a more complete 
discussion of our final CY 2014 OPPS packaging policy, we refer readers 
to section II.A.3. of this final rule with comment period.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, and as we proposed, we 
are continuing to compare the final list of packaged revenue codes that 
we adopt for CY 2014 to the revenue codes that the I/OCE will package 
for CY 2014 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 2014, as we did for CY 2013, we reviewed the changes to 
revenue codes that were effective during CY 2012 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we proposed to package for CY 2014. We believe that the 
charges reported under the revenue codes listed in Table 6 below 
continue to reflect ancillary and supportive services for which 
hospitals report charges without HCPCS codes. Therefore, for CY 2014, 
we proposed to continue to package the costs that we derive from the 
charges reported without HCPCS codes under the revenue codes displayed 
in Table 6 below for purposes of calculating the geometric mean costs 
on which the final CY 2014 OPPS/ASC payment rates are based.
    Comment: One commenter recommended that CMS consider examining 
revenue codes not currently on the list of CY 2014 packaged revenue 
codes for potential addition to the list of packaged revenue codes. The 
commenter stated that with increased packaging of ancillary and 
adjunctive services, it becomes more important to ensure that all OPPS 
service costs are packaged into the pertinent OPPS furnished service.
    Response: In the CY 2010 OPPS/ASC proposed rule and the final rule 
with comment period, we reviewed the revenue code-to-cost center 
crosswalk and the revenue codes which are considered for use in OPPS 
ratesetting. Although there was an extensive discussion in the CY 2010 
OPPS/ASC final rule with comment period about the use of revenue codes 
in OPPS ratesetting, we did not receive any public comments regarding 
additions or removals of revenue codes from the packaged revenue code 
list (78 FR 43554). Similarly, commenters' specific concerns have 
typically been isolated to the adoption of the new standard cost center 
CCRs in the Medicare cost report Form CMS-2552-10. However, we 
recognize the commenter's concern and believe that an examination of 
both the current packaged revenue code list and potential addition or 
removal of revenue codes in the future may be worth performing.
    After consideration of the public comments we received, we are 
finalizing the proposed packaged revenue codes for CY 2014, which are 
identified in Table 6 below, without

[[Page 74852]]

modification. We note that these revenue codes include only revenue 
codes that were in effect in CY 2012, the year of the claims data on 
which the final CY 2014 OPPS payment rates are based.
BILLING CODE 4120-01-P

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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 Medicare administrative contractor (MAC) was 
required to allocate the sum of charges for services with a status 
indicator equaling ``S'' or ``T'' based on the relative payment weight 
of the APC to which each code was assigned. We do not believe that 
these charges, which were token charges as submitted by the hospital, 
are valid reflections of hospital resources. Therefore, we deleted 
these claims. We also deleted claims for which the charges equaled the 
revenue center payment (that is, the Medicare payment) on the 
assumption that, where the charge equaled the payment, to apply a CCR 
to the charge would not yield a valid estimate of relative provider 
cost. We proposed to continue these processes for the CY 2014 OPPS.
    For the remaining claims, we proposed to then standardize 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

[[Page 74855]]

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 
proposed to use the pre-reclassified wage indices for standardization 
because we believe that they better reflect the true costs of items and 
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most 
accurate unadjusted 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 119 million 
claims were left. Using these approximately 119 million claims, we 
created approximately 125 million single and ``pseudo'' single 
procedure claims, of which we used approximately 124 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 
2014 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 calculated the APC relative payment 
weights using geometric mean costs, and we do the same for CY 2014. 
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 2014 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 2014 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, in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS 
relative payment weights based on geometric mean costs, we also applied 
the 2 times rule based on geometric mean costs. For the CY 2014 OPPS, 
we are continuing to develop the APC relative payment weights based on 
geometric mean costs.
    We note that, for purposes of identifying significant HCPCS codes 
for examination in the 2 times rule, we consider codes that have more 
than 1,000 single major claims or codes that have both greater than 99 
single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC geometric mean cost to be 
significant. This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 124 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 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 proposed CY 2014 policy to continue to base the 
relative payment weights on geometric mean costs, we believe that this 
same consideration for identifying significant HCPCS codes should apply 
because the principles are consistent with their use in the median-
based cost methodology. Unlisted codes are not used in establishing the 
percent of claims contributing to the APC, nor are their costs used in 
the calculation of the APC geometric mean. Finally, we reviewed the 
geometric mean costs for the services for which we pay separately under 
this final rule with comment period, and we reassigned HCPCS codes to 
different APCs where it was necessary to ensure clinical and resource 
homogeneity within the APCs. The APC geometric means were recalculated 
after we reassigned the affected HCPCS codes. Both the HCPCS code-
specific geometric means and the APC geometric means were weighted to 
account for the inclusion of multiple units of the bypass codes in the 
creation of ``pseudo'' single procedure claims.
    Comment: Several commenters remarked on the quality of the data and 
the degree to which technical errors caused modeling problems 
throughout the rest of the system. These commenters believed that CMS 
did not provide adequate data to allow hospitals to assess the impact 
of the major revisions. Commenters also commented on the complexity 
inherently in the payment system and increased by the many interactions 
between various proposed and existing policies. These commenters 
remarked that CMS had not fully explained the impacts of each proposal 
in a manner that would allow stakeholders to provide meaningful input. 
Based on the assertions about a lack of transparency, impact analysis, 
guidance on how rates were developed, policy details, technical errors, 
etc., commenters suggested that those proposals be delayed until more 
accurate and detailed information was available. Other commenters 
stated that CMS had ignored previous HOP Panel suggestions on analyzing 
the impact of expanded packaging policies, and believed that the 
potential for unintended downstream consequences existed.
    Response: We appreciate the commenters' concerns with regards to 
the complexity of modeling the OPPS. There are many interactions 
between the various goals and pieces of the payment system. For 
example, as discussed in section II.A.1.b. of this final rule with 
comment period, the goal of extracting more data from the available 
claims through the bypass list process is also balanced by the impact 
of any packaged costs that may be redistributed as a result of that 
data process. In developing the CY 2014 OPPS/ASC proposed rule, we 
strived to provide as accurate information as possible with regard to 
the calculated rates. We discovered that, in the process of applying 
established and proposed methodologies to develop the CY 2014 proposed 
OPPS and ASC payment rates, specific cost estimation errors occurred in 
the OPPS modeling process. We released corrected data files on August 
28, 2013, and extended the comment period to September 16, 2013, on the 
technical corrections noted in the correcting document published in the 
Federal Register on September 6, 2013 (78 FR 54842). While, in a budget 
neutral system, changes to any OPPS

[[Page 74856]]

relative payment weights have redistributional effects throughout the 
system, any policy change or data update has the potential to do the 
same. Therefore, the technical corrections described in the correcting 
document were made to address issues where the calculated payment rates 
were not appropriately reflective of the proposed policies. While, as 
discussed in the correcting document to the CY 2014 OPPS/ASC proposed 
rule, new proposed visit APC 0634 contained a technical error that 
excluded certain packaged costs from the APC, the fact that we proposed 
to use APC 0634 as the baseline APC for scaling the aggregate CY 2014 
OPPS weight for budget neutrality, did not distort the relativity of 
the OPPS payment weights. As discussed in section II.A.4. of this final 
rule with comment period, the selection of the base APC or any other 
number, from which to establish the relative payment weights, does not 
have an impact because OPPS weights are scaled for budget neutrality.
    With regard to the adequacy of available data, each year, CMS makes 
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 display of the proposed and final 
rules. In addition, 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, we 
believe commenters 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 their 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 geometric mean cost for every independent 
service. However, commenters 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 this 
and prior proposed and final rules. Among the public comments received 
in response to the CY 2014 OPPS/ASC proposed rule, we received many 
detailed public comments that included data analysis.
    We disagree that the CY 2014 OPPS policy proposals should be 
delayed as a result of the data concerns that commenters have raised. 
While we are sympathetic to the challenges that have been described, we 
develop policy and model the OPPS payment rates under those same 
constraints. In general, we have tried to limit the changes beyond the 
current year OPPS with regards to data modeling, so that little 
additional logic changes would be necessary and would instead be built 
off existing processes. While we continuously examine ways in which the 
data process could be simplified or made clearer, we also welcome and 
appreciate public comment with regards to potential improvements. 
Similarly, we appreciate the meaningful comments that stakeholders 
provide regarding ways that the cost modeling process could be more 
accurate or methods to extract more appropriate data from the claims 
available for OPPS cost modeling.
    The technical errors described in the correcting document published 
in the Federal Register on September 6, 2013 (78 FR 54842) were 
generally isolated to specific policy areas and did not substantively 
affect the proposed policies described in the CY 2014 OPPS/ASC proposed 
rule. The correcting document merely corrected the underlying data 
errors to conform to the proposed policies clearly intended in the 
preamble of the proposed rule.
    As commenters have described, modeling the OPPS payment rates can 
sometimes be a complex undertaking. We have tried to alleviate some of 
those concerns about the complexity and transparency of the OPPS cost 
modeling process by having an extensive discussion of the data process 
in the preamble discussion, through providing code lists, isolating the 
impacts of certain proposals in the regulatory impact analysis, and 
providing a claims accounting with documented claims volume throughout 
each stage of the process. Commenters have stated that CMS has not 
provided data regarding packaging policies to the Advisory Panel on 
Hospital Outpatient Payment (referred to in this document as the 
Panel). However, in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68573), the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60409 through 60412), the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71682 through 71868), the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74184 through 74185), and the CY 2013 OPPS/
ASC final rule final rule with comment period (77 FR 68273 through 
68274), we describe various data analyses we have provided to the Panel 
based on its recommendations.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2014 methodology for calculating the 
geometric mean costs upon which the CY 2014 OPPS payment rates are 
based.
    As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this 
final rule with comment period, in some cases, APC geometric mean costs 
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.f. of this final rule with comment period 
discusses the calculation of composite APC criteria-based geometric 
mean costs. Section VIII.B. of this final rule with comment period 
addresses the methodology for calculating the geometric mean costs for 
partial hospitalization services.
(2) Recommendations of the Panel Regarding Data Development
    At the August 2013 meeting of the Panel, we discussed the claims 
accounting process for the CY 2014 OPPS proposed rule, the proposed 
adoption of the new standard cost centers for CT, MRI, and cardiac 
catheterization in the new Medicare cost report Form CMS-2552-10, as 
well as the CY 2014 OPPS policy of calculating OPPS relative payment 
weights using geometric mean costs.
    At the August 2013 Panel meeting, the Panel made a number of 
recommendations related to the data process. The Panel's data-related 
recommendations and our responses follow.
    Recommendation: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that John Marshall, C.R.A., 
R.C.C, R.T., serve as chair of the Data Subcommittee.
    CMS Response: We are accepting this recommendation.
    In addition, the Panel requested that CMS provide additional 
information about the impacts of certain CY 2014 policy proposals at 
the 2014 spring

[[Page 74857]]

meeting. Depending upon the CY 2014 final policy decisions, we will 
consider providing additional relevant information to the Panel at the 
Spring 2014 Panel meeting.
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Device-Dependent APCs
    Historically, 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. The standard methodology for calculating 
device-dependent APC costs utilizes claims data that generally reflect 
the full cost of the required device by using only the subset of single 
procedure claims that pass the procedure-to-device and device-to-
procedure edits; do not contain token charges (less than $1.01) for 
devices; do not contain the ``FB'' modifier signifying that the device 
was furnished without cost to the provider, or where a full credit was 
received; and do not contain the ``FC'' modifier signifying that the 
hospital received partial credit for the device. 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 2014 OPPS/ASC proposed rule (78 FR 43558 through 43561), 
for CY 2014, we proposed in section II.A.2.e. to define 29 device-
dependent APCs as single complete services and to assign them to 
comprehensive APCs that would provide all-inclusive payments for those 
services. As we explained in that section, we proposed this policy as a 
further step to improve the accuracy and transparency of our payments 
for these services where the cost of the device is large compared to 
the other costs that contribute to the cost of the service. Table 5 of 
the proposed rule provided a list of the 39 APCs currently recognized 
as device-dependent APCs and identified those 29 APCs that we proposed 
to include in the comprehensive APCs proposal (78 FR 43557). We 
proposed to treat the remaining 10 device-dependent APCs by applying 
our standard APC ratesetting methodology to calculate their CY 2014 
payment rates. We initially adopted a specific device-dependent APC 
ratesetting methodology because commenters had previously expressed 
concerns that the costs associated with certain high-cost devices were 
not always being accurately reported and included in the calculation of 
relative payment weights for the associated procedures. As we stated in 
the proposed rule, we do not believe that it is necessary to continue 
to apply the more specific device-dependent APC ratesetting methodology 
to ensure accurate ratesetting for the 10 APCs that were not included 
in the comprehensive APCs proposal because hospitals now have had 
several years of experience reporting procedures involving implantable 
devices and have grown accustomed to ensuring that they code and report 
charges so that their claims fully and appropriately reflect the costs 
of those devices. Therefore, we believe that it is possible to 
calculate the payment rates for these APCs using our standard APC 
ratesetting methodology (78 FR 43556).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557), 
beginning in CY 2014, we also proposed to no longer implement 
procedure-to-device edits and device-to-procedure edits for any APCs. 
We explained that, under this proposal, hospitals would still be 
expected to adhere to the guidelines of correct coding and append the 
correct device code to the claim when applicable. However, claims would 
no longer be returned to providers when specific procedure and device 
code pairings do not appear on a claim. We stated that we believe that 
this is appropriate because of the experience hospitals now have had in 
coding and reporting these claims fully and because, for the more 
costly devices, the proposed comprehensive APCs would reliably reflect 
the cost of the device if it is included anywhere on the claim. 
Therefore, we do not believe that the burden on hospitals of adhering 
to the procedure-to-device edits and device-to-procedure edits, and the 
burden on the Medicare program of maintaining those edits, continue to 
be warranted. As with all other items and services recognized under the 
OPPS, we expect hospitals to code and report their costs appropriately, 
regardless of whether there are claims processing edits in place.
    Comment: Commenters urged CMS not to finalize its proposal to 
eliminate device-to-procedure edits and procedure-to-device edits in 
order to ensure continued complete and accurate cost reporting by 
hospitals. In addition, one commenter requested that CMS, if it elects 
to delete these edits, commit to only using complete and correctly 
coded claims from CY 2014 for the CY 2016 ratesetting process. Some 
commenters, while supporting elimination of the contractor edits, 
opposed dropping the use of the edit criteria when selecting the set of 
claims to be used to calculate the geometric mean costs of services. 
One commenter requested that CMS remove APC 0648 from the list of 
device-dependent APCs.
    Response: We continue to believe that the elimination of device-to-
procedure edits and procedure-to-device edits is appropriate due to the 
experience hospitals now have in coding and reporting these claims 
fully and because, for the more costly devices, the proposed 
comprehensive APCs would reliably reflect the cost of the device if it 
is included anywhere on the claim. We remind commenters that, under our 
proposed policy, hospitals would still be expected to adhere to the 
guidelines of correct coding and append the correct device code to the 
claim when applicable. As with all other items and services recognized 
under the OPPS, we expect hospitals to code and report their costs 
appropriately, regardless of whether there are claims processing edits 
in place. We expect the CY 2014 claims that we will use for the CY 2016 
ratesetting to reflect this correct coding and cost reporting. While we 
believe that device-to-procedure edits and procedure-to-device edits 
are no longer necessary at this time, we are sensitive to the 
commenters' concerns that all relevant costs for the 39 APCs currently 
recognized as device-dependent APCs are appropriately included in the 
claims that CMS will use for ratesetting. In light of those concerns, 
we are further assessing whether we need to continue claims processing 
edits requiring a device code to be on the claim under the 
comprehensive APCs in CY 2015.
    We believe that APC 0648 is appropriately included in the current 
list of device-dependent APCs, as APC 0648 is populated by HCPCS codes 
that usually, but not always, require that a device be implanted or 
used to perform the procedure.
    After consideration of the public comments we received, and in 
conjunction with our finalized comprehensive APC policy, which is fully 
discussed in section II.A.2.e. of this final rule with comment period, 
we are finalizing our proposal to no longer apply the current device-
dependent APC ratesetting methodology to the 10 currently recognized 
device-dependent APCs not included in the

[[Page 74858]]

comprehensive APC proposal and apply our standard APC ratesetting 
methodology to calculate their payment rates, but delaying the 
implementation of this finalized policy until CY 2015. For CY 2014, we 
will continue to apply the current device-dependent APC ratesetting 
methodology to the 39 currently recognized device-dependent APCs.
    Table 7 below provides a list of the 39 APCs currently recognized 
as device-dependent APCs for CY 2014 and identifies those 29 APCs that 
we are including in the finalized comprehensive APCs policy for CY 
2015.

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(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 2014 OPPS/ASC proposed rule (78 FR 43557), for CY 2014, 
we proposed to continue to establish payment rates for blood and blood 
products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past public comments indicating that the former OPPS 
policy of defaulting to the overall hospital CCR for hospitals not 
reporting a blood-specific cost center often resulted in an 
underestimation of the true hospital costs for blood and blood 
products. Specifically, in order to address the differences in CCRs and 
to better reflect hospitals' costs, we proposed to continue to simulate 
blood CCRs for each hospital that does not report a blood cost center 
by calculating the ratio of the blood-specific CCRs to hospitals' 
overall CCRs for those hospitals that do report costs and charges for 
blood cost centers. We 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 stated that we calculated the costs upon which 
the proposed CY 2014 payment rates for blood and blood products are 
based using the actual blood-specific CCR for hospitals that reported 
costs and charges for a blood cost center and a hospital-specific 
simulated blood-specific CCR for hospitals that did not report costs 
and charges for a blood cost center.
    We continue to believe 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 believe 
that it yields more accurate estimated costs for these products. We 
continue to believe that this methodology in CY 2014 would 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 did not receive any public comments on this proposal. Therefore, 
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 2014. We 
continue to believe that this methodology in CY 2014 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 note that, as discussed in section II.A.2.e. of this final rule 
with comment period, we are establishing comprehensive APCs that will 
provide all-inclusive payments for certain device-dependent procedures. 
Under this policy, we will include the costs of blood and blood 
products when calculating the overall costs of these comprehensive 
APCs. We note that we will continue to apply the blood-specific CCR 
methodology described in this section when calculating the costs of the 
blood and blood products that appear on claims with services assigned 
to the comprehensive APCs. Because the costs of blood and blood 
products will be reflected in the overall costs of the comprehensive 
APCs (and, as a result, in the payment rates of the comprehensive 
APCs), we will not make separate payments for blood and blood products 
when they appear on the same claims as services assigned to the 
comprehensive APCs.
    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 CY 2014 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 Source Payment
    Section 1833(t)(2)(H) of the Act provides that the Secretary shall 
create 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, in a manner that reflects the number, isotope, and 
radioactive intensity of the brachytherapy sources furnished and must 
include separate groups for palladium-103 and iodine-125 sources, and 
for stranded and non-stranded devices furnished on or after July 1, 
2007. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60533 through 60537), we adopted for CY 2010 the general OPPS 
prospective payment methodology for brachytherapy sources, consistent 
with section 1833(t)(2)(C) of the Act, with payment rates based on 
source-specific costs, which has been utilized for each year's 
brachytherapy source payment since CY 2010 (74 FR 60537; 75 FR 71980; 
76 FR 74162; 77 FR 68242). As we have previously stated, we believe 
that adoption of the general OPPS prospective payment methodology for 
brachytherapy sources is appropriate (77 FR 68240).
    Comment: Commenters expressed concern regarding CMS' brachytherapy 
source data and stated that there are longstanding problems with CMS' 
OPPS data used to set brachytherapy source payment rates. Commenters 
also stated that the brachytherapy source data continue to show huge 
variation in per unit costs across hospitals. Commenters noted that 
high dose rate (HDR) brachytherapy sources decay over a 90-day period 
and are used to treat multiple patients. Therefore, the commenters 
believed that the true cost of brachytherapy sources per use depends on 
the number of patients treated during the 90-day period, which makes it 
difficult to establish fair and adequate payment rates. Commenters also 
believed that CMS' claims data contain rank order anomalies between the 
high-activity palladium-103 source (HCPCS code C2635) and the low-
activity palladium-103 sources (HCPCS codes C2640 and C2641), and 
stated that the high-activity palladium-103 source always costs more 
than low-activity palladium-103 sources.
    Response: We believe that the claims data used for brachytherapy 
ratesetting

[[Page 74861]]

are adequate to ensure accurate payment for these services. Also, as we 
have stated in previous OPPS/ASC proposed and final rules, 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 (72 FR 66782; 74 FR 
60534; 75 FR 71979; 76 FR 74161; and 77 FR 68241). We have also 
explained in previous OPPS/ASC proposed and final rules that 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, and with the 
exception of outlier cases, the prospective payment is adequate to 
ensure access to appropriate care (72 FR 66782; 74 FR 60535; 75 FR 
71979; and 77 FR 68241). 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. In 
addition, relative payment weights are typically estimated using a 
smaller set of claims.
    As we have stated in previous OPPS/ASC proposed and final rules, we 
agree that HDR brachytherapy sources such as HDR irirdium-192 have a 
fixed active life and must be replaced every 90 days (75 FR 71980; 76 
FR 74162; and 77 FR 68242). 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, when 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 (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 
74162; and 77 FR 68242). For most of these OPPS services, our practice 
is to establish prospective payment rates based on the costs determined 
from hospitals' claims data to provide incentives for efficient and 
cost effective delivery of these services.
    In the case of high-activity and low-activity iodine-125 sources, 
our CY 2012 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 costs of 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, we do not have any information about the expected 
cost differential between high-activity and low-activity sources of 
various isotopes other than what is available in our claims and 
hospital cost report data (75 FR 71979; 76 FR 74162; and 77 FR 68242). 
For the high-activity palladium-103 source, only 7 hospitals reported 
this service in CY 2012, compared to 118 and 171 hospitals for the low-
activity palladium-103 sources described by HCPCS codes C2640 and 
C2641, respectively. As we stated regarding this issue in the CYs 2010, 
2011, 2012, and 2013 OPPS/ASC final rules with comment period, it is 
clear that fewer hospitals furnished the high-activity palladium-103 
source than the low-activity palladium-103 sources, and we expect that 
the hospital cost distribution for those hospitals could be different 
than the cost distribution of the large number of hospitals reporting 
the low-activity palladium-103 sources (74 FR 60535; 75 FR 71979; 76 FR 
74162; and 77 FR 68242).
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to set the payment rates for 
brachytherapy sources using our established prospective payment 
methodology, which is based on geometric mean costs. The CY 2014 final 
payment rates for brachytherapy sources are found in Addendum B to this 
final rule with comment period.
e. Establishment of Comprehensive APCs
(1) Definition and General Principles
    During the initial development of a proposal for an outpatient 
prospective payment system in 1998 (63 FR 47552 through 48036), we 
considered developing the payment system based on a comprehensive 
outpatient bundle, as opposed to on a HCPCS component level. In 2000, 
we implemented an OPPS based generally on making payments at the HCPCS 
level (65 FR 18434 through 18820). Since then, however, we have been 
steadily moving the OPPS towards a more comprehensive approach that 
increases flexibility and opportunity for efficiencies in a prospective 
system.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, 
we proposed to create 29 comprehensive APCs to replace 29 existing 
device-dependent APCs. We proposed to define a comprehensive APC as a 
classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Because a comprehensive APC would treat all individually 
reported codes as representing components of the comprehensive service, 
our proposal was to make a single prospective payment based on the cost 
of all individually reported codes that represent the provision of a 
primary service and all adjunctive services provided to support that 
delivery of the primary service. Specifically, we proposed to create 
comprehensive APCs for the 29 most costly device-dependent services, 
where the cost of the device is more expensive than the other costs 
that contribute to the cost of delivering the primary service.
    We stated in the proposed rule that we believe that, under the 
authority of sections 1833(t)(1) and (t)(2) of the Act, the Secretary 
has the discretion to establish comprehensive APCs as part of 
developing the OPPS classification system, and that this proposal 
furthers our ongoing efforts to move the OPPS towards a more 
comprehensive payment system in support of our objectives to increase 
flexibility and efficiencies.
    The OPPS data we have accumulated over the past decade have enabled 
us to continue to address several longstanding goals, including: 
continuing to improve the validity of our payments to most accurately 
reflect costs; improving transparency and reducing complexity and 
administrative burden whenever possible; and increasing flexibility for 
hospitals to develop increased efficiencies in the delivery of quality 
care.
    We stated that we believe that this proposal to establish 
comprehensive APCs will improve our ability to accurately set payment 
rates. In the normal process of setting payment rates, costs in certain 
cost centers (``uncoded costs'') are added to the costs of services 
reported with specific HCPCS codes only when they can be reliably 
assigned to a single service. Under the proposal, the entire claim 
would be associated with a single comprehensive service so all costs 
reported on the claim may be reliably assigned to that service. This 
increases the accuracy of the payment for the comprehensive service and 
also increases the stability of the payment from year to year.
    We also stated that we believe that our policy will enhance 
beneficiary understanding and transparency. Typically beneficiaries 
understand the primary procedure to be the OPPS service they receive, 
and do not generally consider that the other HCPCS

[[Page 74862]]

codes are separate services. For example, beneficiaries believe that a 
single service includes procedures such as ``getting my gall bladder 
removed'' or ``getting a pacemaker.'' We believe that defining certain 
services within the OPPS in terms of a single comprehensive service 
delivered to the beneficiary improves transparency for the beneficiary, 
for physicians, and for hospitals by creating a common reference point 
with a similar meaning for all three groups and using the comprehensive 
service concept that already identifies these same services when they 
are performed in an inpatient environment.
    Finally, we believe that larger bundles that contain a wider mix of 
related services in the prospectively paid bundles increase the 
opportunities for providers to tailor services to the specific needs of 
individual beneficiaries, thereby increasing the opportunities for 
efficiencies and improving the delivery of medical care.
    Comment: Overall, commenters were generally supportive of the 
concept of creating larger payment bundles, but were uncertain that 
they fully understood the specifics of the proposed comprehensive APC 
payment policy. Commenters acknowledged many potential advantages for 
hospitals, and possibly also for beneficiaries in terms of lower 
coinsurance payments and increased transparency, as well as for 
increased physician flexibility.
    A few commenters fully endorsed the proposal for CY 2014. For 
example, MedPAC stated that it has long supported CMS' efforts to 
expand the size of payment units in the OPPS and supported this 
proposal, as well as other packaging proposals in this final rule with 
comment period. MedPAC stated that the comprehensive APC groups have 
similarities to the diagnosis related groups (DRGs) used in the 
inpatient prospective payment system (IPPS) and that this payment 
structure encourages hospitals to identify the most efficient and 
efficacious methods to provide care for each patient, which will help 
contain Medicare spending. Another commenter believed that the proposed 
device-dependent APCs were particularly appropriate for comprehensive 
APCs because the independent services that require these devices are 
generally clearly defined and the other services furnished during the 
encounter are generally furnished in order to facilitate the 
independent service. The commenter supported the ability of this 
proposal to use all claims data in establishing a payment rate for the 
comprehensive APC.
    Several commenters recommended a more expansive policy. One 
commenter recommended that CMS identify other procedures that would be 
suitable for the creation of comprehensive APCs. Other commenters 
suggested that CMS require hospitals to report charges for all items 
and services for which comprehensive APC payment is being made as 
covered charges and specify that hospitals may not charge beneficiaries 
for these items and services (because the copayment for the APC 
constitutes the only beneficiary cost sharing for the package of 
services). Commenters also suggested that CMS limit the national 
unadjusted payment for each comprehensive APC under the OPPS to no more 
than the standardized DRG amount that would be paid for the same 
service provided to an inpatient without complications or 
comorbidities.
    Response: We appreciate the support of the commenters for our 
proposal to create comprehensive packages. We agree with the commenters 
that this would improve our ability to more accurately establish 
payment rates for these services by enabling us to use all claims for 
the primary service in a comprehensive APC when establishing payment 
for that APC. We appreciate the commenters' interest in identifying 
other services that would be suitable for the creation of comprehensive 
APCs, as well as ways to consider setting payment relative to the IPPS. 
We agree with the commenters that hospitals should report charges for 
all items and services for which a comprehensive APC payment is being 
made, and note that it has been a longstanding requirement as stated in 
the Claims Processing Manual IOM 100-4, Chapter 4, Section. 10.4.A that 
hospitals must report all services that were furnished on an outpatient 
claim regardless of whether or not those services are separately paid, 
and that Medicare providers may not separately bill beneficiaries for 
services that are covered under Medicare.
    Comment: The majority of commenters recommended that CMS delay 
implementation of the comprehensive APCs until CY 2015 or later. While 
they generally supported the idea of larger payment bundles, commenters 
were concerned that they could not verify the accuracy of the proposed 
payments and urged CMS not to implement these policies until the agency 
has verified that its calculations are accurate. Commenters asserted 
that it has become increasingly difficult for stakeholders to verify 
OPPS payment rates because the complexity of the modeling logic is far 
beyond other payment systems that CMS administers, such as the IPPS. 
Some commenters were concerned that they were not able to replicate 
CMS' calculations, preventing independent analyses and affecting their 
ability to develop comments and alternative proposals. Some commenters 
requested that CMS provide stakeholders with additional information 
about how estimated costs for these APCs are being calculated for CY 
2014, and give stakeholders an opportunity to comment on the additional 
information provided.
    Some commenters requested that CMS provide individual impacts of 
each proposed policy when proposing several policies that have an 
interactive effect. Several commenters stated that CMS' packaging 
proposals discussed in section II.A.3. of the proposed rule, combined 
with this proposal to create 29 new comprehensive APCs, created a 
complicated ``layering'' effect that made their understanding of how 
final estimated costs for proposed comprehensive APCs would be 
calculated a much more involved process.
    Finally, commenters recommended a delayed implementation to allow 
hospitals more time to assess the impact of such a new payment approach 
on their particular institution and to consider how they may need to 
adjust organizational processes. Commenters also suggested that we 
might need more time to implement revisions to our claims processing 
systems.
    Response: We agree with the commenters that we should delay 
implementation of the proposed comprehensive APCs. As we discuss later 
in this section, we are finalizing our proposal to create 29 
comprehensive APCs with modification, but we are delaying 
implementation and final configuration of those comprehensive APCs 
until CY 2015. We acknowledge commenters' concerns that this is a 
complex proposal for a new payment structure under the OPPS. We agree 
that hospitals should have time to prepare for a comprehensive payment 
structure, and we also agree with the commenters that a delay in 
implementation will allow us more time to operationalize changes 
necessary to process comprehensive payments.
    In response to public commenters' requesting additional detail on 
our calculation of the comprehensive APC relative payment weights, we 
provide a granular discussion of our methodology for constructing the 
comprehensive APC payment rates later in this section, as well as the 
specific APC configurations we would implement for CY 2014 if we had 
not delayed implementation until CY 2015. We also believe that the 
delay

[[Page 74863]]

in implementation will give hospitals more time to study the final 
methodology for calculating APC relative payment weights that we 
discuss in this section for the modification that recognizes resource 
differences in complex and simple versions of the same primary service. 
We are taking advantage of the delay in implementation and requesting 
additional public comments on this methodology.
    With regard to the commenters' concern that they could not fully 
model the proposal, we provide all of the information we would have 
used to create APC relative payment weights for CY 2014 using the CY 
2012 claims data to illustrate the final methodology below. We believe 
that this will assist interested parties in replicating our 
methodology. We will recalibrate all of the comprehensive APC relative 
payment weights for CY 2015 using CY 2013 claims data consistent with 
our annual recalibration of APC relative payment weights to reflect the 
most recently available claims and cost report information in next 
year's rulemaking cycle. We discuss the limited methodological errors 
that we discovered in the proposed rule and subsequent correcting 
document in section II.A.3. of this final rule with comment period.
    With regard to the availability of detailed impacts, we believe 
that a delay in implementation until CY 2015 along with the 
illustrations of the methodology included in this section will give 
stakeholders the requested time to model this final policy and assess 
the impact on their organization. We will incorporate the proposed 
payment rates for CY 2015 comprehensive APCs in our CY 2015 impact 
analysis in the CY 2015 OPPS/ASC proposed rule.
    Comment: Commenters were also concerned that this proposal would 
impose a significant administrative burden on providers and that there 
is not sufficient time for information system technology vendors and 
operational processes to adjust to the new regulations or to allow 
hospitals enough time to fully understand how the proposals would 
affect their outpatient finances, making hospital budgeting for the 
upcoming year nearly impossible. Moreover, several commenters were 
concerned that neither CMS nor its Medicare Administrative Contractors 
(MACs) would be prepared to implement the proposed changes for CY 2014.
    Other commenters believed that providers are likely to have 
increased costs and challenges in their efforts to accurately separate 
claims for unrelated services. One commenter recommended that CMS make 
the necessary operational changes to billing instructions before moving 
forward with its proposal, and implement the proposed comprehensive 
APCs only after the agency has used the new billing instructions long 
enough to have claims data that identify related services for the 
purpose of defining a comprehensive APC.
    Response: This proposal does not require any changes in provider 
coding and billing practices, nor would we expect providers to change 
their billing and coding practices in response to a change in payments. 
We do expect providers to assess their delivery of these comprehensive 
services in light of internal organizational processes. As previously 
stated, we are finalizing the comprehensive APC proposal with 
modification in this final rule with comment period, but we are 
delaying implementation of the finalized policy until CY 2015. This 
will allow us sufficient time to develop appropriate claims processing 
systems protocols for comprehensive APCs and to test those new 
protocols prior to implementation.
    Comment: Many commenters were concerned that a comprehensive DRG-
like payment would provide a single payment for a wide range of cases 
characterized by widely varying complexity and widely varying costs. 
Such a system could potentially disadvantage hospitals willing to take 
on the treatment of sicker, more complex and costly cases while 
rewarding those that handle less complex and less costly cases. One 
commenter was specifically concerned that the level of payment was not 
sufficient to support the higher level of diagnostic testing and 
ancillary services that occur at academic medical centers. Another 
commenter stated that the costs of these cases are relatively fixed 
when they are dependent on one or more expensive devices and hospitals 
can either perform these complex procedures at a loss or cease 
performing them altogether, which has implications for beneficiary 
access to care. One commenter stated that hospitals have only limited 
ability to reduce costs for complex procedures and recommended that CMS 
incorporate a ``severity level'' APC similar to the Medicare Severity 
Diagnosis Related Group (MS-DRG) system where there is a base DRG, a 
complication or comorbidity DRG (CC DRG), and a major complication or 
comorbitity DRG (MCC DRG). In adapting the concept to the APC 
classification system, the commenter recommended that complexity could 
be based on the included components, for example, an ICD insertion 
comprehensive APC and another higher-weighted comprehensive APC for ICD 
insertion with removal of previously implanted device.
    A few commenters believed that the comprehensive payment may have 
unintended consequences that could include quality consequences, cost 
consequences, and payment consequences. Several commenters were 
concerned that the quality of care could suffer because the commenters 
believed that there are currently no outcome programs or measures in 
place, similar to inpatient quality measures, readmission reduction 
programs and value based purchasing incentives, to monitor the quality 
of care provided under an encounter-based payment that creates an 
incentive for hospitals to improve delivery efficiency. The commenters 
believed that inappropriate attempts to garner additional profit could 
lead to reduced access and lower quality of health care services 
provided in the hospital outpatient setting. Several commenters were 
concerned that there might be unintended Medicare cost consequences if 
hospitals split services and delayed ancillary procedures until a 
subsequent encounter. Some of these commenters believed that the 
proposal should be tested or evaluated through a demonstration project 
or some other appropriate mechanism before broader introduction, while 
one commenter objected to the CY 2014 implementation because CMS had 
not proposed mechanisms to retrospectively assess the ramifications of 
these proposed policy changes on patients. Finally, one commenter 
opined that the proposal does not conform the requirement under section 
1833(t)(2) of the Act that items and services shall not be treated as 
comparable with respect to the use of resources if the highest mean 
cost for an item or service is more than 2 times greater than the 
lowest mean cost.
    Response: We agree with the commenters that there is wide spread 
variation in the comprehensive costs of individual claims within each 
primary procedure, and we further agree with the commenters that we do 
not want to financially disadvantage hospitals that treat beneficiaries 
who require more complex and costly procedures. We also understand that 
complex beneficiaries may require more diagnostic tests. We agree with 
the commenters that there are constraints on individual hospitals' 
ability to reduce costs associated with complex procedures, and we 
agree with the commenters who recommended recognizing the level of 
resources

[[Page 74864]]

associated with more complex forms of a procedure not unlike the 
severity levels used in the IPPS. Therefore, we are modifying our 
proposed policy for creating comprehensive APCs to recognize variation 
in the complexity of services that will be paid through comprehensive 
APCs for CY 2015.
    We do not believe that there is any issue with 2 times rule 
violations in the proposed rule or in this final rule with comment 
period. The statute directs the Secretary to establish groups of 
covered OPD services that are comparable both clinically and with 
respect to use of resources. In doing so, the statute requires the 
Secretary to compare the mean cost of items and services within a group 
and ensure that the highest mean cost item or service is no more than 2 
times greater than the lowest mean cost item or service within a group 
(2 times rule). With respect to each proposed comprehensive APC, no 2 
times rule violations were observed. However, as noted above, we do 
observe widespread variation within the comprehensive costs of primary 
services. As we discuss below in more detail, our final policy 
recognizes differences in complexity and resource costs of complex 
forms of the primary service to address variation within the 
comprehensive costs of individual primary procedures.
    Commenters raised concerns about quality decreases because of 
economic pressures, and access issues because of a reluctance of 
facilities to provide these device-intensive procedures to certain 
beneficiaries if the expected costs for complex cases would greatly 
exceed the comprehensive APC payment. We note that these same concerns 
were raised with the introduction of both the IPPS and the OPPS, but 
that claims data continue to show that hospitals continue to provide 
complex services to beneficiaries. We believe that hospitals understand 
that there will be considerable variation in the costs of providing a 
comprehensive primary service to individual beneficiaries relative to 
the comprehensive payment amount.
    We disagree with the commenters on the need for greater outcomes 
measures prior to implementation of the comprehensive APC payment 
policy. As noted, in this final rule with comment period, we are 
recognizing the resource differential for complex forms of primary 
procedures. Further, we believe that outpatient procedures, such as 
these device-intensive procedures, that are also performed on an 
inpatient basis benefit from hospital protocols established for 
inpatient hospital quality programs such as quality measures, 
readmission reduction programs, and value-based purchasing incentives. 
Therefore, we do not agree with the commenters who were concerned that 
patient care might suffer or that quality measures need to be 
strengthened before implementation of the comprehensive APC policy.
    We are concerned by some of the comments that imply that some 
providers might change their practice of providing a comprehensive 
service and instead perform split or staged procedures in order to 
maximize payment. Although we do not believe that practitioners or 
facilities would voluntarily expose beneficiaries to an increased risk 
of additional surgery and anesthesia, we recognize that payment can 
influence behavior. When we implement the finalized comprehensive APC 
policy in CY 2015, we will closely monitor billing patterns for split 
or staged procedures and consider claims processing edits or other 
approaches to ensure that our prospective payments uniformly apply to 
complete services, if necessary.
    With regard to the commenters' request for evaluation under a 
demonstration project before full implementation, we do not believe 
that comprehensive APCs are sufficiently different from our historical 
hospital payment practices to warrant a demonstration project. Further, 
we are adopting the proposed policy with modification and are delaying 
implementation of the comprehensive APC policy until CY 2015 in this 
final rule with comment period to the public to allow us and the public 
time to transition to this new payment approach.
(2) Comprehensive APCs for Device-Dependent Services
(a) Identification of High-Cost Device-Dependent Procedures
    As we discussed in the CY 2014 OPPS/ASC proposed rule, in order to 
identify those services for which comprehensive packaging would have 
the greatest impact on cost validity, payment accuracy, beneficiary 
transparency, and hospital efficiency, we ranked all APCs by CY 2012 
costs and then identified 29 device-dependent APCs where we believe 
that the device-dependent APC is characterized by a costly primary 
service with relatively small cost contributions from adjunctive 
services.
    Comment: Several commenters asked for additional information on the 
criteria utilized by CMS to create the comprehensive APCs and how CMS 
would evaluate services and procedures to qualify for comprehensive 
APCs going forward. One commenter asked why the other 10 device-
dependent APCs were not included, and why no other nondevice-dependent 
APCs were classified as a comprehensive APC. Another commenter 
recommended that CMS consider the comprehensive approach for a smaller 
number of APCs (four or five), while other commenters recommended that 
additional APCs be paid as comprehensive APCs, including 
recommendations for a broader application of the comprehensive APC 
criteria to all claims dominated by a single procedure and specifically 
recommended procedures such as those assigned to APC 0067 (Stereotactic 
Radiosurgery).
    Response: As we stated in the proposed rule, we initially proposed 
a subset of device-dependent APCs for conversion to comprehensive APCs 
because we believed that these procedures represented a cohesive 
subgroup with which to introduce a broader packaging initiative. We 
stated that comprehensive APCs are appropriate when they reflect a 
single global service that the beneficiary would be receiving from the 
hospital. In this case, we have identified procedures where the 
beneficiary would reasonably consider the encounter to be for the 
implantation of a device, and we limited our proposal to the most 
costly procedures where the geometric mean cost of the comprehensive 
procedure was approximately five times the current beneficiary 
inpatient deductible or greater. This created a consistent group of 
services with similar clinical and resource characteristics, which were 
archetypal for our definition of a comprehensive service.
    However, we agree with the commenters that there is no reason that 
comprehensive payments could not be extended in future years to other 
procedures. In addition, we do not agree with the commenters that we 
should limit the comprehensive APCs to a small trial of four or five 
APCs. We are adopting the proposed policy with modification and are 
delaying implementation of the comprehensive APC policy until CY 2015 
in this final rule with comment period to the public to allow us and 
the public time to transition to this new payment approach. We believe 
that the identified subgroup of device-related APCs is clinically 
cohesive and similar in resource construction. We will consider 
possibly adding a comprehensive APC for single session cranial 
stereotactic radiosurgery (procedures assigned to APC 0067) in CY 2015.

[[Page 74865]]

(b) Creation of Comprehensive APCs for Certain Device-Dependent 
Procedures
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, 
we proposed to create 29 comprehensive APCs to prospectively pay for 
device-dependent services associated with 136 HCPCS codes. We proposed 
to base the single all-inclusive comprehensive APC payment on all 
outpatient charges reported on the claim, excluding only charges that 
cannot be covered by Medicare Part B or that are not payable under the 
OPPS. This comprehensive APC payment would include: (1) packaged 
payment for all packaged services and supplies in CY 2014 and as 
discussed in section II.A.3. of this final rule with comment period; 
and (2) packaged payment for all adjunctive services, which are those 
services and supplies that typically would receive separate payment 
when appearing on any claim that does not contain a HCPCS code reported 
as a primary service assigned to a comprehensive APC, including certain 
items and services currently paid through other fee schedules. We 
present these two categories for ease of presentation, but generally 
consider both sets of services to be ``adjunctive'' in that they are 
integral and ancillary to, supportive of, and dependent on the primary 
procedure. Therefore, we consider all outpatient services on a 
comprehensive APC claim to be adjunctive to the primary service with a 
few exceptions, such as mammography services and ambulance services, 
which are never payable as hospital outpatient services in accordance 
with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which 
must receive separate payment under section 1833(t)(2)(H) of the Act; 
and pass-through drugs and devices, which also require separate payment 
under section 1833(t)(6) of the Act.
(3) Inclusion of Otherwise Packaged Services and Supplies
    As part of the comprehensive APCs, we proposed to package all 
services that are packaged in CY 2013, and all services proposed for 
unconditional or conditional packaging for CY 2014.
    We did not receive any separate public comments on this proposal 
outside of the public comments we received on our proposal to create 
comprehensive APCs for CY 2014 (which final policy with modification, 
we are delaying implementation until CY 2015) discussed in section 
II.A.3. of this final rule with comment period.
(4) Inclusion of Adjunctive Services
    We previously noted in section II.A.3.a. of the proposed rule that 
it has been a goal of the OPPS to package services that are typically 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service. We proposed to package into the comprehensive APCs all of 
these integral, ancillary, supportive, dependent, and adjunctive 
services, hereinafter collectively referred to as ``adjunctive 
services,'' provided during the delivery of the comprehensive service. 
This includes the diagnostic procedures, laboratory tests and other 
diagnostic tests, and treatments that assist in the delivery of the 
primary procedure; visits and evaluations performed in association with 
the procedure; uncoded services and supplies used during the service; 
outpatient department services delivered by therapists as part of the 
comprehensive service; durable medical equipment as well as prosthetic 
and orthotic items and supplies when provided as part of the outpatient 
service; and any other components reported by HCPCS codes that are 
provided during the comprehensive service, except for mammography 
services and ambulance services, which are never payable as OPD 
services in accordance with section 1833(t)(1)(B)(iv) of the Act.
    Comment: Several commenters expressed concerns regarding the 
packaging of unrelated services reported on the claim. Given that a 
single claim can span multiple days, a few commenters believed that 
under current billing instructions this proposal would arbitrarily 
package all services occurring within a 30-day or 60-day period. 
Currently, there is no means on outpatient claims to differentiate 
between adjunct services that are related to the primary procedure and 
other services that are ordered by other physicians and/or are 
unrelated to the primary procedure. These commenters were concerned 
that if CMS assumed that all services reported on the claim are 
related, it could lead to incorrect ratesetting. Alternatively, these 
commenters reasoned that if CMS revised billing instructions to allow 
all unrelated services (not merely labs) to be billed on separate 
claims, hospitals would need to change their billing systems to bill 
separately for unrelated services and would experience significant 
administrative burden separating unrelated from related items and 
services.
    Response: We do not agree with the commenters' assertions that a 
significant amount of unrelated services would be billed on the claim 
for the primary service. We note that most commenters were concerned 
about unrelated services reported on claims spanning 30 days. We remind 
hospitals that we have previously issued manual guidance in the 
Internet Only Manual at 100-4, Chapter 1, Section 50.2.2 that only 
recurring services should be billed monthly. Moreover, we have further 
specified that in the event that a recurring service occurs on the same 
day as an acute service that falls within the span of the recurring 
service claim, hospitals should bill separately for recurring services 
on a monthly claim (repetitive billing) and submit a separate claim for 
the acute service. We also do not expect that these claims for 
comprehensive services in the outpatient setting would extend beyond a 
few days.
    Additionally, we have noted that occasionally beneficiaries may, 
for reasons of convenience or coincidence, receive laboratory services 
at the hospital that are unrelated to the primary service. When 
beneficiaries are at the hospital for the non-trivial procedures in 
comprehensive APCs, we do not expect that unrelated laboratory services 
would be a common occurrence, but we have nonetheless instructed 
hospitals that laboratory tests ordered by unrelated providers for 
unrelated medical conditions may be billed on a 14X bill-type. We refer 
readers to section II.A.3.c.(3) of this final rule with comment period 
for more discussion of this final policy.
    Beyond these two sets of circumstances, we believe that other 
services performed at the time of these major procedures can reasonably 
be considered to be related to the primary service or procedure. We 
proposed that we would consider all services reported on the claim to 
be related to the primary service. Under such a presumption, all 
services delivered to a beneficiary during an encounter for a 
comprehensive procedure would be included in establishing the payment 
rate for the comprehensive APC. As we are including all adjunctive 
services in the comprehensive APC calculation, hospitals would not need 
to look for unrelated services. We considered all covered costs when 
calculating the comprehensive APC payment as is done with IPPS DRGs. As 
previously noted, hospitals would continue to code and bill for these 
services in the same way that they currently code and bill.
    Comment: One commenter asked that CMS modify the proposal by 
specifically excluding clinical diagnostic laboratory tests and the

[[Page 74866]]

facility component of anatomic pathology procedures from comprehensive 
APC payment for the same reasons that other commenters believed that 
these services should not be packaged as part of our general packaging 
proposals.
    Response: We do not agree with this commenter that laboratory and 
the facility component of anatomic pathology procedures should be 
excluded from the comprehensive APC payment. We are finalizing our 
other proposed policy to package laboratory tests, as described in 
section II.A.3.c.(3) of this final rule with comment period. We note 
that laboratory and anatomic pathology tests are almost always 
performed as part of the provision of the primary service in the case 
of these comprehensive services and are, therefore, appropriately 
considered ancillary and supportive. In summary, we believe that these 
device-dependent procedures represent archetypal cases of a single 
comprehensive service and that laboratory and anatomic pathology 
services are classic examples of adjunctive services that are 
supportive of the primary procedure.
(5) Inclusion of Devices, Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies (DMEPOS)
    As part of the comprehensive service packaging policy described 
above, we proposed to package all devices; implantable durable medical 
equipment (DME); implantable prosthetics; DME, prosthetics, and 
orthotics when used as supplies in the delivery of the comprehensive 
service; and supplies used in support of these items when these items 
or supplies are provided as part of the delivery of a comprehensive 
service. We have a longstanding policy of providing payment under the 
OPPS for implantable DME, implantable prosthetics, and medical and 
surgical supplies, as provided at sections 1833(t)(1)(B)(i) and 
(t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). 
Under this proposal, DME, prosthetics, and orthotics, when used as 
supplies in the delivery of the comprehensive service, would be covered 
OPD services as provided under section 1833(t)(1)(B)(i) of the Act and 
Sec.  419.2(b)(4) of the regulations. Under this proposal, we believe 
that when such items and services are provided as adjunctive components 
in the delivery of a comprehensive service, such items are appropriate 
for coverage under the OPPS as covered OPD services, and for payment 
under the OPPS. We noted that, at other times, such items when not 
provided as adjunctive components in the delivery of a comprehensive 
service would not constitute covered OPD services, and such items would 
be appropriately provided by suppliers and paid for under the DMEPOS 
benefit. More specifically, we do not believe that this proposed policy 
limits a hospital's ability to function as a DMEPOS supplier and bill 
DMEPOS items to the DME-MAC when those items are unrelated to the 
outpatient procedure and provided outside of the delivery of the 
comprehensive service.
    In summary, we proposed to consider all DMEPOS items to be covered 
hospital outpatient department services and to be adjunctive to the 
primary service when they are delivered during the comprehensive 
service, as described above and, therefore, proposed to package such 
items into the applicable comprehensive service. This policy includes 
any items described by codes that are otherwise covered and paid 
separately in accordance with the payment rules for DMEPOS items and 
services, and applies to those items when they are provided as part of 
the delivery of the comprehensive service. Under this proposal, when 
such items are provided during the delivery of a comprehensive service, 
we proposed that they are covered OPD services as provided under 
sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and Sec. Sec.  
419.2(b)(4), (b)(10), and (b)(11) of the regulations, and payable under 
the OPPS, as described above.
    We did not receive any public comments on our proposal to include 
these DMEPOS items in the comprehensive APC payment. We did receive 
public comments on the impact of these new items on budget neutrality, 
which we discuss below, and comments on how DMEPOS items impact APC 
0227 (Implantation of Drug Infusion Device), which we discuss in 
greater detail later in this section.
(6) Inclusion of OPD Services Reported by Therapy Codes
    Generally, section 1833(t)(1)(B)(4) of the Act excludes therapy 
services from the OPPS. We have previously noted that therapy services 
are those provided by therapists under a plan of care, and are paid 
under section 1834(k) of the Act subject to an annual therapy cap, when 
applied. However, certain other activities similar to therapy services 
are considered and paid as outpatient services. Although some 
adjunctive services may be provided by therapists and reported with 
therapy codes, we do not believe that these services always constitute 
therapy services. In the case of adjunctive components of a 
comprehensive service that are described by codes that would, under 
other circumstances, be indicative of therapy services, we note that 
there are a number of factors that would more appropriately identify 
them as OPD services. These services are not independent services, but 
are delivered as an integral part of the OPD service on the order of 
the physician who is providing the service; they are not typically 
provided under an established plan of care, but on a direct physician 
order; they may be performed by nontherapists; and they frequently do 
not contribute to a rehabilitative process. For example, we note that 
therapists might be asked to provide a detailed documentation of 
patient weaknesses to be used by the physician to help identify or 
quantify a possible procedure-associated stroke or help with the 
mobilization of the patient after surgery in order to prevent blood 
clots. We note that these nontherapy services furnished by a therapist 
are limited to the immediate perioperative period, consistent with 
their inclusion as part of the larger service to deliver the device, 
and are distinct from subsequent therapy services furnished under a 
therapy plan of care, which serve to establish rehabilitative needs and 
begin the process of rehabilitation.
    For that reason, when provided within this very limited context of 
a comprehensive service such as the implantation of an expensive 
device, in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we 
proposed that services reported by therapy HCPCS codes, including costs 
associated with revenue codes 042X, 043X and 044X would be considered 
to be adjunctive OPD services in support of the primary service when 
those services occur within the perioperative period; that is, during 
the delivery of this comprehensive service that is bracketed by the OPD 
registration to initiate the service and the OPD discharge at the 
conclusion of the service. These services do not constitute therapy 
services provided under a plan of care, are not subject to a therapy 
cap, if applied, and are not paid separately as therapy services.
    Comment: Physical therapy stakeholders commented that they were 
concerned about the effect this proposal may have on necessary physical 
therapy services that are provided in conjunction with these proposed 
29 APCs and any comprehensive APCs that may be added in the future. The 
commenter stated that, generally, section 1833(t)(1)(B)(4) of the Act 
excludes therapy services from the OPPS. The commenter further stated 
that, instead, the majority of therapy services in the hospital setting 
are

[[Page 74867]]

provided by therapists under a plan of care, and are paid under the 
physician fee schedule (we refer readers to section 1834(k) of the 
Act). However, the commenter acknowledged that there is a subset of 
services designated as ``sometimes therapy'' services that are paid 
under the OPPS when they are not furnished as therapy under a certified 
plan of care in an outpatient hospital or critical access hospital 
(CAH).
    The commenter stated that physical therapy should not be considered 
to be an adjunctive service because physical therapists are 
consultative members of the health care team, physical therapy is a 
separate benefit, and some services provided during the perioperative 
period, such as a physical therapy evaluation to establish a plan of 
care, could still be considered to be therapy services. The commenter 
was also concerned that the comprehensive APC payment would not be 
adequate to cover the services provided by therapists during this 
perioperative period, that rehabilitation could be prolonged if the 
therapist is unable to intervene ``to increase the patient's mobility, 
function and endurance prior to surgery,'' and that it could be 
difficult to reliably and reproducibly differentiate those 
perioperative services that are not therapy from those that could be 
separately billed as therapy services. Another commenter asked if 
functional reporting requirements would apply in these cases of 
adjunctive services reported with therapy codes.
    Response: We agree with the commenter that physical therapy is a 
separate benefit that is not part of an OPPS service. However, after 
consideration of the public comments we received, we continue to 
believe that services provided during the perioperative period are 
adjunctive services and not therapy services as described in section 
1834(k) of the Act regardless of whether the services are delivered by 
therapists or other nontherapist health care workers. We note that 
adjunctive services are those services provided in support of another 
service, that is, they are typically performed to facilitate the 
primary service and are unnecessary or serve a different function if 
the primary service is not provided. Adjunctive services may be 
provided by consultative members of the healthcare team. For example, 
an add-on procedure performed by a cardiac surgeon is nonetheless 
adjunctive to the primary procedure, as an add-on procedure by 
definition cannot exist in the absence of the procedure to which it is 
added.
    We have previously noted that therapy services are those provided 
by therapists under a plan of care in accordance with section 
1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid under 
section 1834(k) of the Act subject to an annual therapy cap, when 
applied. However, certain other activities similar to therapy services 
are considered and paid as outpatient services. Specifically, we have 
said in the Claims Processing Manual IOM 100-4, Chapter 5, Section 20.1 
that some services, described as ``sometimes therapy services,'' may at 
times be considered therapy, but at other times may be consider to be 
outpatient department services, such as when those services are 
provided by non-therapists or provided in the absence of a plan of 
care. We stated in the proposed rule that we believe services reported 
with therapy codes, but that are provided as part of a comprehensive 
service are similar to ``sometimes therapy'' services in that these 
services are not properly considered to be therapy services even though 
they may be reported with therapy HCPCS codes (78 FR 43559 through 
43560).
    Considering the services that commenters believed should be therapy 
services, we note that these are outpatient procedures; therefore, the 
comprehensive procedure includes only the perioperative period, a brief 
period of time immediately before and immediately following the 
procedure. We would not expect that an evaluation performed immediately 
following the surgery would establish the beneficiary's needs for 
rehabilitation because the beneficiary is still under the influence of 
the completed primary surgical procedure. Rather, services reported 
with therapy codes during that brief time period may represent 
interventions to promote breathing and ambulation, traditional post-
operative nursing services, or may represent assessments to provide the 
surgeon with specific clinical information relative to the immediate 
effects of the surgery. We would not expect therapy assessments or 
rehabilitative therapy until after the patient has recovered from the 
immediate effects of the procedure and associated anesthesia. With 
respect to the statement that it may be beneficial to increase the 
beneficiary's endurance prior to surgery, we agree with the commenter 
that this can be a desirable and necessary service, but we would not 
expect that therapists are routinely increasing ``mobility, function 
and endurance'' in the hour or two immediately before the surgery. 
Therefore, we do not expect that providers and reviewers would struggle 
to differentiate separately paid therapy services from appropriately 
packaged nontherapy services. We believe that therapy services would be 
separated in time from the comprehensive services, and would not be 
provided during the span of the comprehensive service, from OPD 
registration to discharge, because we do not expect that the 
comprehensive service would extend beyond the immediate perioperative 
period. We also believe that, for a beneficiary who is already 
receiving therapy on an ongoing basis, it is very unlikely that a 
therapist would deliver that service during a comprehensive service. 
There are rare exceptions, for example, in the case of a beneficiary 
receiving therapy for a burn or contracture. In that case, we have 
previously published guidance stating that recurring services may be 
separated from acute services and billed on a separate claim.
    We have stated that the relative cost of these comprehensive 
services includes all of the estimated costs reported on the claims for 
these services. Therefore, the total payment for the comprehensive 
service includes a payment for the services reported with therapy codes 
that is proportional to the frequency with which these codes are 
reported on the claims. As the comprehensive payment now reflects 
costs, we believe that the aggregate comprehensive payment will 
continue to be adequate to cover the cost of the service provided, and 
we do not expect that these services would be discontinued when they 
are medically necessary. We also note that there is no provision in 
this final rule with comment period that prohibits a hospital from 
providing any medically necessary service as part of a comprehensive 
service, regardless of the code with which it is otherwise commonly 
reported.
    With respect to functional reporting, we note that these services 
reported with therapy codes are outpatient department services not 
therapy services and, therefore, the requirement for functional 
reporting does not apply. These changes will be implemented in the 
claims processing systems prior to the start of CY 2015.
(7) Inclusion of Additional Hospital Room and Board Revenue Cost 
Centers in the Calculation of Covered Costs
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we stated that 
we believe that the cost of the bed and room occupied by the patient, 
the cost of nursing services, and the cost of any necessary fluid and 
nutrition (board) are considered covered costs when incurred during the 
provision of an OPD service,

[[Page 74868]]

that is, during the provision of the comprehensive service. Because we 
are able to assign all costs reported on the claim to the comprehensive 
service, we believe that we have an opportunity to better capture costs 
by including these costs in our calculations even when they appear in 
certain revenue cost centers not usually used to report OPPS costs. 
Specifically, we proposed to include costs reported with room, board, 
and nursing revenue codes 012X, 013X, 015X, 0160, 0169, 0200 through 
0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 
0234, 0239, 0240 through 0243, and 0249 because we believe these 
revenue cost centers are sometimes associated with the costs of room, 
nutrition, and nursing care provided during these comprehensive 
services.
    Comment: One commenter supported the specific inclusion of room and 
board revenue cost centers on outpatient claims, but another commenter 
believed that reporting may be difficult for hospitals and hospital 
systems. Commenters were concerned that CMS did not discuss how those 
charges would be included in the cost calculation for the comprehensive 
APCs or provide a cost center source for converting those charges to 
costs in the CY 2014 OPPS Revenue Code to Cost Center Crosswalk 
released with the proposed rule. Another commenter was concerned that 
additional funds were not moved into the OPPS system to account for 
these ``new'' costs.
    Response: We appreciate the commenter's support for our decision to 
specifically identify the costs of room and board as being covered 
costs in certain outpatient stays. We understand the other commenters' 
confusion as to why room and board revenue codes would appear on an 
outpatient claim because our claims processing instructions do not 
allow payment for these revenue codes on Part B claims as they are 
reserved exclusively for inpatient use. (For example, we refer readers 
to our recent contractor instructions under Change Request (CR) 8185, 
``CMS Administrator's Ruling: Part A to Part B Rebilling of Denied 
Hospital Inpatient Claims'', which excludes these revenue codes on 
rebilled Part B inpatient claims because room and board services are 
not covered under Medicare Part B). For this reason, we have not 
included these revenue codes on our revenue code to cost center 
crosswalk. Although we proposed to include costs estimated from charges 
for these revenue codes in our estimate of comprehensive APC costs, we 
did not include any of these costs. We failed to modify our revenue 
code-to-cost center crosswalk that we use to estimate costs from 
charges on claims to include room and board revenue codes. Without 
revenue codes and associated CCRs from identified cost centers, our 
model ignored those revenue codes and did not estimate a cost for the 
room and board revenue codes. We did not include any additional 
estimated costs in our proposed comprehensive APC payment calculation. 
We discuss the role of the revenue code-to-cost center crosswalk in 
section II.A.1.c. of this final rule with comment period.
    We now believe that the appearance of these revenue codes on 
hospital outpatient claims would be improper billing. Charges on 
ancillary revenue codes for recovery room and observation, for example, 
should reflect the complete costs of furnishing those services, 
including the capital cost of the room and nursing labor costs. 
Further, we would expect that hospitals would allocate these costs, and 
if appropriate, board costs for services furnished to outpatients, to 
ancillary cost centers on their Medicare hospital cost report 
consistent with the matching principles of cost accounting principles. 
We believe that, as calculated, our estimated costs for comprehensive 
APCs appropriately includes all costs and charges associated with 
staying in a room for the duration of the comprehensive service as an 
outpatient, and we are not finalizing our proposal to include the costs 
reported with certain inpatient room, board, and nursing revenue codes.
(8) Inclusion of Hospital-Administered Drugs
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we also 
proposed to package all drugs provided to the beneficiary as part of 
the delivery of the comprehensive service, except for those drugs 
separately paid through a transitional pass-through payment. 
Intravenous drugs, for example, are OPPS services that are considered 
adjunctive to the primary procedure because the correct administration 
of the drug either promotes a beneficial outcome, such as the use of 
intravenous pain medications, or prevents possible complications, such 
as the use of intravenous blood pressure medications to temporarily 
replace oral blood pressure medications and reduce the risk of a sudden 
rise in blood pressure when a normal daily medication is stopped. We 
noted that, in defining these packaged drugs, we were applying both our 
existing definitions of self-administered drugs (SADs) and our existing 
definition of drugs as supplies to the situation where the OPD service 
is a comprehensive service.
    We proposed that all medications provided by the hospital for 
delivery during a comprehensive service pursuant to a physician order, 
regardless of the route of administration, would be considered to be 
adjunctive supplies and, therefore, packaged as part of the 
comprehensive APC payment. We stated that we believe that the physician 
order demonstrates that the delivery of the medication by the hospital 
is necessary to avoid possible complications during the delivery of the 
comprehensive service, to ensure patient safety, and to ensure that the 
comprehensive service delivery is not compromised and, therefore, the 
medication should be considered an adjunctive supply.
    Therefore, we proposed to consider all medications to be supplies 
that are adjunctive to the primary service if the medicines are ordered 
by the physician and supplied and delivered by the hospital for 
administration during the comprehensive service.
    Comment: Commenters generally supported the inclusion of drugs as 
supplies in the comprehensive APC payment. For example, one commenter 
stated that this proposal would be extremely helpful to beneficiaries 
by reducing their financial burden and would greatly reduce the 
processing burden on the hospital. Several commenters stated that CMS' 
reasoning was sound and the concept should be expanded to all self-
administered drugs incident to practitioners' therapeutic services, not 
just in comprehensive APCs because the commenters believed that the 
concept that drugs are integral and adjunctive to the furnishing of a 
therapeutic service applies to observation and other procedures. For 
example, one commenter stated that self-administered drugs provided 
during an ED visit are directly related to the necessary care. The 
commenter suggested that a requirement to bill for self-administered 
drugs be established so that these costs could be identified for 
inclusion in ratesetting.
    However, one commenter was concerned that including all hospital-
administered drugs, regardless of the route of administration, in the 
cost calculations of the comprehensive APCs will not accurately account 
for the significant cost variation in required drugs from beneficiary 
to beneficiary based on individual beneficiary requirements and that, 
as a result, the payment rate for a comprehensive APC might not provide 
adequate payment for the specific drugs and biologicals an individual 
beneficiary needs, and that

[[Page 74869]]

hospitals would be discouraged from providing appropriate drugs during 
a comprehensive service.
    Response: We appreciate the commenters' support for our proposal to 
consider drugs, regardless of their route of administration, to be 
adjunctive supplies used in support of the primary comprehensive 
service when ordered by a physician and delivered during the 
administration of a comprehensive service.
    Self-administered drugs are a special issue because they are 
excluded from Medicare Part B coverage by section 1861(s)(2)(B) of the 
Act as implemented in the regulations at 42 CFR 410.27. However, as we 
have stated in the Benefit Policy Manual IOM 100-2, Chapter 15, Section 
50.2, drugs that are integral to a procedure are considered to be 
supplies used in the delivery of covered hospital outpatient services, 
and not part of the Part B drug benefit as described under section 
1861(s)(2)(B) of the Act and 42 CFR 410.27. We do not view this 
proposal to include all medications provided by the hospital for 
delivery during a comprehensive service pursuant to a physician order, 
regardless of the route of administration, as adjunctive supplies to be 
an exception to the benefit category exclusion for self-administered 
drugs, but rather that covered outpatient services include supplies and 
other ancillary items needed to deliver these comprehensive services. 
As stated in our discussion above, we have historically instructed 
hospitals to include charges for self-administered drugs as supplies on 
submitted claims, and we, therefore, include them in our calculation of 
APC payments. We also do not view this proposal as an expansion of 
coverage, but rather as the application of an existing policy to a 
broader payment bundle.
    Although some cost of drugs that are used as supplies have been 
included in APC payments, we recognize that there are some drugs that 
previously may not have been considered as supplies because previously 
they were provided outside of the defined service. We generally address 
public comments about how costs for newly included adjunctive items 
will be considered under budget neutrality below.
    We do not believe that including these drugs and biologicals in the 
comprehensive APC payment greatly increases a hospital's financial risk 
for providing a comprehensive service. Further, we expect that a 
payment based on geometric mean estimated cost would reflect the 
relative resources of drugs used as supplies included on comprehensive 
service claims, along with all other ancillary supplies and services, 
and that while the cost of any given case will vary, the hospital would 
receive a payment based on average estimated cost for all cases. We do 
not believe that comprehensive APC payments that include physician-
ordered, hospital-administered drugs delivered during the comprehensive 
service would be inadequate to cover the cost of providing the service, 
and we do not believe that the comprehensive APC payment would 
discourage hospitals from providing appropriate drugs during delivery 
of these comprehensive services.
    Finally, we agree with the commenters that all covered costs 
related to a service should be included on the claim per our manual 
instruction in the Claims Processing Manual IOM 100-4, Chapter 4, 
Section 10.4.A and as discussed in section II.3.a. (Packaging) of this 
final rule with comment period and that those costs should be reported 
as precisely as possible using HCPCS codes when available or uncoded 
revenue cost centers when HCPCS codes do not exist. Overall, we believe 
that drug costs, regardless of the route of administration, are 
accurately accounted for in the APC relative payment weight. We believe 
that overall payment for the comprehensive service is adequate and will 
permit access to the specific drugs and biologicals required for an 
individual beneficiary.
    After consideration of all of the public comments we received, we 
are finalizing our proposal to package all outpatient services, 
including diagnostic procedures, laboratory tests and other diagnostic 
tests, and treatments that assist in the delivery of the primary 
procedure; visits and evaluations performed in association with the 
procedure; coded and uncoded services and supplies used during the 
service; outpatient department services delivered by therapists as part 
of the comprehensive service; durable medical equipment, as well as 
prosthetic and orthotic items and supplies when provided as part of the 
outpatient service; and any other outpatient components reported by 
HCPCS codes that are provided during the comprehensive service, except 
for certain services including mammography services, ambulance 
services, brachytherapy seeds, and pass-through drugs and devices. When 
billed on a claim in conjunction with a primary procedure assigned to 
status indicator ``J1'' in CY 2015, we will pay for these services 
through the OPPS comprehensive APC payment. We are not finalizing our 
proposal to include costs reported with room, board, and nursing 
revenue codes 012X, 013X, 015X, 0160, 0169, 0200 through 0204, 0206 
through 0209, 0210 through 0212, 0214, 0219, 0230 through 0234, 0239, 
0240 through 0243, and 0249.
    The APCs for which we are finalizing this proposal for CY 2015 are 
identified below in Table 8.

[[Page 74870]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.268


[[Page 74871]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.269

(c) Methodology
    As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), 
we calculated the proposed relative payment weights for these device-
dependent comprehensive APCs by using relative costs derived from our 
standard process as described in section II.A. of the proposed rule and 
this final rule with comment period. Specifically, after converting 
charges to costs on the claims, we identified all claims containing 1 
of the 136 HCPCS codes that define procedures specified as constituting 
a comprehensive service. These claims were, by definition, classified 
as single major procedure claims. Any claims that contained more than 
one of these HCPCS codes were identified, but were not included in 
calculating the cost of the procedure that had the greatest cost when 
traditional HCPCS level accounting was applied. All other costs were 
summed to calculate the total cost of the comprehensive service, and 
statistics for those services were calculated in the usual manner. 
Comprehensive claims for each primary service reported by a HCPCS code 
were excluded when their comprehensive claim cost exceeded +/- 3 
standard deviations from the geometric mean comprehensive cost of the 
primary service HCPCS code.
(d) Payments
    As we further stated in the CY 2014 OPPS/ASC proposed rule (78 FR 
43534), we used the proposed APC relative payment weights for each of 
these device-dependent comprehensive services to calculate proposed 
payments following our standard methodology. The proposed payments for 
the HCPCS codes assigned to these proposed comprehensive APCs were 
included in Addendum B of the proposed rule (which is available via the 
Internet on the CMS Web site). We proposed to assign a new status 
indicator, ``J1'' (OPD services paid through a comprehensive APC), to 
these device-dependent procedures. The claims processing system would 
be configured to make a single payment for the device-dependent 
comprehensive service whenever a HCPCS code reporting one of these 
primary procedures appears on the claim. From a processing system 
perspective, all other adjunctive services except mammography, 
ambulance, and pass-through services would be conditionally packaged 
when a comprehensive service is identified on a claim. From our data, 
we determined that multiple primary HCPCS codes are reported together 
in 24 percent of these device-dependent claims, but rarely represent 
unrelated services. Having determined that having multiple unrelated 
device-dependent services reported on a claim is an uncommon event, we 
proposed to only pay the largest comprehensive payment associated with 
a claim. However, the costs of all of these more extensive or 
additional services are included in the calculations of the relative 
payment weights for the comprehensive service, so the prospective 
payment includes payment for these occurrences.
    Comment: Some commenters suggested that errors and lack of clarity 
pertaining to some HCPCS codes proposed for comprehensive payment in 
the proposed rule prevented the public from being able to respond 
informatively to the comprehensive APC proposal. One commenter was 
concerned that CMS stated in the preamble text that there are 136 HCPCS 
codes that define the device-dependent services to be included in the 
proposed comprehensive APCs whereas, in Addendum B to the proposed 
rule, there are 148 HCPCS codes listed. Other commenters identified 
occasional instances in the proposed rule APC cost statistics data 
files where the number of single procedures was reported as more than 
the number of total procedures, and they also identified several 
inconsistencies in Addendum B where the HCPCS code's status indicator 
was listed as ``Q2'' (conditionally packaged), yet the APC assignment 
was associated with status indicator ``J1'' (comprehensive APC, all 
other items on the claim are packaged).
    Response: We discussed 136 primary procedure codes in our proposal 
for comprehensive APCs (78 FR 43534). Commenters are correct that we 
also identified 148 primary procedure codes in Addendum B to the 
proposed rule as corrected (which is available on the CMS Web site at: 
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). As we discussed in our September 6, 
2013 correcting document, we revised the status indicators of several 
HCPCS codes that appeared in Addendum B from ``Q2'' to ``J1'' to 
reflect their status as a primary procedure code in a comprehensive 
APC. The remaining difference in these two numbers is that 136 
represents the number of CY 2012

[[Page 74872]]

device-dependent HCPCS codes reported on the CY 2012 claims that we are 
using to model CY 2014 geometric mean costs to illustrate the 
comprehensive APC methodology. We generally discuss our modeling of the 
CY 2012 claims data to establish CY 2014 payment rates in section 
II.A.1.c. of this final rule with comment period. However, considering 
the revisions to specific procedure codes used to report certain 
procedures, such as the new percutaneous coronary intervention 
procedure codes (CPT codes 92920 through 92943) beginning in CY 2013, 
the number of CY 2013 device-dependent HCPCS codes appropriately 
assigned to comprehensive APCs increased to 148. Upon adoption of the 
new coding scheme for CY 2014, the number of HCPCS codes assigned to a 
comprehensive APC for payment in this final rule with comment period as 
it would have been implemented for CY 2014 is 167. All of these 
comprehensive HCPCS codes for each year (CY 2012 through 2014) appear 
below in Table 9. Before we implement this policy in CY 2015, we will 
assess all active codes for CY 2015 and assign the procedure to status 
indicator ``J1,'' as appropriate.
    We believe that the corrections to the status indicators assigned 
to the device-dependent procedure codes that appeared in Addendum B to 
our correcting document (http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) were minor and 
did not compromise the ability of commenters to analyze and respond to 
our comprehensive APC proposal. We note that some commenters were able 
to correctly identify the claims that we used to model the proposed CY 
2014 payment rates for comprehensive APCs by identifying the device-
related HCPCS codes associated with the 29 comprehensive APCs for CY 
2012. Some commenters also were able to correctly identify the HCPCS 
codes that we proposed would trigger a comprehensive payment in CY 2014 
based on our identification of HCPCS codes in Addendum B. The 
commenters were able to model relative payments based on our 
identification of the inclusion of all services reported on the claim 
except mammography, ambulance, and pass-through services, and were able 
to determine the impact of the proposal based on our publication of 
proposed payment rates for those 29 comprehensive APCs. Our proposed 
payment rate for these comprehensive APCs did not change appreciably 
with the correcting document. In addition, we are delaying 
implementation of the finalized comprehensive APC policy until CY 2015, 
and we are providing a detailed discussion of our final methodology for 
establishing comprehensive APC relative payment weights through this 
final rule with comment period.

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    Comment: Commenters stated that they had difficulty understanding 
the APC assignment of a specific claim when two or more procedure codes 
assigned to status indicator ``J1'' appear on a single claim and 
indicated that they could not independently replicate the proposed 
comprehensive APC methodology. Commenters believed that there was 
ambiguity in whether the primary HCPCS code assignment was based on CY 
2012 Medicare payment for the primary procedure or CY 2012 claims cost 
as determined by reported charges converted to costs in the CY 2012 
claims data set using CMS' methodology outlined in section II.A.1.c. of 
the proposed rule and this final rule with comment period. One 
commenter believed that using a ranking based on CY 2012 payments would 
be inconsistent with setting a prospective payment rate for CY 2014 
because prioritizing by payment was potentially more reflective of 
historical costs than CY 2102 costs and also reflected units in a way 
that assigned some procedures reporting claims with single units to one 
APC and other procedures reporting claims with multiple units to a 
different APC. This latter issue was particularly concerning to 
commenters because the commenters believed that some claims contributed 
to the cost of one APC, yet would actually be paid through a different 
APC.
    Response: We disagree with the commenters that we proposed 
different criteria to assign procedures to comprehensive APCs for 
modeling payments and to assign procedures to comprehensive APCs for 
payment in the claims processing system. However, we recognize that the 
wording of our proposed methodology for assigning procedures to 
comprehensive APCs could be interpreted in several ways, and we are 
receptive to commenters concerns that they better understand the 
proposed comprehensive APC payment methodology for the treatment of 
claims reporting multiple device-related procedures. While we are 
finalizing a comprehensive APC policy, we are delaying the effective 
date of this policy until CY 2015, and we invite comment on the final 
methodology discussed in this section.

[[Page 74884]]

    We stated in the proposed rule that, ``Any claims that contained 
more than one of these procedures were identified but were included in 
calculating the cost of the procedure that had the greatest cost when 
traditional HCPCS level accounting was applied.'' Using this 
methodology, we proposed to identify a primary service on claims 
reporting multiple HCPCS codes assigned to status indicator ``J1'' by 
identifying the HCPCS code assigned to status indicator ``J1'' on the 
claim that had the highest device-dependent APC geometric mean cost. 
The primary service is not only the most costly service but also 
typically represents the most significant or core service that is being 
provided to the beneficiary. To facilitate claims processing and to 
ensure that we identified the most costly device-related procedure on 
each claim, including those billed with multiple units, we envisioned 
using the CY 2014 device-dependent APC payment amount that would have 
been made for the service in the absence of a proposal for 
comprehensive APCs to identify the most costly procedure described by a 
HCPCS code assigned to status indicator ``J1'' on the claim. We 
proposed to assign the procedure described by a HCPCS code assigned to 
status indicator ``J1'' with the highest device-dependent APC line-item 
payment, considering the entire payment when multiple units are billed, 
as the primary procedure and to make payment for the claim through the 
associated comprehensive APC. We note that the device-dependent APC 
payment rates have the same relativity as device-dependent geometric 
mean costs, as those costs underpin final budget neutral payment rates.
    We agree with the commenters that the methodology by which a claim 
that has at least one procedure described by a HCPCS code that is 
assigned to status indicator ``J1'' is assigned to a comprehensive APC 
is fundamental to understanding final payment under the comprehensive 
APC policy. If there is only one procedure described by a HCPCS code 
assigned to status indicator ``J1'' reported on the claim, the 
comprehensive APC assignment is straightforward; the claim is paid 
through the comprehensive APC associated with that procedure. This is 
true under the proposed methodology as well as under the revised 
methodology we are finalizing in this final rule with comment period. 
In the event that more than one procedure described by a HCPCS code 
assigned to status indicator ``J1'' was present on the claim, an 
important goal of our proposed methodology was to ensure that the 
costliest procedure, including increased cost due to multiple units, 
would be identified as the primary procedure on the claim so that the 
claim would be paid through the most costly potential comprehensive APC 
and ultimately garner the highest potential comprehensive APC payment. 
After review of the public comments we received, we are modifying our 
proposed methodology for assigning a primary procedure described by a 
HCPCS code assigned to status indicator ``J1'' reported on a claim to 
an appropriate comprehensive APC when more than one procedure described 
by a HCPCS code assigned to status indicator ``J1'' is reported. First, 
we will only use current ratesetting estimated cost information and not 
device-dependent APC payment rates to identify the primary procedure 
described by the HCPCS code assigned to status indicator ``J1'' on the 
claim and the subsequent comprehensive APC through which payment for 
the service would be made. For CY 2015, we will use estimated costs on 
CY 2013 claims to calibrate comprehensive APC payment amounts.
    Second, we will recognize the greater resources attributable to 
more complex cases. Commenters suggested addressing variations in cost 
of comprehensive APCs by recognizing the greater resources attributable 
to more complex cases with multiple device-dependent procedures in some 
manner similar to the severity adjustment incorporated into the IPPS 
MS-DRG system. We agree with the commenters that instituting a higher 
comprehensive payment for complex cases would both allow us to continue 
a comprehensive payment methodology where the most costly service 
reported with status indicator ``J1'' on the claim determines the 
comprehensive APC assignment and also recognize relative resource 
differences associated with multiple device-dependent procedures. In 
this response, we discuss the first step in this process of identifying 
a primary HCPCS service assigned to status indicator of ``J1'' for each 
claim. We present the methodology for identifying complex subsets of 
primary services and reassigning claims to higher-level APCs in the 
following comment and response.
    To address concerns presented by some of the commenters that they 
could not fully model the proposal, we provide all of the information 
we used to create relative payment weights for CY 2014 using the CY 
2012 claims data to illustrate the final methodology below. We believe 
that this will assist interested parties in replicating our 
methodology. We will recalibrate all of the comprehensive APC relative 
payment weights for CY 2015 using CY 2013 claims data, consistent with 
our annual recalibration of APC relative payment weights, to reflect 
the most recently available claims and cost information.
    To arrive at the illustrative CY 2014 comprehensive geometric mean 
cost for the comprehensive APCs in Table 8, we began by first 
identifying all claims reporting a single procedure described by a 
HCPCS code with status indicator ``J1.'' As noted earlier, this is 
approximately 75 percent of claims with any procedure described by a 
HCPCS code reported with status indicator ``J1.'' On claims reporting a 
single procedure described by a HCPCS code with status indicator 
``J1,'' we considered that procedure to be the primary service that 
determines the comprehensive APC assignment. We then used these single 
``J1'' claims to calculate a comprehensive APC single ``J1'' procedure 
claim geometric mean cost for all comprehensive APCs using the total 
cost on each claim. These comprehensive APC single ``J1'' procedure 
claim geometric mean costs appear in Table 9.
    We then began the process of identifying a ``primary HCPCS code'' 
that represents the ``primary service'' or ``primary procedure'' on a 
claim reporting multiple procedures described by HCPCS codes with 
status indicator ``J1.'' We used the APC geometric mean comprehensive 
cost based on claims reporting a single ``J1'' procedure described by a 
HCPCS code with status indicator ``J1'' (Table 9) to identify the most 
costly procedure reported on each claim. Specifically, we selected the 
primary HCPCS code by determining the comprehensive procedure that is 
assigned to the APC with the highest geometric mean comprehensive cost 
based on claims with a single service with status indicator ``J1.'' We 
undertook a second step when a comprehensive service claim contained 
two or more procedures described by a HCPCS code with status indicator 
``J1'' that are assigned to the same APC. Of those procedures described 
by a HCPCS code with status indicator ``J1'' that are also assigned to 
the same APC with the highest comprehensive APC cost from Table 9, we 
identified the service described by a HCPCS code reported with status 
indicator ``J1'' with the highest HCPCS-level geometric mean cost, also 
derived from the comprehensive cost of claims that contain a single 
procedure with status indicator ``J1,'' to be the primary HCPCS code on 
the claim.

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    In the event that a HCPCS-level geometric mean comprehensive cost 
cannot be determined for a particular HCPCS code from the claims data, 
such as new HCPCS codes that are not represented in the claims data or 
an add-on code for which there are no claims with only that procedure, 
we will model a HCPCS-level comprehensive geometric mean cost that we 
will only use to identify a primary procedure. For procedure codes with 
missing data, we will include an estimated comprehensive HCPCS code 
geometric mean cost in each proposed or final rule, as appropriate, 
using the best information we have available about each code. However, 
we will not use modeled HCPCS-level comprehensive geometric mean costs 
to set comprehensive APC payment rates. We will only use modeled HCPCS-
level comprehensive geometric mean costs in our claims processing 
systems to identify a primary HCPCS code reported on a claim with 
multiple procedures described by HCPCS codes assigned to status 
indicator ``J1'' in the same comprehensive APC. Our goal in modeling 
such a HCPCS-specific geometric mean cost is to identify a primary 
HCPCS code on a claim with multiple procedures in the same 
comprehensive APC with sufficient accuracy for a few years until actual 
claims data become available. This modeled geometric mean cost is not 
intended in any way to presuppose the actual cost of the service for 
future ratesetting.
    Table 9 contains a list of all HCPCS codes assigned to status 
indicator ``J1'' that are assigned to APCs, which are associated with a 
comprehensive payment. Deleted codes are those codes that were used to 
estimate geometric mean costs, but are not valid codes for CY 2104 
while new codes are those codes that will be valid for payment in CY 
2014, but were not present in the CY 2012 claims data. The 
comprehensive APC assignment that we proposed for each HCPCS code 
assigned to status indicator ``J1'' in the proposed rule is shown in 
Column 3, and the illustrative final CY 2014 comprehensive APC 
assignment that we would have been established based on public comment 
on the CY 2014 proposed rule and using CY 2012 claims data is shown in 
Column 4. Column 7 shows the APC geometric mean cost and Column 8 shows 
the HCPCS code geometric mean cost; together these two columns allow 
the determination of the primary service HCPCS code and initial APC 
assignment for any claims with a combination of HCPCS codes reported 
with status indicator ``J1.'' We have not provided any modeled HCPCS 
geometric mean costs for CY 2013 or CY 2014 ``J1'' HCPCS codes for 
which we do not have claims data as we are finalizing this policy with 
modification, but delaying implementation until CY 2015. We will make 
those modeled geometric mean costs available in next year's proposed 
rule.
    Comment: Commenters expressed concern that CMS' proposal for a 
single, comprehensive APC payment would not adequately cover the higher 
cost of cases where multiple expensive devices are used. Commenters 
also raised several concerns with paying claims with multiple primary 
procedures under a single APC payment. The commenters noted that, under 
comprehensive APCs, hospitals would find simple claims with a single 
comprehensive HCPCS code and few services to be more profitable on a 
case basis than complex claims with a greater number of comprehensive 
HCPCS codes and more ancillary services. Commenters believed that this 
could be a significant issue for many of the comprehensive APCs because 
only one primary service is paid and one quarter of all claims have 
multiple procedures. Many commenters believed that a single, 
comprehensive APC payment for single and multiple device insertion 
procedures would create an incentive to not perform complex and 
multiple procedures where the cost materially exceeds payment and that 
it also could create an incentive for hospitals to use inappropriately 
less expensive devices, services, and supplies to offset the financial 
threat of reduced ``packaged'' payments, including cases where those 
substitutions could increase program costs as a whole and carry greater 
risk for beneficiaries.
    Commenters argued that hospitals systematically performing more 
multiple device insertion procedures may face severe financial hardship 
because they would not have enough simple, single primary procedure 
cases to cover the cost of their many multiple device insertion 
procedures, which may limit their ability to provide these services as 
they have in the past. While we stated that we believed that the 
comprehensive APC proposal would encourage hospitals to negotiate 
better rates on supplies and increase the efficiency of individual 
procedures, commenters stated that the added cost of additional 
expensive devices cannot be routinely reduced to approximate the cost 
of a single device procedure.
    Response: We agree with the commenters that there is wide spread 
variation in the comprehensive costs of individual claims within each 
primary procedure, and we further agree with the commenters that we do 
not want to financially disadvantage hospitals that treat sicker 
beneficiaries that require more complex and costly procedures. We also 
agree with the commenters that the presence of certain device-related 
procedures reported together on a claim can, but does not always, 
constitute a more complex and resource-intensive subset of a 
comprehensive procedure.
    In calculating the proposed payment rates for comprehensive APCs, 
we proposed to allocate the costs of all ancillary and adjunctive 
services to the primary procedure assigned to status indicator ``J1,'' 
including the costs of additional procedures identified with status 
indicator ``J1.'' A comprehensive approach increases opportunities for 
hospitals to garner efficiencies in the delivery of these services, but 
also increases the variation in estimated total claim costs 
contributing to the comprehensive APC relative payment weight 
calculation. We agree with the commenters that, in certain instances, 
cost variation could be too large and could potentially create undue 
financial risk for hospitals that treat complex patients. We also agree 
with the commenters that there are some limitations on individual 
hospitals' ability to reduce costs associated with complex procedures, 
especially in the short term. Cost reductions may involve changing 
suppliers or renegotiating contracts for expensive devices. Further, it 
may be difficult for hospitals to immediately analyze the effects of 
changing payment models and rapidly implement the practices that they 
use to handle cost variations within inpatient DRGs.
    Given our interest in establishing a comprehensive APC payment 
under the OPPS that is comparable to a severity level DRG payment 
adjustment, we agree with the commenters who recommended assigning 
combinations of procedures that are reported together which indicate a 
more complex and resource-intensive version of the primary procedure to 
higher level comprehensive APCs, not unlike the IPPS policy of 
assigning procedures with certain conditions to higher paying MS-DRGs. 
After reviewing significant public comments pointing out common 
clinical scenarios for combinations of device insertion procedures 
assigned to status indicator ``J1,'' we decided to recognize complexity 
in these device-dependent procedures by reassigning claims for certain 
forms of the primary procedures to higher level comprehensive APCs as a 
modification to our proposal. We welcome public

[[Page 74886]]

comments on recognizing the cost of more complex forms of primary 
procedures through our final policy to reassign claims for complex 
forms of the primary procedures discussed below. We identify the 
complex forms of primary procedures that we would reassign for CY 2014 
using CY 2012 claims data if we were implementing the comprehensive APC 
policy in CY 2014 in Table 10. We discuss our consideration of code-
specific comments by clinical family later in this section.
    We took several steps to moderate resource cost variation in 
comprehensive APC payments. First, we undertook a standard APC 
recalibration. We specifically evaluated the APC assignment of some 
primary procedures and moved those procedures from one APC to another 
to better align resource and clinical homogeneity. In considering the 
APC assignment of these procedures, we looked at the traditional 
parameters of geometric mean cost for the primary service and clinical 
characteristics of the APC. We created, consolidated, or redefined the 
primary procedures in the comprehensive APCs as necessary to better 
group services with clinical and resource homogeneity. Second, we 
identified complex subsets of primary procedures, which consist of the 
primary HCPCS code reported in combination with other HCPCS codes that 
together describe a more complex form of the primary service. We 
reassigned many claims with complex subsets of primary procedures to a 
higher level comprehensive APC in the same clinical family through this 
methodology. We define a clinical family of comprehensive APCs to be a 
set of clinically related comprehensive APCs that represent different 
resource levels of clinically comparable services.
    Reassignment of claims with complex subsets of the primary 
procedures does not change the primary service identified on a claim. 
We continue to consider all services reported on the claim, even the 
additional ``J1'' HCPCS codes identifying a claim as complex, to be 
adjunctive and packaged into the primary service. We make a distinction 
here between the idea of a primary service under comprehensive APCs and 
the concept of a composite service as discussed in section II.A.2.f. of 
this final rule with comment period. Both methodologies foster more 
accurate ratesetting by allowing us to use additional information 
reported on a claim to establish a geometric mean cost and accompanying 
relative payment weight. However, under a composite payment approach, 
we identify certain procedures that are frequently performed together 
during a single clinical encounter as a single service and identify 
that set of services as a complete service. For comprehensive APCs, we 
assess many combinations of procedure codes for purposes of determining 
complex forms of a primary service, but the combination of codes is not 
considered to be separate and distinct service. For comprehensive APCs, 
the primary service continues to represent the complete furnished 
service.
    For the purpose of evaluating HCPCS code combinations for 
reassignment to a higher level comprehensive APC after identifying one 
of the procedures described by a HCPCS code assigned to status 
indicator ``J1''reported on the claim as being the primary service, we 
recognized a combination of procedure codes as complex and 
appropriately reassigned to a higher level APC in the same clinical 
family of services if the complex combination of procedures met all of 
the following criteria.
     The comprehensive geometric mean cost of the claims with 
the combination of procedures was more than two times the comprehensive 
geometric mean cost of claims reporting only a single comprehensive 
procedure described by a HCPCS code assigned to status indicator 
``J1.''
     There were greater than 100 claims with the specific 
combination of procedure codes.
     The number of claims reporting the specific combination of 
procedure codes exceeded 5 percent of the total volume of claims 
reporting that procedure as the primary service described by a HCPCS 
code assigned to status indicator ``J1'', and we did not determine that 
the combination of procedure codes represented an uncommon clinical or 
resource extreme value within the entire family of services.
    In reviewing the CY 2012 claims data for purposes of illustrating 
this final methodology, we addressed all of the combinations of 
procedures reported on claims that met all of these criteria, but also 
addressed other combinations of procedures reported on claims that did 
not meet all of these criteria if clinical consistency suggested that 
additional reassignment was necessary.
    Once we determined that a particular procedure code combination for 
a primary service was complex because it represented a sufficiently 
costly case and frequent subset within the primary procedure overall, 
we evaluated alternate APC assignments for those claims reporting a 
combination of procedure codes. We assessed resource variation for 
reassigned claims within the receiving APC using the geometric mean 
cost for all reassigned claims for the primary service relative to 
other services assigned to that APC using the 2 times rule criteria. We 
maintained clinical homogeneity by reassigning claims within the same 
clinical family of comprehensive APCs. Any combinations of multiple 
comprehensive HCPCS codes that were not sufficiently frequent or which 
did not represent sufficiently costly cases relative to the cost of the 
primary procedure established with simple, single procedure claims were 
not identified as complex subsets of the primary procedures and were 
not reassigned. We repeated this process for each APC for which 
commenters expressed concerns regarding complexity of cases 
contributing to wide variation in costs. After both reassigning some 
procedure codes to different comprehensive APCs and reassigning claims 
for complex cases of primary services, we then calculated the final 
comprehensive geometric mean cost for the comprehensive APCs. The 
illustrative comprehensive geometric mean costs that we would have 
calculated for the comprehensive APCs for CY 2014 appear in Table 8.
    Infrequently, we will not have claims data for some procedures 
described by HCPCS codes that are assigned to status indicator ``J1'' 
and, therefore, no claims cost information upon which to base an 
assessment of volume or costliness. In this case, we will use the best 
information available to us to prospectively identify a complex version 
of the primary service, which is indicated by the combination of 
procedure codes reported on a claim and assign those complex cases to a 
higher level comprehensive APC. We will reassess the appropriateness of 
identifying certain combinations of procedure codes as complex subsets 
of a primary service once cost information becomes available. This is 
comparable to our policy for assigning new codes or codes without 
claims data to an APC based on the best information we have available 
at the time of assignment and reassessing that resource homogeneity of 
that APC assignment when claims data become available.
    Table 10 shows the combinations of procedure codes that we 
identified within the 136 primary procedure codes assigned to status 
indicator ``J1'' in the CY 2012 claims data that we used in our 
illustration of CY 2014 modeling and the APC to which those 
combinations of procedures would be reassigned, as well as combinations 
of CY 2013 and CY 2014 procedure codes that are not represented in our 
modeling dataset for

[[Page 74887]]

which we identified a clinical similarity to existing services and 
would have identified for reassignment as a complex subset of the 
primary service for CY 2014. We intend to reassess both procedure code 
assignments in the comprehensive APCs and our identification and 
reassignment of complex cases represented by combinations of procedure 
codes using updated claims and cost report data as we establish 
relative payment weights each year. We note that we will have CY 2013 
claims data for some of the procedure codes listed in Table 10 and we 
will reassess our identification of combinations of procedures as 
complex for CY 2015 in light of data and in response to comments 
received on this final rule with comment period in our CY 2015 OPPS/ASC 
proposed rule.
    In summary, after consideration of the public comments we received, 
we are finalizing the following methodology for establishing an APC 
relative payment weight for the comprehensive APC policy, which is our 
proposed policy with a modification. During ratesetting, single claims 
reporting a single procedure described by a HCPCS code assigned to 
status indicator ``J1'' are used to establish an initial APC assignment 
for each procedure described by that HCPCS code. The geometric mean of 
the total estimated costs on each claim is used to establish resource 
similarity for each procedure code's APC assignment and is evaluated 
within the context of clinical similarity, with assignment starting 
from the APC assignments in effect for the current payment year. Claims 
reporting multiple procedures described by HCPCS codes assigned to 
status indicator ``J1'' are identified and the procedures are then 
assigned to a comprehensive APC, based on the primary HCPCS code, that 
has the highest geometric mean estimated cost. This ensures that 
multiple procedures described by HCPCS codes assigned to status 
indicator ``J1'' reported on claims are always paid through and 
assigned to the comprehensive APC that would generate the highest APC 
payment. If multiple procedures described by HCPCS codes assigned to 
status indicator ``J1'' that are reported on the same claim have the 
same APC geometric mean estimated cost, as would be the case when two 
different procedures described by HCPCS codes assigned to status 
indicator ``J1'' are assigned to the same APC, identification of the 
primary HCPCS code is then based on the procedure described by the 
HCPCS code assigned to status indicator ``J1'' with the highest HCPCS-
level geometric mean cost based on claims with a single HCPCS code 
assigned to status indicator ``J1.'' Where we have no claims data upon 
which to establish a HCPCS-level comprehensive geometric mean cost, we 
will model a HCPCS-level geometric mean cost for the sole purpose of 
appropriately assigning the primary HCPCS code reported on a claim. The 
comprehensive APC assignment of each procedure described by HCPCS codes 
assigned to status indicator ``J1'' is then confirmed by verifying that 
the APC assignment remains appropriate when considering the clinical 
similarity, as well as the estimated cost of all claims reporting each 
procedure described by HCPCS codes assigned to status indicator ``J1,'' 
including simple and complex claims, with multiple device-related 
procedures.
    We are providing in Table 9 the APC assignments for each procedure 
described by HCPCS codes assigned to status indicator ``J1,'' the APC 
geometric mean estimated cost based on claims reporting single 
procedures, and the HCPCS geometric mean estimated cost based on the 
claims reporting single procedures that we used to identify primary 
HCPCS codes and to assign the procedure to an appropriate comprehensive 
APC. If we were implementing this policy in CY 2014, Table 9 would 
contain the same information as the claims processing system and could, 
therefore, be used to determine the initial APC assignment and APC 
geometric mean estimated cost for any procedure described by HCPCS 
codes assigned to status indicator ``J1'' reported on claims prior to 
any reassignment of certain costly claims for a primary service that 
represent a complex form of the primary service to higher level APCs. 
Table 9 is configured for CY 2104 and will be updated for 
implementation in CY 2015.
    We then considered reassigning complex subsets of claims for each 
primary service HCPCS code. All claims reporting more than one 
procedure described by HCPCS codes assigned to status indicator ``J1'' 
are evaluated for the existence of commonly occurring combinations of 
procedure codes reported on claims that exhibit a materially greater 
comprehensive geometric mean cost relative to the geometric mean cost 
of the claims reporting that primary HCPCS code. This indicates that 
the subset of procedures identified by the secondary HCPCS code has 
increased resource requirements relative to less complex subsets of 
that procedure. If a combination of procedure codes reported on claims 
is identified that meets these requirements, that is, commonly 
occurring and exhibiting materially greater resource requirements, it 
is further evaluated to confirm clinical validity as a complex subset 
of the primary procedure and the combination of procedure codes is then 
identified as complex, and primary service claims with that combination 
of procedure codes are subsequently reassigned as appropriate. If a 
combination of procedure codes does not meet the requirement for a 
materially different cost or does not occur commonly, it is not 
considered to be a complex, and primary service claims with that 
combination of procedure codes are not reassigned. All combinations of 
procedures described by HCPCS codes assigned to status indicator ``J1'' 
for each primary HCPCS code are similarly evaluated.
    Once all combinations of procedures described by HCPCS codes 
assigned to status indicator ``J1'' have been evaluated, all claims 
identified for reassignment for each primary service are combined and 
the group is assigned to a higher level comprehensive APC within a 
clinical family of comprehensive APCs, that is, an APC with greater 
estimated resource requirements than the initially assigned 
comprehensive APC and with appropriate clinical homogeneity. We 
assessed resource variation for reassigned claims within the receiving 
APC using the geometric mean cost for all reassigned claims for the 
primary service relative to other services assigned to that APC using 
the 2 times rule criteria.
    For new HCPCS codes and codes without data, we will use the best 
data available to us to identify combinations of procedures that 
represent a more complex form of the primary procedure and warrant 
reassignment to a higher level APC. We will reevaluate our APC 
assignments, and identification and APC placement of complex claims 
once claims data become available. We then recalculate all APC 
comprehensive geometric mean costs and ensure clinical and resource 
homogeneity.
    We have provided in Table 10 the combinations of procedures 
described by HCPCS codes assigned to status indicator ``J1'' that we 
used to set payment rates and the additional combinations of procedures 
described by new HCPCS codes assigned to status indicator ``J1'' that 
would be identified for reassignment as a complex form of the primary 
procedure in CY 2014. If we were implementing this policy in CY 2014, 
Table 10 would contain the same information as the claims processing 
system and could, therefore, be used to

[[Page 74888]]

determine the final comprehensive APC assignment and comprehensive APC 
geometric mean estimated cost for any procedure described by HCPCS 
codes assigned to status indicator ``J1'' reported on an individual 
claims. Table 10 is configured for CY 2104. We will update this table 
for implementation in CY 2015.

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BILLING CODE 4120-01-C
(e) Impact of Proposed Comprehensive APCs for Device-Dependent 
Procedures
 Impact on Medicare Payments
    In our proposed rule, we stated that because these device-dependent 
comprehensive APCs are entirely derived from existing services 
currently reported on Medicare claims, the policy is effectively budget 
neutral in its impact on Medicare payments. We noted that room, board, 
and nursing services have been covered costs in the delivery of 
outpatient services that require the patient to receive nursing 
services, occupy a bed for outpatient care, and maintain a controlled 
metabolic intake during a prolonged outpatient stay. Although we 
proposed to include new revenue center costs for room and board when 
reported on these claims, we emphasized that we were proposing to 
include them to increase the accuracy of reporting and not because they 
represent a new cost.
    Comment: One commenter opined that CMS is correct to include the 
costs of all component services and supplies that would be packaged 
under the proposal for CY 2014; all adjunctive services, including 
laboratory tests, diagnostic tests and evaluation and management 
services; DMEPOS for which payment would be made under the OPPS; 
services reported by therapy codes that would be payable under the 
OPPS; room and board as reported in room and board revenue cost 
centers; and cost of hospital-administered drugs (regardless of the 
route of administration) to ensure that the geometric mean cost upon 
which the payment for these comprehensive APCs would be based would 
include all necessary costs of the services. However, several 
commenters were concerned that CMS did not account for the payments for 
services proposed to contribute to the comprehensive APC geometric mean 
costs into the CY 2013 current year payment estimates in budget 
neutrality calculations, but included these costs in the CY 2014 OPPS 
payment rate calculations. The commenters pointed out that CMS proposed 
to include the CLFS payments for laboratory services proposed for 
packaging in the OPPS current year (CY 2013) total payment amount when 
calculating budget neutrality adjustments for the prospective payment 
year (CY 2014), but that CMS apparently did not add payments to the 
OPPS current year total payment estimate for the adjunctive items and 
services that would be newly paid under the OPPS through the 29 
comprehensive APCs. In short, payment for newly added services should 
be added to the total CY 2013 payment level against which CY 2014 
payments would be held budget neutral. These commenters defined the 
additional services that would be newly paid under the OPPS to include 
durable medical equipment, therapy services, inpatient nursing 
services, and inpatient room and board for overnight outpatient stays. 
The commenters further stated that the proposed rule provides no 
information concerning how this calculation was made and data was not 
provided to allow the public to review and validate the determination 
of budget neutrality.
    Response: We appreciate the acknowledgement that we correctly 
identified and included the costs of adjunctive services contributing 
to these comprehensive OPD services, with the exception of charges on 
inpatient revenue codes, including room and board revenue codes. We 
agree with the commenters that we should have included payments for 
adjunctive services proposed for payment through the OPPS for the first 
time in the current year budget neutrality calculations as well as in 
the relative payment weights for the proposed year calculation. In 
calculating budget neutrality adjustments for CY 2015 we will 
incorporate modeled payments for services that will be newly included 
in the comprehensive APCs on both sides of the budget neutrality 
calculation as we did for those laboratory services that we are 
packaging for CY 2014.
    Comment: Several commenters stated that, although they recognized 
that changes in assignments in a prospective (average) payment system 
cause some payments to increase and others to decrease, the commenters 
were concerned that payment amounts have not been set to appropriately 
encompass the additional services that will be packaged. Another 
commenter noted that the shift from limited to comprehensive APCs would 
be accompanied by wide shifts in payment and questioned whether the 
changes with the expanded bundles, including occasional decreases, 
accurately reflected the costs of the additional packaged services. 
They requested that CMS delay proposed payments for the comprehensive 
APCs to ensure payment amounts have been set appropriately to include 
the additional packaged services.
    Response: We agree with commenters that, for some services, there 
was considerable variation in the payment change from an isolated 
payment for the primary service, a device-related procedure, to a 
comprehensive payment for the complete service. There were a number of 
reasons for this variation. First, services varied considerably with 
respect to the number and estimated cost of adjunctive services that 
were typically provided during the same encounter. Some services were 
almost completely described by the primary HCPCS code with status 
indicator ``J1'' with few additional adjunctive services reported in 
the claims data. Proposed comprehensive payment for these services did 
not change significantly. Other services, however, appear with many 
adjunctive services reported in the claims data that became packaged 
into the comprehensive payment, so the comprehensive payment for those 
primary HCPCS codes was considerably greater than the payment for the 
primary service alone.
    Second, comprehensive payments allow us to use almost all of the 
claims for the primary service, rather than using a smaller subset of 
claims that have a single major procedure and no other significant 
procedures. We believe that this methodology provides much more 
accurate cost estimates for these comprehensive services, including 
incorporating the cost of all adjunctive services proportional to their 
presence on claims reporting comprehensive services into our final APC 
relative payment weight calculation. Our adoption of the geometric 
mean-based methodology rather than the median-based methodology to 
establish relative payment weights finalized in the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68229 through 68233) ensures that 
the final APC relative payment weight captures the complete spectrum of 
estimated geometric mean costs of procedures reported on claims and 
assigned to that APC. We recognize that the magnitude and direction of 
the change in payment from current OPPS payment structure for more 
granular payment for individual services to the proposed single 
comprehensive APC payment for the primary service and its adjunctive 
services varied from primary service to primary service. In a few 
instances, the relative geometric mean cost of the entire comprehensive 
service was less than the geometric mean cost of the primary service 
alone. We believe that this is largely attributable to the improved 
accuracy of our ratesetting process. Under our traditional ratesetting 
methodology, we attempt to identify a cost for each separately payable 
service from our claims data. We use many strategies to use as much 
claims data as possible, but we cannot use all claims to estimate the 
APC

[[Page 74902]]

geometric mean cost underpinning the relative payment weight. 
Comprehensive APCs allow us to use almost all of the claims for the 
primary service to calculate the geometric mean cost and the 
comprehensive APC to which the primary service is assigned.
    Finally, we note that we reassigned some procedures described by 
HCPCS codes assigned to status indicator ``J1'' to different 
comprehensive APCs based on public comments that we received. Also in 
response to public comments that we received, we are finalizing a 
methodology for identifying complex subsets of the procedures reported 
in combination with the primary service that contain multiple device-
dependent procedures and require greater resources, and we are 
reassigning these complex cases to a higher level comprehensive APC. We 
believe that reassigning claims for complex forms of the primary 
procedure to a higher level APC within the same clinical family 
directly addresses commenters' concerns regarding recognizing the 
additional cost of ancillary services in complex procedures and 
improves the relative accuracy of the final OPPS payment for the 
primary service.
    Comment: Several commenters questioned whether outlier payments 
would be adequate under the OPPS as the new comprehensive APCs are 
formed and packaging is expanded. The commenters noted that under the 
IPPS outlier payments are set at 5.1 percent of total payments, 
compared to 1 percent under the OPPS, and costs reported above the 
outlier threshold under the IPPS are paid at 80 percent compared to 50 
percent under the OPPS. One commenter suggested that CMS increase 
outlier payments for comprehensive APCs, while another commenter 
suggested that outlier payments are an issue that CMS should examine 
and perhaps should have examined prior to advancing new packaging 
policies.
    Response: Although we did not propose a change in outlier payments, 
we will consider whether we should expand our current outlier payment 
policy. Section 1833(t)(5)(C) of the Act specifies that the estimated 
total of additional payments for outliers cannot exceed 3 percent of 
estimated total program payments in that year. Currently, we allocate 1 
percent of total program payments to outlier payments each year. 
Overall, we believe that the current structure of the OPPS, which 
continues to make separate payment for most services, does not create 
the same financial risk for individually costly cases as IPPS payment 
through MS-DRGs, for example. Further, we are not sure an expansion to 
our outlier payment policy is necessary because we believe that our 
final policy to reassign claims for complex forms of primary services 
to higher level APCs reduces financial risk associated with 
comprehensive APC payment.
 Impact on APCs
    Impact on Composite APCs. There is currently one device-dependent 
composite service under the OPPS, cardiac resynchronization therapy, 
which is assigned to APC 0108. Because a comprehensive APC will treat 
all individually reported codes as representing components of the 
comprehensive service, all of the elements of the composite service are 
included in the new comprehensive service. Therefore, cardiac 
resynchronization therapy will no longer be identified as a composite 
service, but will be identified as a comprehensive service. All 
services currently assigned to APC 0108, including cardiac 
resynchronization therapy services, were assigned to the new 
comprehensive APC in our CY 2014 proposal.
    Comment: Several commenters noted that, whereas we proposed making 
APC 0085 (Level II Electrophysiologic Procedures) a comprehensive APC, 
we did not discuss composite APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation Composite), which also would be absorbed by the 
new comprehensive APC policy. The commenters also noted that they 
believed that CMS calculated an APC geometric mean cost and payment 
rate based on the same set of claims for both APCs.
    Response: We stated that cardiac resynchronization therapy services 
(assigned to APC 0108 Cardiac Resychronization Therapy) would no longer 
be identified as a composite service because it would be incorporated 
into a comprehensive service. However, we did not state in the proposed 
rule that the same situation existed in terms of APC 8000. Commenters 
are correct that the same principle applies. Because one of the 
components of the composite service is assigned a procedure assigned to 
status indicator ``J1,'' all of those claims reporting these services 
would trigger the comprehensive payment policy that we are finalizing 
with modification in this final rule with comment period. Commenters 
also are correct that in the proposed rule, we incorrectly assigned 
procedures to both APCs and calculated geometric mean costs and 
relative payment weights based on the same set of claims. We will 
reassign the previous status indicators for procedures assigned to APC 
8000 from ``S'' and ``T'' to status indicator ``J1'' for CY 2015, and 
we will make a comprehensive APC payment for cardiac electrophysiologic 
evaluation and ablation services.
    Impact on Claims Used to Calculate Other APCs. Some of the costs 
reported on claims for device-dependent procedures may no longer be 
available to contribute to the calculations for other services through 
the pseudo-single process described in section II.A. of this final rule 
with comment period. However, the loss of usable cost data for these 
services will not create a significant impact on other APCs because 
most of these services currently cannot be isolated as the ``single 
services'' that can be used in the cost calculation process. The 
exceptions are services such as EKGs and chest x-rays that occur in 
very high frequency across all types of encounters, and laboratory 
services and drugs, neither of which are calculated based on average 
cost. Finally, it is also important to note that the impact associated 
with the loss in usable claims data is lessened when assessing the 
benefit of more accurate cost calculations and ratesetting that will be 
achieved from the use of 400,000 new claims that can now be used for 
these purposes because of the establishment of the comprehensive APCs.
    Impact on Device-Dependent APCs. The impact on current device-
dependent APCs is described above in section II.A.2.d.(1) of this final 
rule with comment period. Comprehensive APC geometric mean costs 
generally exceed the device-dependent procedure geometric mean costs by 
an average of 11 percent, less than $1,000 per claim. The direct cost 
contribution of other adjunctive OPPS services accounts for most of 
this increase, with laboratory tests contributing approximately $18 per 
claim (a 0.1 percent increase) and other adjunctive covered outpatient 
services (not currently paid under the OPPS) contributing an additional 
$18 per claim. There is significant variation across comprehensive 
APCs, however, not only because the distribution of adjunctive services 
varies, but also because the larger bundles allow a more complete 
incorporation of packaged costs. Finally, the use of comprehensive APCs 
would allow the number of claims used to estimate costs for these 
services to almost triple from 233,000 to 649,000, increasing the 
accuracy of our relative cost estimates.
    Comment: Several commenters were concerned about hospitals' 
willingness to consider new technologies, which can be costly. The 
commenters

[[Page 74903]]

expressed concern that this proposal would impact device pass-through 
payment, New Technology APC provisions, and payments for device-
dependent APCs. The commenters also were concerned that packaging is 
likely to limit the data available for future OPPS updates because the 
commenters believed that hospital reporting would be less accurate if 
there were no payment consequences for omitting a device on the claim 
and that the sunset of device edits would reduce the reliability of the 
data provided for payment calculations for the same reason. The 
commenters also were concerned that future potential pass-through 
device categories may be disadvantaged because pass-through eligibility 
includes demonstrating costliness relative to several thresholds based 
on APC payment. Specifically, the commenters were concerned that fewer 
device categories would be eligible for pass-though payment because 
fewer device categories would exceed a new higher threshold as a 
percent of the APC payment amount as payment increases with expanded 
packaging. Some commenters requested that CMS continue to apply the 
procedure-to-device and device-to-procedure edits. One commenter 
asserted that hospitals do not find these edits to be burdensome, that 
the edits are a useful flag for accurate charging and that, if it is 
eliminated, providers could fail to report device charges completely.
    Response: We do not agree with commenters that comprehensive APC 
payment will inhibit adoption of new technology. We have not proposed 
any changes to the New Technology APCs or device pass-through payment 
provisions and we discuss these payment policies in sections 
II.A.2.d.(1) and I.B. of this final rule with comment period. These 
processes for supporting new technologies will continue. New Technology 
APCs are reserved for new services that are not eligible for 
transitional pass-through payments for a device, drug, or biological, 
and for which we lack sufficient clinical information and cost data to 
appropriately assign them to a clinical APC group. Our proposed policy 
does not impact our New Technology APC policy, and our determination of 
new technology eligibility is not dependent on a particular cost 
threshold.
    With regard to pass-through payment eligibility, we agree with the 
commenters that comprehensive APCs will create expanded bundles and 
generally higher payment from which the dollar value of the various 
cost thresholds that are part of the pass-through eligibility process 
will be determined. The specific cost thresholds used in determining 
eligibility of a new device pass-through category are listed in 42 CFR 
419.66(d). For CY 2015, payment for device-dependent procedures through 
comprehensive APC payment will create a higher costliness threshold 
against which new device categories interested in pass-through status 
must demonstrate costliness. We believe that the statutory construction 
of the OPPS envisions the relative cost of services to vary over time 
as services are redefined, recoded, and reassigned among APCs, and as 
new claims and cost report data become available, which would raise or 
lower the cost threshold for pass-through payment eligibility under 
section 1833(t)(6)(A)(iv)(II) of the Act. We estimate that, for CY 
2014, the inclusion of additional adjunctive packaged services, in 
aggregate, account for approximately 11 percent of the cost of these 
device-intensive services. Relative payment weights for device-related 
procedures can change by this amount each year due to annual 
recalibration. As we implement the comprehensive APC payment policy in 
CY 2015, we will monitor the impact of eligibility for device pass-
through payments for a change in the percent of potential device 
categories failing to clear the current cost threshold criteria.
    We also believe that that expanded payment bundles encourage 
adoption of new technologies by giving hospitals more flexibility over 
how they deliver a particular service and creating more opportunities 
for hospitals to make tradeoffs to absorb the cost of improved devices. 
As we discuss in section II.A.2.d.(1) of this final rule with comment 
period, we plan to continue our historical device editing in CY 2014. 
Also as indicated in that section, we are further assessing whether we 
need to continue claims processing edits requiring a device HCPCS code 
to be reported on the claim when we implement the comprehensive APCs 
policy in CY 2015.
 Impact on Beneficiary Payments
    Under the comprehensive service APCs, instead of paying copayments 
for a number of separate services that are generally, individually 
subject to the copayment liability cap at section 1833(t)(8)(C)(i) of 
the Act, beneficiaries can expect to only pay a single copayment that 
is subject to the cap. This will likely reduce beneficiary overall 
liability for most of these claims.
    Comment: Several commenters agreed with CMS that, due to the 
inpatient deductible cap on beneficiary copayments, net beneficiary 
coinsurance would decrease under the proposed change. One commenter was 
concerned that beneficiary out-of-pocket costs may still be higher for 
any individual beneficiary. The commenter was particularly concerned 
that new cost-sharing with beneficiaries for laboratory services would 
be contrary to statue and congressional intent. The commenter objected 
to a proposal that would impose new beneficiary cost-sharing 
requirements in order to cut total projected Medicare spending for 
outpatient services.
    Response: We believe that this proposal decreases the liability for 
almost all beneficiaries receiving primary procedures assigned to 
comprehensive APCs in CY 2015 because the inpatient deductible cap, 
mandated by statute to apply to single services, will now apply to the 
entire hospital claim, as it is now considered a single service or 
procedure. We agree with the commenters that there may be some isolated 
beneficiaries who may have a higher beneficiary liability than they 
would have had we not proposed comprehensive APCs. In many instances, 
and for these device-related procedures in particular, beneficiaries 
will no longer make copayments for individual ancillary services. 
Because the device insertion procedures that we have proposed as 
comprehensive services are universally very expensive, the cap will 
apply to the majority of claims reporting services assigned to 
comprehensive APC. We received many public comments on our proposal to 
package laboratory services and address those comments and concerns in 
our discussion of that final policy in section II.A.3.c.(3) of this 
final rule with comment period.
 Impact on Specific APCs
    In conjunction with our proposed rule, we published Addendum B, 
which identified specific proposed comprehensive payments associated 
with HCPCS codes proposed for assignment to status indicator ``J1'' 
under the proposed comprehensive APC payment policy. We identified the 
29 device-dependent APCs proposed for comprehensive APCs and assigned 
HCPCS codes based on their prior APC assignment. Most of the public 
comments that we received were specific to certain HCPCS codes, certain 
APCs, or certain families of services.
    Although we are not implementing this final comprehensive APC 
payment policy until CY 2015, to address concerns by some commenters 
that they could not fully model the proposal, we provide all of the 
information we would use to create a relative payment weight

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for CY 2014 using the CY 2012 claims data in order to illustrate the 
final comprehensive APC methodology. We summarize and respond to the 
public comments on individual services in this section, as if we were 
implementing this policy for CY 2014, grouped by those families of 
services below. We will recalibrate all of the comprehensive APC 
relative payment weights for CY 2015 using CY 2013 claims data, 
consistent with our annual recalibration of APC relative payment 
weights, to reflect the most recently available claims and cost 
information in next year's rulemaking cycle.
    Comment: With reference to the neurostimulator family of APCs, APCs 
0039, 0041, 0061, and 0318, one commenter was concerned that the CY 
2014 proposal would broadly decrease payments for neurostimulator 
insertions. Other commenters believed that total payments would remain 
approximately the same, but also believed that the spread of costs 
within a given APC was too great when certain combinations of devices 
were used. Commenters argued that there is a vast difference in supply 
(device) costs between a battery or generator replacement and a paddle 
lead implant or even a percutaneous lead implant. Commenters argued 
that bundling all of the different variations of neurostimulator 
implants into one comprehensive payment could create an unintended 
incentive to use less effective single leads and to increase the number 
of device replacements and revisions, which could potentially limit the 
therapeutic effectiveness for patients with complex pain syndromes.
    With respect to leads, commenters stated that payment for dual lead 
trials would be decreased by nearly 40 percent, while single lead 
trials would be increased by 25 percent, encouraging single lead 
trials. Similarly, the payment for the initial dual lead implant would 
decrease by 16 percent. The commenter asserted that this policy may 
reverse the common clinical practice of dual lead trials for the 
majority of patients and create a financial incentive to reduce the 
number of leads used for permanent implants, increasing the need for 
additional lead placements at a later time, which would result in an 
increase in readmissions and possible increase in adverse events and 
complications.
    Additionally, commenters believed that this proposal could create 
incentives to use shorter life devices such as non-rechargeable 
devices, requiring more frequent replacement procedures in future 
years. The commenters stated that on the one hand, providers would have 
a financial incentive to use less expensive devices initially. However, 
the commenter further stated that on the other hand because CMS is 
proposing to increase the generator replacement payment rate by 29 
percent, providers could be encouraged to use shorter life devices that 
may require more frequent replacements with a consequent increase in 
Medicare spending and beneficiary cost sharing.
    Commenters proposed a number of modifications to address these 
issues, including the creation of composite APCs to pay appropriately 
for the combination of devices provided to an individual patient. The 
commenters recommended that CMS retain the existing single component 
APCs for use when only one component (that is, a generator or an array) 
is implanted or replaced, and create two new composite APCs that 
reflect different combinations of components--pulse generator and one 
array and pulse generator and two or more arrays. Alternatively, the 
commenters recommended Comprehensive APC 0318 (Implantation of 
Neurostimulator Pulse Generator and Electrode) as the appropriate 
assignment for most complete neurostimulator systems procedures because 
it is already used to describe complete cranial nerve and vagus nerve 
systems procedures. Several commenters recommended maintaining a 
differentiation between laminectomy lead implants and percutaneous 
implants, and between spinal systems and sacral systems.
    Response: We do not agree with the commenters who are concerned 
that we are underestimating payments for neurostimulators. We believe 
that by using all claims for these services, instead of the much 
smaller subsets of single claims that we used for our device-dependent 
methodology, any adjustments in the payments for specific services 
represent a more accurate estimation of relative resources required for 
the primary service than past estimates. We also note that by 
estimating the total cost of the procedure by packaging all charges 
reported on the claim, we ensure that all of the estimated costs of all 
of these services contribute to the cost estimation for the 
neurostimulator procedure. Our methodology for identifying single 
claims, which is designed to isolate the unique costs associated with a 
specific service, makes some assumptions about assigning packaged costs 
to individual services. However, we agree with the commenters who were 
concerned that complex procedures such as those characterized by 
multiple units and multiple comprehensive components have a wide 
variation in comprehensive costs and that the geometric mean cost of 
these subsets is often materially greater than the geometric mean cost 
of all claims that include both simple and complex versions of the 
procedure. We agree with the commenters that delivery of these complex 
services could potentially be impacted under our proposed comprehensive 
APC payment policy.
    Specifically, we agree with the commenters that procedures that 
implant individual elements of device systems, such as a generator 
without leads, may have significantly different costs than procedures 
that implant entire systems. We also agree with the commenters that 
there may be significant resource differences between individual 
elements of neurostimulator systems, such as transcutaneous leads and 
implanted paddles, and between different systems, such as epidural 
systems and sacral systems. These differences may then be reflected in 
the variation in the estimated geometric mean costs of the 
comprehensive service due to different combinations of component 
services. Therefore, we are accepting the commenters' suggestions and 
we would reconfigure these APCs to better separate procedures for 
individual elements of neurostimulator systems from procedures in which 
the entire system is implanted, and to more closely align relative 
resource requirements of complex subsets of the service with the 
corresponding payment for that subset if we were implementing this 
comprehensive APC policy in CY 2014.
    Once we reassign complex claims for a primary service to a higher 
level APC, as we discuss below, we believe that many of the concerns 
raised by the commenters would be directly addressed, and therefore, we 
do not believe that we should not consider these procedures for a 
comprehensive APC assignment in CY 2015. We believe that hospitals 
understand that under a prospective payment system the cost of 
providing care to individual patients may vary relative to the payment 
amount, which is one hallmark of a prospective payment system. We are 
comfortable implementing comprehensive APCs for neurostimulators in CY 
2015 with variance in the geometric mean costs of individual services 
that are comparable to the variance we see in estimated hospital costs 
for traditional, discrete, noncomprehensive services.
    To implement the commenters' suggestions we would use the four 
techniques described above to reassign claims for complex forms of the 
primary

[[Page 74905]]

service to higher level APCs. We have analyzed the claims in which 
multiple units or multiple HCPCS codes assigned to status indicator 
``J1''are present and have divided individual services into simple and 
complex services, with complex services characterized by complete 
systems, multiple components or other associations that correlate with 
high resource requirements (high cost). We are adopting the basic 
suggestion of differentiating between partial systems and complete 
systems, and we plan to use the claims data to group clinically 
similar, high-volume, complex procedures into APCs with similar costs 
in CY 2015. In this final rule with comment period, we invite 
commenters to apply the analysis, methodology, and the payment 
estimation techniques presented here to specific neurostimulator 
services and to provide comment on these illustrative CY 2014 
reassignments of complex neurostimulator claims.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, if we were implementing this policy for CY 2014, for this 
neurostimulator family of APCs are as follows:
     APC Redesignations: We would eliminate APC 0315, and we 
would rename APC 0039 and APC 0318.
     APC Reassignments: We would reassign CPT codes 43647 and 
63655 from APC 0061 to APC 0039; CPT code 0268T from APC 0039 to APC 
0040; CPT codes 63664 and 64553 from APC 0040 to APC 0061; and CPT code 
61886 from APC 0315 to APC 0318.
     Complexity Reassignment: We would reassign certain HCPCS 
code combinations that occur with CPT codes 0282T, 61885, 63650, 63663, 
63685, 64555, and 64590 as complex forms of the primary service. We 
summarize all of the codes that we would reassign as complex forms of 
their primary procedure in Table 10 as if we were implementing this 
policy in CY 2014.
    We request comment on these specific HCPCS code movements and 
complex claim reassignments. We will reassess the application of this 
policy to this neurostimulator family of APCs with CY 2013 claims data 
for CY 2015 implementation, and we will update them based on new claim 
and cost report data and any relevant new CY 2015 codes through next 
year's rulemaking cycle.
    Comment: With reference to the endovascular family of APCs, APCs 
0082, 0083, 0104, 0229, 0319, and 0656, one commenter was supportive of 
the approach to further integrate the payment methodologies for the 
inpatient and outpatient systems in this case and agreed that patients 
who receive the major services contained within the 29 comprehensive 
APCs are unlikely to be receiving unrelated services on the same day. 
The commenter urged CMS to monitor the effects of this new system to 
ensure that patients continue to receive access to the most appropriate 
care. Other commenters were generally supportive of the approach, but 
believed that there were specific reasons for not applying 
comprehensive status to the endovascular family APCs, for delaying the 
implementation for these comprehensive APCs, or for modifying payments 
within the family. One commenter specifically was concerned about a 
substantial decline in payment for APC 0083 (Coronary Angioplasty, 
Valvuloplasty, and Level I Endovascular Revascularization of the Lower 
Extremity).
    Commenters noted that for CY 2011, 16 new HCPCS codes were 
implemented to create comprehensive codes for endovascular treatment in 
the lower extremity arterial territories; for CY 2013, new base and 
add-on codes were created for coronary artery interventions; and four 
new comprehensive endovascular codes will be added for CY 2014. Several 
commenters objected to the creation of any comprehensive APCs using any 
CPT codes that are less than 3 years old, as they believe the data is 
not yet reliable.
    Several commenters noted that the existing OPPS payment structure 
for coronary and peripheral revascularization procedures (angioplasty 
and stent placement) is component-based, providing separate but often 
reduced APC payments for each clinical aspect of the revascularization 
service, which are frequently assigned a status indicator of ``T'' 
(multiple reduction applies). Commenters argued that the clinical 
scenarios for revascularization procedures are based on each 
beneficiary's unique clinical needs, making them incredibly complex 
with required resources varying significantly from patient to patient. 
Given this complexity, one commenter opined that coronary and 
peripheral revascularization procedures are ill-suited for 
comprehensive APCs because this type of payment structure is unable to 
capture the differences in hospital resources associated with the 
differences in revascularization services offered to patients. A few 
commenters believed that the proposal will inevitably give hospitals an 
incentive to use less expensive items and less extensive procedures 
even if those items will increase program costs as a whole and carry 
greater risk for beneficiaries. In a specific example, one commenter 
was concerned that all cardiac magnetic resonance imaging and other 
imaging studies within a 30-day period would be bundled into payment 
for the comprehensive APC, discourage the use of appropriate imaging 
modalities, and result in cost as the driving factor in patient access 
to needed medical imaging services.
    Finally, another commenter believed that comprehensive APCs for 
stent placement procedures would allow a few patients receiving all the 
possible components of the bundle to experience a lesser hospital 
outpatient copayment amount, but would cause many beneficiaries to pay 
for services that they have not received and do not need.
    Response: We appreciate the commenters' support for our conclusion 
that beneficiaries receiving these major services are unlikely to be 
receiving unrelated services on the same day, and we appreciate 
commenters who were generally supportive of our intent to create 
comprehensive packages. We recognize that there has been recent change 
in the coding and billing of many of these endovascular procedures, but 
we believe that hospitals prepare to adopt new codes each year and 
establish a charge relative to the best cost information available to 
them. We use estimated costs from claims data as soon as it becomes 
available to establish APC relative payment weights generally, and we 
have no reason to believe that continuing that practice for 
comprehensive APCs is not appropriate. With respect to the comments 
concerning APC 0083, for example, we note that the estimated hospital 
costs for the procedure alone did not change significantly between CY 
2011 and CY 2012, and that the proposed comprehensive service geometric 
mean cost was approximately 10 percent higher than the single procedure 
geometric mean cost, a ratio that is comparable to the average 
aggregate increase in cost for the additional ancillary services 
observed across all proposed comprehensive services, indicating 
continued stability in the relative cost estimations despite changes to 
a methodology that now aggregates all estimated costs reported on each 
claim before calculating a geometric mean cost.
    However, we agree with the commenters that endovascular procedure 
coding has historically been component based. In general, commenters 
argued that multi-vessel endovascular procedures have different 
resource requirements than single-vessel procedures. We agree with the

[[Page 74906]]

commenters that there is a correlation between the number of vessels 
treated and hospital costs. However, we also observe that there are a 
variety of endovascular procedures where the geometric mean costs of 
some single-vessel procedures are similar to the geometric mean costs 
of other multi vessel procedures. Nonetheless, we generally agree with 
the commenters that the range of estimated costs for any individual 
HCPCS code or HCPCS code combination is wide, with considerable overlap 
occurring across primary service codes and code combinations. We agree 
that, in general, payments for multiple vessel services should be 
adjusted to account for higher complexity and resources when those 
higher resources are reflected in our claims data.
    To model commenters' suggestions for illustration purposes in CY 
2014, we have used the techniques described above to reassign claims 
for certain high-cost, complex versions of the primary service, 
primarily multiple vessel endovascular procedures. We analyzed the 
claims in which multiple units of a primary service or multiple HCPCS 
codes assigned to status indicator ``J1,'' including the primary 
service, are present. We divided individual services into simple and 
complex services, with complex services characterized by multiple 
components, multiple vessels, or other associations that correlate with 
high resource requirements (high cost). For our CY 2014 illustration, 
we are adopting the basic suggestion of differentiating between single 
vessel and multiple vessel procedures, and we are using the claims data 
to group clinically similar, high-volume, complex procedures into APCs 
with similar costs. In this final rule with comment period, we invite 
commenters to apply the analysis, methodology, and the payment 
estimation techniques presented here to specific endovascular services 
and to provide comment on these illustrative CY 2014 reassignments of 
complex claims for endovascular services.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, if we were implementing this policy for CY 2014 for this 
endovascular family of APCs are as follows:
     APC Redesignations: We would delete APC 0082 and reassign 
its services to other APCs. We would create a new APC, APC 0445 (Level 
III Endovascular Procedures). We would rename APCs 0083, 0104, 0229, 
0319, and 0656.
     APC Reassignments: We would reassign CPT codes 37229, 
37230 and 92995 from APC 0082 to APC 0445; CPT codes 92984, 92987, 
92990, and 92997 from APC 0083 to APC 0104; and HCPCS code G0291 from 
APC 0656 to APC 0319 (for the purpose of estimating geometric mean 
costs from CY 2012 claims data used for CY 2014 ratesetting).
     New HCPCS Codes: The comprehensive APC assignments that we 
would make for new HCPCS codes for this family are listed in Table 9. 
The new codes in this family would include CPT codes 37236, 37237, 
37238, 37239, 37241, 37242, 37243, 37244, 92920, 92921, 92924, 92925, 
92928, 92933, 92934, 92937, 92938, 92941, 92943, 92944, and HCPCS codes 
C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, and C9608.
     Complexity Reassignments: We would reassign certain HCPCS 
code combinations that occur with HCPCS and CPT codes 0238T, 35471, 
35475,35476, 37204, 37205, 37220, 37221, 37224, 37225, 92920, 92928, 
92933, 92941, 92943, 92980, 92981, 92982, 92995, C9600, C9602, C9604, 
C9606, C9608, G0290, and G0291. We summarize all of the codes that we 
would reassign as complex forms of their primary service in Table 10 as 
if we were implementing this policy in CY 2014.
    We request comment on these specific HCPCS movements and complex 
claim reassignments. We will reassess the application of this policy to 
this endovascular services family of APCs with CY 2013 claims data for 
CY 2015 implementation, and we will update them based on new claims 
data and any relevant new CY 2015 codes through next year's rulemaking 
cycle.
    Comment: Commenters generally did not object to the creation of 
comprehensive APCs for cardiac electrophysiology (EP) studies and one 
commenter specifically supported the proposal. However, commenters were 
confused and concerned about the impact of comprehensive APCs on 
payment for certain ablation procedures when performed in conjunction 
with EP studies. In the proposed rule, we discussed the creation of 
comprehensive APCs for EP studies, applying our proposed methodology in 
which all adjunctive services, with a few exceptions already discussed, 
reported on the claim are packaged into the payment for the primary 
service, which is based on the average comprehensive cost of those 
claims. However, we also inadvertently included a discussion of the 
continued existence of composite APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation), a composite payment based on the performance 
of an ablation procedure with an EP service. Claims containing HCPCS 
codes for both an ablation and an EP study would, therefore, meet the 
criteria for the composite, but would also meet the criteria for 
comprehensive APC 0085 (Level II Electrophysiologic Procedures), 
understandably generating reader confusion and causing commenters to 
ask how any services would be paid as composite APC 8000 services when 
they would all be subsumed under comprehensive APC 0085. We also 
believe that we added to this confusion by initially including some 
claims and estimated costs in the cost calculation of both APC 8000 and 
APC 0085, duplicating the reporting of composite APC 8000 claims and 
causing some statistics for the two APCs to be incorrect. Moreover, we 
also were not consistent in our application of status indicators or in 
our treatment of EP-ablation composites that for CY 2013 were reported 
with new CPT codes.
    Commenters proposed several alternatives to our proposed treatment 
of EP studies and ablations but all of the alternatives involved 
differentially paying for ablation procedures when those procedures 
were performed in conjunction with EP procedures. One commenter 
recommended retaining one of the remaining ablation codes, CPT code 
93650 (Ablate heart dysrhythm focus), as a status indicator ``Q3'' 
codes that may be paid through a composite APC when not conditionally 
packaged. Noting that a status indicator of ``Q3'' would have the same 
packaging effect as including it in the comprehensive package as 
proposed, we believe this commenter intended to recommend a higher 
payment for EP procedures performed with an ablation, such as would 
occur when the two codes would determine a composite APC assignment. 
Another commenter expressed concerns that CPT code 93620 
(Electrophysiology evaluation) was also listed with a status indicator 
of ``Q3'' but assigned to comprehensive APC 0085. Commenters requested 
that we clarify the intended treatment of EP and ablation services, 
differentially pay for the lower costs of EP studies performed alone 
relative to the higher costs of EP-ablation procedures, and create a 
consistent treatment of services within these sets of codes.
    Response: We agree with the commenters that our proposed rule 
provisions were not consistent in regard to our treatment of the 
electrophysiology-ablation procedures as composite services and as 
comprehensive services. We also agree with the commenters that there 
are significant differences between

[[Page 74907]]

estimated costs of EP studies and estimated costs of EP-ablation 
procedures, and that the costs of services reported with EP-ablation 
combination codes are similar to the costs of single EP-ablation 
services assigned to composite APC 8000. For CY 2015, we intend to 
modify our proposal to create a separate comprehensive APC for new CY 
2013 HCPCS codes that represent an EP study procedure with ablation, 
and we also intend to identify combined EP-ablation services reported 
with multiple HCPCS codes as a complex form of EP services and reassign 
them to a higher level APC. Finally, we also intend to delete composite 
APC 8000 as we move payment for these services under the comprehensive 
APC payment policy. In this final rule with comment period, we invite 
commenters to apply the analysis, methodology, and the payment 
estimation techniques presented here to specific EP services and to 
provide comment on these illustrative CY 2014 reassignments of complex 
claims for EP services.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, as if we were implementing this policy for CY 2014, for this 
set of electrophysiologic evaluation and ablation APCs are as follows:
     APC Redesignations: We would redesignate composite APC 
8000 as comprehensive APC 0444 (Level III Electrophysiologic 
Procedures).
     New codes: We would reassign CPT codes 93653, 93654 and 
93656 from APC 8000 to APC 0444.
     Complexity Reassignments: We would reassign HCPCS codes 
93619 and 93620, in combination with CPT code 93650, as complex forms 
of the primary EP service, and we would reassign those claims to APC 
0444. For purposes of modeling the policy for CY 2014, we treated 
claims previously assigned to composite APC 8000 as complex forms of 
the primary service. We summarize all of the codes that we would 
reassign as complex forms of their primary procedures in Table 10 as if 
we were implementing this policy in CY 2014.
    We request public comment on these specific HCPCS movements and 
complex claim reassignments. We will reassess the application of this 
policy to this set of electrophysiologic evaluation and ablation APCs 
with CY 2013 claims data for CY 2015 implementation, and we will update 
them based on new claims data and any relevant new CY 2015 codes 
through next year's rulemaking cycle.
    Comment: In addition to the general comment that CMS should ensure 
that complex (multiple device) procedures are not inappropriately 
grouped with single device insertions, there were several public 
comments regarding the pacemaker-defibrillator family of services, APCs 
0089, 0090, 0106, 0107, 0108, 0654, 0655, and 0674. With the exception 
of public comments on cardiac resynchronization therapy (CRT), these 
comments dealt with general issues such as the difficulty in modeling 
the impacts of payment changes based on the information provided in the 
proposed rule and are discussed elsewhere in this final rule with 
comment period. Currently, we pay for CRT services through composite 
APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)) 
based on the geometric mean costs of procedures reported on claims with 
a specific set of codes describing the parts of this composite service 
(77 FR 68258). Our proposal for comprehensive payment would have 
subsumed the need for a composite APC in CY 2014. One commenter 
requested that CRT services continue to be paid based on the geometric 
mean cost of the composite service rather than based on the geometric 
mean cost of all services furnished with multiple lead pacemakers or 
defibrillators that would occur with both our proposal to package 
procedures described by add-on codes and the comprehensive APC policy.
    Response: We agree with the commenters that complex forms of 
certain services, generally characterized by combinations of codes in 
which components were separately reported in order to describe the 
delivery of an entire pacemaker or defibrillator system, have different 
resource profiles from simple procedures that implant system components 
or certain simple devices. We agree that CRT services are one of the 
most costly subsets of pacemaker implantation services but that other 
complex combinations of codes also exist. However, as part of the 
process of converting these APCs to comprehensive APCs, we noted that 
the comprehensive geometric mean cost of these services differed 
considerably, in some cases, from our estimates of the primary service 
calculated through our traditional single bill methodology and these 
new cost estimates suggested reassigning codes among the family of 
pacemaker APCs in order to increase resource homogeneity. These 
reassignments also suggested renaming or restructuring APCs as 
necessary. We found these reassignments would reduce much of the cost 
to payment variance.
    Therefore, in response to public comments we received, we would 
modify our proposal to establish comprehensive payments for pacemaker 
related services. We would realign the APCs by moving primary services 
subject to our standard 2 times rule methodology. In addition, we have 
identified a number of HCPCS combinations that represent high volume, 
high cost, more complex subsets of the primary service, and we would 
reassign those claims to a higher level APC. We note that our decision 
to finalize this proposed comprehensive APC policy with modification in 
this final rule with comment period, but to delay implementation of the 
policy until CY 2015 creates the opportunity for the public to further 
review the illustrative reconfigurations of comprehensive APCs that we 
would make in response to comment. In this final rule with comment 
period, we invite commenters to apply the analysis, methodology, and 
the payment estimation techniques presented here to specific pacemaker 
services and to provide comment on these illustrative CY 2014 APC 
configurations, APC assignments, and complexity reassignments.
    Changes to implement commenters' suggestions and concerns for CY 
2014, if we were implementing this policy for CY 2014, for this 
pacemaker-defibrillator family of APCs are as follows:
     APC Redesignations: We would rename APC 0089 ``Level III 
Insertion/Replacement of Permanent Pacemaker,'' and we would rename APC 
0106 ``Insertion/Replacement of Pacemaker Components.''
     APC Reassignments: We would reassign CPT code 33217 from 
APC 0106 to APC 0090; CPT code 33229 from APC 0645 to APC 0655; CPT 
code 33231 from APC 0107 to APC 0108; CPT codes 33208, 33214, and 33224 
from APC 0655 to APC 0089; and CPT code 33221 from APC 0654 to APC 
0089.
     Complexity Reassignments: We would reassign certain 
combinations of the following CPT codes 33206, 33207, 33208, 33210, 
33212, 33213, 33216, 33224, 33227, 33228, 33230, 33240, 33263, and 
33264 as complex forms of the primary pacemaker-defibrillator service. 
We summarize all of the codes that we would reassign as complex forms 
of their primary procedures in Table 10 as if we were implementing this 
policy in CY 2014.
    We request comment on these specific HCPCS movements and complex 
claim reassignments. We will reassess the application of this policy to 
this pacemaker-defibrillator family of APCs with CY 2013 claims data 
for CY 2015 implementation, and we will update them based on new claims 
data and any

[[Page 74908]]

relevant new CY 2015 codes through next year's rulemaking cycle.
    Comment: Several commenters requested that CMS not designate APC 
0202 (Level VII Female Reproductive Procedures) as a comprehensive APC. 
The commenters opined that, as opposed to the stated description of 
comprehensive APCs, APC 0202 does not contain a single major procedure 
with relatively small cost contributions from adjunctive services but 
contains independent services that are frequently performed in 
combination with each other. Commenters also noted that CMS is 
currently achieving payment efficiencies for these concomitant 
procedures by reducing the payment for any second procedure to 50 
percent even when that second procedure contains an additional medical 
device. The commenters stated that when multiple services are performed 
together under a comprehensive payment, the averaged payment assigned 
to the APC may be significantly less than the cost of the individual 
services performed. The commenters believed that this may encourage 
some hospitals to delay or stage procedures inappropriately, increasing 
overall Medicare costs and potentially threatening patient access to 
certain devices.
    One commenter believed that APCs 0385 (Level I Prosthetic 
Urological Procedures) and 0386 (Level II Prosthetic Urological 
Procedures) similarly would have sizable reductions in Medicare 
payments that could create significant disincentives for hospitals to 
perform certain procedures that utilize medical devices. Another 
commenter believed that this result also applied to APC 0674 (Prostate 
Cryoablation).
    Response: We do not agree with the commenters that these APCs 
represent a different class of services. All of the services described 
by the HCPCS codes in these APCs represent major surgical procedures 
where the encounter can be viewed as a single primary service and where 
a beneficiary would view the encounter globally. What commenters are 
describing as unrelated procedures are individual components of a 
single surgical procedure, which is, in turn, the primary reason for 
the encounter. CPT codes are designed by physicians to facilitate 
reporting of variation in physician work and, as a result, often 
describe individual components of services that can be grouped in 
various ways. However, from a hospital payment perspective, many of 
those component codes are ancillary to or supportive of a primary 
service. For example, during a procedure to repair the urogenital tract 
the surgeon may report CPT code 57265 (Extensive repair of vagina) 
along with CPT code 57288 (Repair bladder defect), but these individual 
physician services are both part of the comprehensive surgical repair 
procedure. In the proposed rule, we proposed defining the most costly 
component of a comprehensive service as the primary service that 
determines the APC assignment and final payment of the service, and we 
believe that this methodology remains appropriate for these services.
    We agree with the commenters generally and that, with respect to 
these reproductive surgery APCs specifically, there are some instances 
of commonly performed clinically coherent combinations of HCPCS codes 
assigned to status indicator ``J1'' that are associated with high 
estimated cost and sufficient volume, and we would designate these 
procedures as complex subsets of these primary services eligible for 
reassignment to a higher level APC if we were implementing this policy 
in CY 2014. We would have applied this methodology along with other 
techniques described above for CY 2014 in order to facilitate the 
transition from discrete incremental payments to a single comprehensive 
payment for the entire service. For APCs 0385, 0386, and 0674, as well 
as APC 0202, we also identified several combinations of HCPCS codes 
that represented common, costly subsets of services and we would 
reassign several HCPCS codes to different APCs to reduce the variance 
between the geometric mean estimated cost of the complex services and 
geometric mean cost of the APC to which the services would be assigned. 
In this final rule with comment period, we are inviting commenters to 
apply the analysis, methodology, and the payment estimation techniques 
presented here to specific reproductive services and to provide comment 
on these illustrative CY 2014 reassignment of complex reproductive 
services claims.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, if we were implementing the policy for CY 2014, for this 
urogenital procedures family of APCs are as follows:
     APC Redesignations: We would rename APC 0385 ``Level I 
Urogenital Procedures''; APC 0386 ``Level II Urogenital Procedures''; 
and APC 0674 ``Level III Urogenital Procedures''.
     APC Reassignments: We would reassign CPT code 53445 from 
APC 0386 to APC 0674; CPT code 55873 from APC 0674 to APC 0385; and CPT 
code 57423 from APC 0202 to APC 0385.
     Complexity Reassignments: We would reassign certain 
combinations of CPT codes 54405, 57265, 57282, and 57285 as complex 
forms of the primary service. We summarize all of the codes that we 
would reassign as complex forms of their primary procedures in Table 10 
as if we were implementing this policy in CY 2014.
    We request comment on these specific HCPCS movements and complex 
claim reassignments. We will reassess the application of this policy to 
this urogenital procedures family of APCs with CY 2013 claims data for 
CY 2015 implementation, and we will update them based on new claims 
data and any relevant new CY 2015 codes through next year's rulemaking 
cycle.
    Comment: One commenter noted that APC 0082, a cardiovascular APC, 
includes CPT code 37204 (Transcatheter occlusion), which is 
occasionally used to report brachytherapy for liver therapy. The 
commenter believed that packaging yttrium in the cost of APC 0082 would 
be in conflict with section 1833(t)(2)(H) of the Act, which requires 
separate payment for brachytherapy.
    Response: We agree with the commenters that the statute specifies 
that brachytherapy devices (seeds) shall be classified separately under 
the OPPS from other services. Because brachytherapy devices could be 
used during some encounters to deliver comprehensive services, we will 
modify our proposal to state that brachytherapy devices, like 
mammography and ambulance services, will not be included in the 
comprehensive payments beginning in CY 2015 and will continue to 
receive separate payment.
    Comment: One commenter stated that CMS should not consider APC 0227 
(Implantation of Drug Infusion Device) to be a comprehensive APC 
because the drug that is used to fill the reservoir is not part of the 
comprehensive service. The commenter stated that the drug that is used 
to fill the pump should not be considered adjunctive because the drug 
itself is therapeutic and separate and apart from the implantation of 
the primary (pump) service. This commenter believed that therapeutic 
drugs in general should be excluded from a comprehensive APC payment 
and expressed concern that packaging may decrease hospital use of 
costly drugs, such as PRIALT, which is a non-narcotic alternative. 
Another commenter stated that CMS should provide greater data 
transparency if it decides to move ahead with the inclusion of DME 
items within a comprehensive APC. The commenter was concerned that 
there will be a decrease in the payment rate for APC 0227 relative to 
the CY 2013 payment rate, which will render the

[[Page 74909]]

payment inadequate to cover the cost of the services in question.
    Response: We do not agree with the commenters that drugs being 
supplied to the patient to fill the reservoir of a pump at the time of 
pump implantation should be excluded from the comprehensive APC 
payment. Drugs supplied to fill the pump during implantation of the 
pump are adjunctive to the procedure. As we have noted above, costs of 
costly adjunctive services are included proportionally into the cost 
estimation for the primary services through our ability to use almost 
all claims for a service and adoption of the geometric mean cost upon 
which to establish relative payment weights. Certainly, the greater the 
cost variance of a particular component and the less frequently that 
exceptional component is used, the less the relative payment weight, 
based on a geometric mean of estimated cost, will reflect those less 
frequent, costly cases. Hospitals are also aware that the costs of 
extremely costly cases are partially mitigated by outlier payments, 
which would continue to apply in this case upon implementation of the 
comprehensive APC policy in CY 2015. Finally, with respect to APC 0227, 
we note that the comprehensive estimated geometric mean costs are in 
fact approximately 10 percent higher than the individual procedure 
estimated geometric mean costs, consistent with the relative 
contribution of adjunctive services across all comprehensive APCs.
    Therefore, we are confirming that drugs used to fill in pumps at 
the time of a comprehensive pump insertion procedure are considered to 
be ancillary and supportive to the primary procedure and packaged as 
part of the comprehensive APC payment regardless of whether the drug 
was previously packaged within the OPPS payment, was previously 
separately paid under the OPPS, or was previously paid according to a 
DMEPOS fee schedule.
(f) Summary of Creation of Comprehensive APCs for High-Cost Device 
Dependent Procedures for Implementation in CY 2015
    In summary, in response to public comments we received, we have 
decided to finalize the comprehensive APCs with modification and to 
delay the implementation or effective date of the policy until CY 2015. 
We acknowledge commenters' concerns that this is a complex new payment 
structure under the OPPS. We agree that hospitals should have time to 
prepare for this comprehensive payment structure, and we also agree 
with the commenters that a delay in implementation will allow us (and 
them) more time to operationalize changes necessary to process 
comprehensive payments.
    In response to public commenters' request for additional detail on 
our calculation of the comprehensive APC relative payment weights, we 
have provided a granular discussion of our methodology for constructing 
the comprehensive APC payment rates as well as the specific APC 
configurations we would implement for CY 2014 if we were not delaying 
implementation to CY 2015. We also believe that the delay in 
implementation will give hospitals more time to study the final 
methodology for calculating relative payment weights that we discuss in 
this section, and specifically how the methodology recognizes resource 
differences in complex and simple versions of the same primary service. 
We are taking advantage of the delay in implementation and requesting 
additional comment on this methodology.
    For CY 2015, we will recalibrate comprehensive APCs and final 
reassignment of complex claims in light of any comments on the 
illustrative CY 2014 assignments that we present and updated CY 2013 
claims and cost report data next year. For CY 2014, we will continue 
our payment for device-dependent APCs and composite payment for both 
CRT and cardiac electrophysiologic evaluation and ablation as discussed 
elsewhere in this final rule with comment period.
    Effective for CY 2015, we will include all integral, ancillary, 
supportive, dependent, and adjunctive outpatient services into the 
comprehensive APC payment, excluding certain services such as ambulance 
services; mammography services; brachytherapy sources; and drugs, 
biologicals, and devices receiving pass-through payment. We will not 
include charges reported with inpatient room and board revenue codes as 
we do not believe outpatient costs are correctly reported in those 
revenue codes. Adjunctive items and services that will be 
unconditionally packaged into the comprehensive APC payment for CY 2015 
include the following.
     All packaged services that were packaged in CY 2013.
     All services finalized for unconditional or conditional 
packaging for CY 2014.
     All adjunctive services and supplies provided during the 
delivery of the comprehensive service, which includes all other cover 
OPPS items and services appearing on a claim, including those with a 
HCPCS with status indicator ``J1''; implantable DMEPOS supplies 
provided during the comprehensive OPPS service; services performed by 
therapists provided during the OPPS service; and all other covered 
outpatient items and services appearing on the claim.
     All packaged hospital-administered drugs pursuant to a 
physician order, excluding pass-through drugs that are required to be 
separately paid by statute.
    We are finalizing a modification to our proposed methodology for 
identifying a primary service, assigned to status indicator ``J1'' on a 
claim reporting multiple procedures described by HCPCS codes assigned 
to status indicator ``J1'' in order to effectuate an appropriate 
comprehensive APC payment. We are finalizing a multiple step process to 
include an evaluation of costliness based on the comprehensive 
geometric mean cost of single procedures assigned to status indicator 
``J1'' reported on claims. We also have determined that there are 
certain subsets of outpatient cases for a primary service that should 
be more appropriately paid when stratified according to the complexity 
of the service. Therefore, we have identified a number of complexity 
reassignments for certain high-volume, costly, complex versions of a 
primary service, and we have reassigned these subsets of procedures 
representing a complex version of the primary service to higher-level 
APCs in the same clinical family.
    In response to public comments we received, we discuss how we would 
have revised some comprehensive APC definitions and reassigned HCPCS 
codes to specific APCs in order to better align the comprehensive 
geometric mean cost of primary services with APCs that better capture 
the resource and clinical aspects of the service if we were 
implementing this policy for CY 2014. We discuss the methodology that 
we followed for all of those modifications to our proposal in detail 
earlier in this section. We display the final APC revisions that we 
would make and final comprehensive geometric mean cost for those APCs, 
if we were implementing this policy for CY 2014 in Table 8. We display 
final HCPCS assignments in Table 9 and complexity reassignments in 
Table 10 that we would make if we were implementing this policy for CY 
2014.
    We have reconciled the inconsistency in our proposal to pay for 
cardiac electrophysiology-ablation procedures under both composite and 
comprehensive methodologies. For CY 2015, we are reassigning the codes 
assigned to composite APC 8000 into a new composite APC 0444, along 
with complex services from APC 0085 that

[[Page 74910]]

are characterized by composite EP-ablation procedures described by 
HCPCS code combinations.
    Therefore, for CY 2015, we are creating 29 comprehensive APCs to 
prospectively pay for services associated with 167 CY 2014 HCPCS codes, 
which is the most recent code set available. We note that the list of 
HCPCS codes represent the procedures that would be assigned to a 
comprehensive APC if we implemented this policy for CY 2014. We will 
update this list as indicated in our proposed and final OPPS rules for 
CY 2015.
    For CY 2015, we are treating all individually reported procedures 
that are assigned to status indicator ``J1,'' which will appear in the 
CY 2015 Addendum B to the proposed rule, as representing components of 
a comprehensive service characterized by a primary service, and we will 
make a single payment for the comprehensive service. We will be making 
a single all-inclusive payment for each comprehensive service reported 
on a claim with that payment subject to a single beneficiary copayment, 
up to the cap set at the level of the inpatient hospital deductible, as 
provided at section 1833(t)(8)(C)(i) of the Act.
f. Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service. Combining payment for multiple, 
independent services into a single OPPS payment in this way enables 
hospitals to manage their resources with maximum flexibility by 
monitoring and adjusting the volume and efficiency of services 
themselves. An additional advantage to the composite APC model is that 
we can use data from correctly coded multiple procedure claims to 
calculate payment rates for the specified combinations of services, 
rather than relying upon single procedure claims which may be low in 
volume and/or incorrectly coded. Under the OPPS, we currently have 
composite policies for extended assessment and management services, low 
dose rate (LDR) prostate brachytherapy, 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 2014 OPPS/ASC proposed rule (78 FR 43561), for CY 2014, 
we proposed to continue our composite policies for extended assessment 
and management services, LDR prostate brachytherapy services, cardiac 
electrophysiologic evaluation and ablation services, mental health 
services, and multiple imaging services, as discussed below. We 
proposed to discontinue and supersede the cardiac resynchronization 
therapy composite APC with our proposed comprehensive APC 0108, as 
discussed in section II.A.2.e. of the proposed rule (78 FR 43561). 
Comments on cardiac resynchronization therapy relating to comprehensive 
APCs are discussed in section II.A.2.e. of this final rule with comment 
period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
(a) Background
    Beginning in CY 2008, we included composite APC 8002 (Level I 
Extended Assessment and Management Composite) and composite APC 8003 
(Level II Extended Assessment and Management Composite) in the OPPS to 
provide payment to hospitals in certain circumstances when extended 
assessment and management of a patient occur (an extended visit). In 
most of these circumstances, observation services are supportive and 
ancillary to the other services provided to a patient. From CY 2008 
through CY 2013, in the circumstances when observation care is provided 
in conjunction with a high level visit, critical care, 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 and prior 
years.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43562 through 43563), 
for CY 2014, we proposed to modify our longstanding policy to provide 
payment to hospitals in certain circumstances when extended assessment 
and management of a patient occur. We proposed to create one new 
composite APC, entitled ``Extended Assessment and Management (EAM) 
Composite'' (APC 8009), to provide payment for all qualifying extended 
assessment and management encounters rather than recognize two levels 
of EAM composite APCs. We proposed to allow any visit furnished by a 
hospital in conjunction with observation services of substantial 
duration to qualify for payment through EAM composite APC 8009. These 
policies are discussed in greater detail below.
(b) Payment for Extended Assessment and Management Services
    As we discussed in section VII. of the CY 2014 OPPS/ASC proposed 
rule (78 FR 43614 through 43617), we proposed to no longer recognize 
five distinct visit levels for clinic visits and emergency department 
visits based on the existing HCPCS E/M codes, and instead recognize 
three new alphanumeric HCPCS codes for each visit type. Currently, the 
payment criteria for the EAM composite APCs 8002 and 8003 include a 
high level visit represented by HCPCS code 99205, 99215, 99284, 99285, 
or G0304; critical care represented by CPT code 99281; or direct 
referral represented by HCPCS code G0379 provided in conjunction with 
observation care represented by HCPCS code G0378. We stated that in 
light of the proposal to no longer differentiate visit payment levels, 
and the fact that the current high level visit codes (HCPCS codes 
99205, 99215, 99284, 99285 and G0304) would no longer be recognized 
under the OPPS, it would no longer be feasible to continue with our 
current payment criteria for the EAM composite APCs 8002 and 8003 for 
CY 2014. Therefore, to ensure that we continue to provide payment to 
hospitals in certain circumstances when extended assessment and 
management of a patient occur, for CY 2014, we proposed to provide 
payment for the entire care encounter through proposed new EAM 
Composite APC 8009 when observation care is provided in conjunction 
with a visit, critical care, or direct referral and is an integral part 
of a patient's extended encounter of care. Specifically, for CY 2014, 
we proposed to provide EAM composite APC payment through a newly 
created composite APC in circumstances when a clinic or ED visit, 
identified by one of the three new alphanumeric HCPCS codes proposed in 
section VII. of the proposed rule, is accompanied by observation care 
of substantial duration on a claim. We would no longer recognize 
composite APC 8002 or APC

[[Page 74911]]

8003. The specific criteria we proposed to be met for the proposed new 
EAM composite APC to be paid is provided below in the description of 
the claims that we proposed to select for the calculation of the 
proposed CY 2016 geometric mean costs for this composite APC.
    We proposed to calculate the geometric mean costs for the proposed 
new EAM composite APC (APC 8009) for CY 2014 using CY 2012 single and 
``pseudo'' single procedure claims that meet each of the following 
criteria:
     The claim does not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we assured that they would not contain a code for a service 
with status indicator ``T'' on the same date of service.);
     The claim contains 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claim contains one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as G0378; or CPT code 99201 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 1)); CPT code 99202 (Office or other outpatient visit for the 
evaluation and management of a new patient (Level 2)); CPT code 99203 
(Office or other outpatient visit for the evaluation and management of 
a new patient (Level 3)); CPT code 99204 (Office or other outpatient 
visit for the evaluation and management of a new patient (Level 4)); 
CPT code 99205 (Office or other outpatient visit for the evaluation and 
management of a new patient (Level 5)); CPT code 99211 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 1)); CPT code 99212 (Office or other outpatient visit 
for the evaluation and management of an established patient (Level 2)); 
CPT code 99213 (Office or other outpatient visit for the evaluation and 
management of an established patient (Level 3)); CPT code 99214 (Office 
or other outpatient visit for the evaluation and management of an 
established patient (Level 4)); CPT code 99215 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 5)); CPT code 99281 (Emergency department visit for the 
evaluation and management of a patient (Level 1)); CPT code 99282 
(Emergency department visit for the evaluation and management of a 
patient (Level 2)); CPT code 99283 (Emergency department visit for the 
evaluation and management of a patient (Level 3)); CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)); or HCPCS code G0380 
(Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B 
emergency department visit (Level 2)); HCPCS code G0382 (Type B 
emergency department visit (Level 3)); HCPCS code G0383 (Type B 
emergency department visit (Level 4)); HCPCS code G0384 (Type B 
emergency department visit (Level 5)); or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes) provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378.
    The proposed CY 2014 geometric means cost resulting from this 
methodology for the proposed new EAM composite APC (APC 8009) was 
approximately $1,357, which was calculated from 318,265 single and 
``pseudo'' single claims that met the required criteria.
    We stated in the proposed rule that when hospital claims data for 
the CY 2014 proposed clinic and ED visit codes becomes available, we 
proposed to calculate the geometric mean cost for the proposed new EAM 
composite APC (APC 8009) for CY 2016 using CY 2014 single and 
``pseudo'' single procedure claims that meet each of the following 
criteria:
     The claims do not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we ensure that they would not contain a code for a service with 
status indicator ``T'' on the same date of service.);
     The claims contain 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claims contain one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as HCPCS code G0378; or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes); or newly proposed alphanumeric 
Level II HCPCS code GXXXA (Type A ED visit); newly proposed 
alphanumeric Level II HCPCS code GXXXB (Type B ED visit); or newly 
proposed alphanumeric Level II HCPCS code GXXXC (Clinic visit) provided 
on the same date of service or 1 day before the date of service for 
HCPCS code G0378.
    Comment: One commenter supported CMS' proposal to delete composite 
APCs 8002 and 8003 and to pay for extended assessment and management 
services through newly created composite APC 8009. Another commenter, 
who did not support the proposal, stated that the proposed policy did 
not accurately account for the cost of providing an extended assessment 
and management service and urged CMS to carefully assess the potential 
impact of this proposal upon different types of facilities and patients 
before moving forward.
    Response: We appreciate the commenter's support of our proposal. We 
disagree with the one commenter's argument that our proposal does not 
accurately account for the cost of providing an extended assessment and 
management service. We believe that this proposal accurately accounts 
for the cost of providing an extended assessment and management service 
and that this proposal does not have any substantial impact on any 
particular type of facility or patient type.
    After consideration of the public comments we received, we are 
finalizing our proposal to create a new composite APC, entitled 
``Extended Assessment and Management (EAM) Composite'' (APC 8009), to 
provide payment for all qualifying extended assessment and management 
encounters rather than recognizing two levels of EAM Composite APCs. In 
light of our CY 2014 final visit payment policy, which is discussed in 
detail in section VII. of this final rule with comment period, we are 
modifying our proposal to allow any clinic and certain high level ED 
visits furnished by a hospital in conjunction with observation services 
of substantial duration to qualify for payment through the newly 
created Extended Assessment and Management (EAM) Composite APC (APC 
8009). Specifically, we are allowing a clinic visit (for CY 2014, there 
will be one code to describe all clinic visits), a Level 4 or Level 5 
Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital 
in conjunction with observation services of substantial duration to 
qualify for payment through composite APC 8009. This modification of 
the proposed EAM composite APC criteria is due to our decision not to 
finalize any changes to the Type A or Type B ED visit codes for CY 
2014. Because we are not changing the ED visit codes for CY 2014, we 
also are not changing for CY 2014 the particular ED visit codes that 
qualify for the EAM composite APC.

[[Page 74912]]

    We also are modifying our proposal to calculate the payment rate 
for the new EAM composite APC (APC 8009). Specifically, we calculated 
the geometric mean cost for procedures assigned to APC 8009 for CY 2014 
using CY 2012 single and ``pseudo'' single procedure claims that met 
each of the following criteria:
     The claim does not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we assured that they would not contain a code for a service 
with status indicator ``T'' on the same date of service.);
     The claim contains 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claim contains one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as HCPCS code G0378; or CPT code 99201 (Office or 
other outpatient visit for the evaluation and management of a new 
patient (Level 1)); CPT code 99202 (Office or other outpatient visit 
for the evaluation and management of a new patient (Level 2)); CPT code 
99203 (Office or other outpatient visit for the evaluation and 
management of a new patient (Level 3)); CPT code 99204 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 4)); CPT code 99205 (Office or other outpatient visit for the 
evaluation and management of a new patient (Level 5)); CPT code 99211 
(Office or other outpatient visit for the evaluation and management of 
an established patient (Level 1)); CPT code 99212 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 2)); CPT code 99213 (Office or other outpatient visit 
for the evaluation and management of an established patient (Level 3)); 
CPT code 99214 (Office or other outpatient visit for the evaluation and 
management of an established patient (Level 4)); CPT code 99215 (Office 
or other outpatient visit for the evaluation and management of an 
established patient (Level 5)); CPT code 99284 (Emergency department 
visit for the evaluation and management of a patient (Level 4)); CPT 
code 99285 (Emergency department visit for the evaluation and 
management of a patient (Level 5)); or HCPCS code G0384 (Type B 
emergency department visit (Level 5)); or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes) provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378.
    The final CY 2014 payment rate for composite APC 8009 is 
approximately $1,199.
(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 geometric mean cost 
derived from claims for the same date of service that contain both CPT 
codes 55875 and 77778 and that do not contain other separately paid 
codes that are not on the bypass list. We refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for 
a full history of OPPS payment for LDR prostate brachytherapy services 
and a detailed description of how we developed the LDR prostate 
brachytherapy composite APC.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43563), for CY 2014, 
we proposed to continue to pay for LDR prostate brachytherapy services 
using the composite APC methodology proposed and implemented for CY 
2008 through CY 2013. That is, we proposed to use CY 2012 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 2013 practice, we proposed 
not to use the claims that meet these criteria in the calculation of 
the geometric mean costs of procedures or services assigned to APC 0163 
(Level IV Cystourethroscopy and Other Genitourinary Procedures) 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 geometric mean costs of procedures or 
services assigned to 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 continue to believe 
that data from claims reporting both services required for LDR prostate 
brachytherapy provide the most accurate geometric mean cost upon which 
to base the composite APC payment rate.
    Using a partial year of CY 2012 claims data available for the CY 
2014 OPPS/ASC proposed rule, we were able to use 1,487 claims that 
contained both CPT codes 55875 and 77778 to calculate the geometric 
mean cost of these procedures upon which the proposed CY 2014 payment 
rate for composite APC 8001 was based. The proposed payment rate for 
composite APC 8001 for CY 2014 was approximately $4,340.
    Comment: A few commenters asserted that the existing methodology to 
create ``pseudo'' single claims from multiple procedure claims is not 
yielding a significant number of claims to be used to calculate 
adequate payment rates for APC 8001, APC 0312 (Radioelement 
Applications), and APC 0313 (Brachytherapy). The commenters believed 
that use of this methodology and its insignificant results is a 
continuing trend.
    Response: For CY 2014, we have 591 final rule claims available for 
APC 8001 geometric mean cost calculation, while for CY 2013 we were 
able to use 677 claims that contained both CPT codes 55875 and 77778 to 
calculate the geometric mean cost of these procedures upon which the 
final CY 2013 payment rate for composite APC 8001 was based. For CY 
2014, we have 52 single claims available for geometric mean cost 
calculation for APC 0312, compared to 74 claims available for CY 2013. 
For APC 0313, we have 17,810 single claims available for CY 2014 for 
geometric mean cost calculation compared to 17,743 single claims 
available for CY

[[Page 74913]]

2013. Therefore, there is approximately the same number of ``pseudo'' 
single claims available for APCs 8001 and 0313 geometric mean cost 
calculation compared to CY 2013. With regard to APC 0312 geometric mean 
cost calculation, the number of single claims available for ratesetting 
for CY 2014 compared to CY 2013 is somewhat low for both years. We 
agree with the commenter that it would be preferable if we had a larger 
volume of single claims on which to base the payment rate for APC 0312. 
We will continue to evaluate additional refinements and improvements to 
our ratesetting methodologies in order to maximize our use of claims 
data. In addition, we will continue to study means by which we can use 
a larger volume of claims data to establish the payment rate for APC 
0312 specifically.
    Comment: One commenter supported CMS' proposal to continue paying 
for LDR prostate brachytherapy services using composite APC 8001 and 
noted recognition of the proposed increase in payment.
    Response: We appreciate the commenter's support for this proposal.
    After consideration of the public comments we received, we are 
finalizing our policy to continue paying for LDR prostate brachytherapy 
services using composite APC 8001 for CY 2014, with a final CY 2014 
geometric mean cost for APC 8001 of approximately $3,858.
(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 
geometric mean costs for these services, and advanced our stated goal 
of promoting hospital efficiency through larger payment bundles. In 
order to calculate the geometric mean 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 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.
    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, 
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.
    As we described in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68425), 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 assigned 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 
assigned them interim status indicator ``Q3'' (paid through a composite 
APC) in Addendum B to the CY 2013 OPPS/ASC final rule with comment 
period. To facilitate implementing this policy, we assigned CPT codes 
93653, 93654, and 93656 to a new Group C, which is paid at the 
composite APC 8000 payment rate. (We noted that we will use single and 
pseudo single claims for CPT codes 93653, 93654, and 93656 when they 
become available for calculating the geometric mean costs upon which 
the payment rate for APC 8000 will be based in future ratesetting.) 
Because CPT codes 93655 and 93657 are

[[Page 74914]]

dependent services that may only be performed as ancillary services to 
the primary CPT codes 93653, 93654, and 93656, we believed that 
packaging CPT codes 93655 and 93657 with the primary procedures is 
appropriate, and we assigned them interim status indicator ``N.'' 
Because the CPT Editorial Panel deleted CPT codes 93651 and 93652, 
effective January 1, 2013, we deleted them from the Group B code list, 
leaving only CPT code 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.
    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 was open to public comment for a period 
of 60 days following the publication of the CY 2013 OPPS/ASC final rule 
with comment period.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43564), for CY 2014, 
we proposed to continue to pay for cardiac electrophysiologic 
evaluation and ablation services using the composite APC methodology 
proposed and implemented for CY 2008 through CY 2013. We also proposed 
to continue the new Group C methodology we first established for CY 
2013, described above, in response to the CPT Editorial Panel's 
creation of primary CPT codes 93653, 93654, and 93656. We stated that 
we continue to believe that the geometric mean cost for cardiac 
electrophysiologic evaluation and ablation services calculated from a 
high volume of correctly coded multiple procedure claims would result 
in an accurate and appropriate proposed payment for these 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 geometric mean 
costs for APC 0085, to which the CPT codes in both Groups A and B for 
composite APC 8000 are otherwise assigned. We proposed that the 
geometric mean costs for APC 0085 would continue to be calculated using 
single procedure claims. For CY 2014, using a partial year of CY 2012 
claims data available for the CY 2014 OPPS/ASC proposed rule, we were 
able to use 15,817 claims containing a combination of Group A and Group 
B CPT codes (Group C was not effective until January 1, 2013) to 
calculate a proposed geometric mean cost of approximately $13,402 for 
composite APC 8000.
    Table 6 of the proposed rule listed the groups of procedures upon 
which we proposed to base composite APC 8000 for CY 2014 (78 FR 43565).
    Comment: One commenter on the CY 2013 OPPS/ASC final rule with 
comment period expressed concern with CMS' treatment of CPT codes 
93653, 93654, and 93656, which are assigned to new Group C and paid at 
the composite APC 8000 payment rate. Specifically, the commenter stated 
that CMS considers CPT code 93462 (Left heart catheterization by 
transseptal puncture through intact septum or by transapical puncture 
(List separately in addition to code for primary procedure)) as 
separately payable. However, the commenter believed that when CPT code 
93462 appears on the claim in combination with CPT code 93656 CMS 
should treat the claims as single procedures for building composite APC 
8000 in regard to cases where CPT code 93462 was used to describe 
services to treat atrial fibrillation (AF). The commenter contended 
that CMS did not do so for CY 2013, which resulted in an underpayment 
for cases assigned to composite APC 8000. The commenter noted that when 
the CPT Editorial Panel created CPT code 93656, it specifically listed 
CPT code 93462 as one of the codes that should not be reported in 
combination with CPT code 93656. The commenter asserted that CMS' 
treatment of CPT code 93462 had several ratesetting consequences. 
According to the commenter, when CPT code 93462 appeared on any 
electrophysiology (EP) claim, it prevented that claim from becoming a 
``single procedure'' claim for composite APC 8000 ratesetting purposes. 
Because CPT code 93462 occurs most frequently for EP treatment of AF, 
preventing EP claims with CPT code 93462 from becoming ``single 
procedure'' claims disproportionately excludes AF claims from composite 
APC 8000 cost calculation. In addition, the commenter stated, because 
those claims are more expensive than the average EP claim, this result 
also reduces both the frequency and average cost of claims used to 
calculate the geometric mean cost of composite APC 8000. The commenter 
stated that separate payment of CPT code 93462 prevents packaging CPT 
code 93462 costs on claims for EP involved with AF, which is contrary 
to the CPT instructions regarding CPT code 93656.
    In response to the CY 2014 OPPS/ASC proposed rule, this same 
commenter and one other commenter expressed appreciation for CMS' 
proposal to package the cost of CPT code 93462 within the APC payment 
rates of other services, and recommended that CMS finalize the proposed 
method of calculating the cost of APC 8000 for CY 2014.
    Response: We assigned CPT code 93462 to APC 0080 for CY 2013, with 
a payment rate of $2,649.52. CPT code 93462 is an add-on code. For CY 
2014, we proposed to package most add-on codes, including CPT code 
93462. As a result of our packaging proposal, the geometric mean cost 
and frequency for composite APC 8000 have increased. Based on CY 2014 
final cost data, the geometric mean cost of composite APC 8000 is 
approximately $13,161 based on 16,937 claims available for cost 
calculation of composite APC 8000. We believe that packaging the cost 
of CPT code 93462 within the APC payment rates of other services as a 
result of the add-on code packaging policy addresses the commenters' 
concerns.
    Comment: One commenter who agreed with CMS' proposed methodology 
not to use claims that meet the composite APC 8000 criteria for 
geometric mean cost calculation purposes for APC 0085, expressed 
concern regarding the proposed payment rate for APC 0085. The commenter 
noted that the proposed payment rate for APC 0085 for CY 2014 is 
$11,517 (the corrected proposed rate included in the September 6, 2013 
OPPS Addendum B, which was posted on the CMS Web site is approximately 
$11,345), which is significantly higher than the CY 2013 payment rate 
of $4,035. However, the commenter believed that this variation is a 
result of unintended reuse of claims used to calculate the composite 
APC 8000 payment rate. The commenter further believed that excluding 
the composite APC 8000 claims from APC 0085 cost calculation will lower 
the geometric mean cost of APC 0085 significantly, and urged CMS to 
correct this error.
    Response: We acknowledge that the proposed payment rate for APC 
0085 was incorrectly initially published as approximately $11,517, as 
well as the corrected payment rate (which was posted on the CMS Web 
site) of $11,345. The proposed rule payment rate for APC 0085 was based 
on our comprehensive APC methodology, which packaged the cost of 
ancillary and other services. However, our comprehensive APC 
methodology will not be effective until CY 2015. The final geometric 
mean cost for APC 0085 is approximately $4,248, based on 6,362 claims 
available for ratesetting.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue

[[Page 74915]]

payment for composite APC 8000 for CY 2014. Based on a full year of CY 
2012 claims data, the final geometric mean cost of composite APC 8000 
is approximately $13,162, based on 16,935 claims available for 
ratesetting. We also are finalizing the payment for APC 0085, based on 
a geometric mean cost of approximately $4,248.
    Table 11 below lists the groups of procedures upon which we based 
composite APC 8000 for CY 2014
BILLING CODE 4120-01-P

[[Page 74916]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.294


[[Page 74917]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.295

BILLING CODE 4120-01-C
(4) Mental Health Services Composite APC (APC 0034)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43565), for CY 2104, 
we proposed to continue our longstanding policy of limiting the 
aggregate payment for specified less resource-intensive mental health 
services furnished on the same date to the payment for a day of partial 
hospitalization services provided by a hospital, which we consider to 
be the most resource-intensive of all outpatient mental health 
treatments. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 through 18455) for the initial discussion 
of this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    We proposed that when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on one 
date of service based on the payment rates associated with the APCs for 
the individual services exceeds the maximum per diem payment rate for 
partial hospitalization

[[Page 74918]]

services provided by a hospital, those specified mental health services 
would be assigned to APC 0034 (Mental Health Services Composite). 
Specifically, we proposed to continue to set the payment rate for APC 
0034 at the same payment rate that we proposed to establish for APC 
0176 (Level II Partial Hospitalization (4 or more services) for 
hospital-based PHPs), which is the maximum partial hospitalization per 
diem payment rate for a hospital and proposed 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 to make a single payment at the same 
payment rate established for APC 0176 for all of the specified mental 
health services furnished by the hospital on that single date of 
service. We stated that we continue to believe that the costs 
associated with administering a partial hospitalization program at a 
hospital represent the most resource-intensive of all outpatient mental 
health treatments. Therefore, we do not believe that we should pay more 
for mental health services under the OPPS than the highest partial 
hospitalization per diem payment rate for hospitals.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2014 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 
2014.
(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 6 of the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68253 through 68257).
    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 2014 OPPS/ASC proposed rule (78 FR 43566), for CY 2014, 
we proposed to continue to pay for all multiple imaging procedures 
within an imaging family performed on the same date of service using 
the multiple imaging composite APC payment methodology. We 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 2014 payment rates for the 
five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 
8007, and APC 8008) were based on geometric mean costs calculated from 
a partial year of CY 2012 claims available for the CY 2014 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 
geometric mean costs, we used the same methodology that we used to 
calculate the final CY 2012 and CY 2013 geometric mean 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 referred to as 
``overlap bypass codes'' that we removed from the bypass list for 
purposes of calculating the proposed multiple imaging composite APC 
geometric mean costs, pursuant to our established methodology (76 FR 
74169), were identified by asterisks in Addendum N to the proposed rule 
(which is available via the Internet on the CMS Web site) and were 
discussed in more detail in section II.A.1.b. of the proposed rule.
    For the CY 2014 proposed rule, we were able to identify 
approximately 0.8 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 
2014 geometric mean costs for the multiple imaging composite APCs.
    Table 7 of the proposed rule listed the proposed HCPCS codes that 
would be subject to the multiple imaging composite policy and their 
respective families and approximate composite APC geometric mean costs 
for CY 2014 (78 FR 43567). We noted that the proposed geometric mean 
costs calculated for many imaging APCs, including the multiple imaging 
composite APCs, have changed significantly from the geometric mean 
costs calculated for the CY 2013 OPPS/ASC final rule with comment 
period for these APCs as a result of the proposed adoption of the new 
MRI and CT cost centers, as discussed in section II.A.1.c. of the 
proposed rule.
    Comment: Some commenters supported CMS' decision not to propose any 
new multiple imaging composite APCs. Other commenters urged CMS to 
restore separate payment for each imaging procedure, regardless of the 
date of service because of the decreases in payment for imaging 
services over several years, which according to the commenters may 
create disincentives to performing multiple imaging services on the 
same date. Some commenters stated

[[Page 74919]]

that other CMS proposals such as the CY 2014 proposed new CCRs for CT 
and MRI services have further decreased payment rates for imaging 
services for CY 2014, and the use of the new cost centers is directly 
responsible for the substantial decreases in payment for multiple 
imaging APCs, including composite APCs. Some commenters suggested that 
CMS provide an analysis of the impacts from decreases in payments for 
imaging services.
    Response: As explained earlier in this section, we continue to 
believe that our multiple imaging composite policies reflect and 
promote the efficiencies hospitals can achieve when performing multiple 
imaging procedures during a single session. We have a total of 1.6 
million composite cases in our claims data for CY 2014 ratesetting, 
which we believe is a sufficiently robust number of multiple imaging 
cases performed for ratesetting purposes. We address the concern that 
the new cost centers may be responsible for substantial decreases in 
payment for multiple imaging APCs in section II.A.1.c. of this final 
rule with comment period.
    After consideration of the public comments we received, for this CY 
2014 final rule with comment period, we were able to identify 
approximately 0.7 million ``single session'' claims out of an estimated 
1.6 million potential composite cases from our ratesetting claims data, 
approximately 45 percent of all eligible claims, to calculate the final 
CY 2014 geometric mean costs for the multiple imaging composite APCs.
    Table 12 below lists the HCPCS codes that will be subject to the 
multiple imaging composite policy and their respective families and 
approximate composite APC geometric mean costs for CY 2014.
BILLING CODE 4120-01-P

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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 
codes 33225 (Insertion of pacing electrode, cardiac venous system, for 
left ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual 
chamber system) (List separately in addition to code for primary 
procedure)) and 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 procedure described by 
CPT code 33225, the procedure described by CPT code 33249 is also 
assigned to APC 0108. When not performed on the same day as the 
procedure described by CPT code 33249, the procedure described by CPT 
code 33225 is assigned to APC 0655 (Insertion/Replacement/Conversion of 
a Permanent Dual Chamber Pacemaker).
    In order to ensure that hospitals correctly code for CRT services, 
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).
    We continued for CY 2013 to recognize CRT-D as a single, composite 
service as described above and finalized in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68259). 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. We also noted that this policy is consistent 
with the principles of a prospective payment system, specifically to 
place similar services that

[[Page 74925]]

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. Because CPT codes 
33225 and 33249 may be treated as a composite service for payment 
purposes, we continued to assign them status indicator ``Q3'' (Codes 
that may be paid through a composite APC) in Addendum B to the proposed 
rule (which is available via the Internet on the CMS Web site). 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).
    In addition, for CY 2013, we revised the claims processing edits in 
place for CPT code 33225 due to revised guidance from the AMA in the 
CPT codebook 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 codebook 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 (77 FR 68259).
    For CY 2014, we proposed to discontinue and supersede the cardiac 
resynchronization therapy composite APC with our proposed comprehensive 
APC 0108, as discussed in section II.A.2.e. of the proposed rule (78 FR 
43561). The public comments that we received on cardiac 
resynchronization therapy that relate to proposed comprehensive APCs 
are discussed in section II.A.2.e. of this final rule with comment 
period.
    As discussed in section II.A.2.e. of this final rule with comment 
period, comprehensive APCs will not be effective until CY 2015. 
Therefore, for CY 2014, we are finalizing the continuation of our 
current CRT-D composite policy, without modification and finalizing 
payment for CRT services using the composite APC 0108 payment 
methodology that we used for CYs 2012 and 2013, as discussed above. 
That is, for CY 2014, CRT-D will be recognized as a single, composite 
service as described above and finalized in the CY 2012 and CY 2013 
OPPS/ASC final rules with comment period. In calculating the costs upon 
which the final payment rate for APC 0108 is based for CY 2014, 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 15,454 single bills from the CY 
2014 final rule claims data to calculate a final geometric mean cost of 
approximately $32,257 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.
3. Changes to Packaged Items and Services
a. Summary of CY 2014 Final Packaging Policies
    Beginning in CY 2014, we are unconditionally or conditionally 
packaging the following items and services and adding them to the list 
of OPPS packaged items and services in 42 CFR 419.2(b):
    (1) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure;
    (2) Drugs and biologicals that function as supplies when used in a 
surgical procedure;
    (3) Certain clinical diagnostic laboratory tests;
    (4) Certain procedures described by add-on codes; and
    (5) Device removal procedures.
    The HCPCS codes that we are packaging for CY 2014 are displayed in 
both Addendum P and Addendum B of this final rule with comment period. 
The supporting documents for this final rule with comment period, 
including but not limited to these Addenda, are available at the CMS 
Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Further details including 
comments and responses on the particular packaging proposals are 
discussed below.
b. Background
    Like other prospective payment systems, the OPPS relies on the 
concept of averaging to establish a payment rate for services. The 
payment may be more or less than the estimated cost of providing a 
specific service or bundle of specific services for a particular 
patient. The OPPS packages payment for multiple interrelated items and 
services into a single payment to create incentives for hospitals to 
furnish services most efficiently and to manage their resources with 
maximum flexibility. Our packaging policies support our strategic goal 
of using larger payment bundles to maximize hospitals' incentives to 
provide care in the most efficient manner. For example, where there are 
a variety of devices, drugs, items, supplies, etc. that could be used 
to furnish a service, some of 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 often results if separate payment is provided for 
the items.
    Packaging also encourages hospitals to effectively negotiate with 
manufacturers and suppliers to reduce the purchase price of items and 
services or to explore alternative group purchasing arrangements, 
thereby encouraging the most economical health care delivery. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while scrutinizing the 
services ordered by practitioners to maximize the efficient use of 
hospital resources. Packaging payments into larger payment bundles 
promotes the predictability and accuracy of payment for services over 
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated 
with higher cost cases requiring many ancillary items and services and 
lower cost cases requiring fewer ancillary items and services. Because 
packaging encourages efficiency and is an essential component of a 
prospective payment system, packaging payment for items and services 
that are typically integral, ancillary, supportive, dependent, or 
adjunctive to a primary service has been

[[Page 74926]]

a fundamental part of the OPPS since its implementation in August 2000. 
Most, but not necessarily all, items and services currently packaged in 
the OPPS are listed in 42 CFR 419.2(b). For an extensive discussion of 
the history and background of the OPPS packaging policy, we refer 
readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/
ASC proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66580).
    Over the last 15 years, we have refined our understanding and 
implementation of the OPPS and have packaged numerous services that we 
originally paid as primary services. As we continue to consider the 
development of larger payment groups that more broadly reflect services 
provided in an encounter or episode of care, we may propose to expand 
these packaging policies as they apply to services that we currently 
separately pay as primary services. We use the term ``primary service'' 
to refer to the HCPCS codes that represent the primary therapeutic or 
diagnostic modality into which we package payment for a dependent 
service.
    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 for the 
combination of the separately payable services and any associated 
packaged services. We emphasize that hospitals should report all HCPCS 
codes for provided services, including those for packaged services, 
unless the CPT Editorial Panel or CMS provides other specific 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. In addition, in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68634), we packaged 
products described as implantable biologicals. As discussed below, in 
the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to add 
each of these categories of packaged items and services that were 
packaged beginning in CYs 2008 and 2009, along with newly proposed 
packaged items and services for CY 2014 as described below to the OPPS 
packaging regulation at 42 CFR 419.2(b). Composite APCs under the OPPS, 
which are described in section II.A.2.f. of this final rule with 
comment period, and comprehensive APCs, which are described in section 
II.A.2.e. of this final rule with comment period, also include 
packaging.
c. Basis for New Packaging Policies for CY 2014
    As discussed above, the OPPS is a prospective payment system. It is 
not intended to be a fee schedule, in which separate payment is made 
for each coded line item. However, the OPPS is currently a prospective 
payment system that packages some items and services but not others. 
Payment for some items and services in the OPPS is according to the 
principles of a prospective payment system, while the payment for other 
items and services is more like that of a fee schedule. Our overarching 
goal is to make OPPS payments for all services paid under the OPPS more 
consistent with those of a prospective payment system and less like 
those of a per service fee schedule, which pays separately for each 
coded item. As a part of this effort, we have continued to examine the 
payment for items and services provided in the OPPS to determine which 
OPPS services can be packaged to achieve the objective of advancing the 
OPPS as a prospective payment system.
    Therefore, as we did in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66610 through 66659), we have examined the items 
and services currently provided under the OPPS, reviewing categories of 
integral, ancillary, supportive, dependent, or adjunctive items and 
services for which we believe payment would be appropriately packaged 
into payment of the primary service they support. Specifically, we 
examined the HCPCS code definitions (including CPT code descriptors) to 
see whether there were categories of codes for which packaging would be 
appropriate according to existing OPPS packaging policies or a logical 
expansion of those existing OPPS packaging policies. In general, in the 
CY 2014 OPPS/ASC proposed rule, we proposed to package the costs of 
selected HCPCS codes into payment for services reported with other 
HCPCS codes where we believe that one code reported an item or service 
that was integral, ancillary, supportive, dependent, or adjunctive to 
the provision of care that was reported by another HCPCS code. Below we 
discuss categories and classes of items and services that we proposed 
to package beginning in CY 2014. In several cases, we proposed that 
services be conditionally packaged so that if they are provided without 
other services, there will be a separate payment for the service. The 
proposed policies detailed below are not exhaustive, and we expect to 
continue to review the OPPS and consider additional packaging policies 
in the future.
d. New Packaging Policies for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43570 through 43575), 
we proposed to package the following categories of items and services 
beginning in 2014:
    (1) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure;
    (2) Drugs and biologicals that function as supplies when used in a 
surgical procedure;
    (3) Certain clinical diagnostic laboratory tests;
    (4) Procedures described by add-on codes;
    (5) Ancillary services (status indicator ``X'');
    (6) Diagnostic tests on the bypass list; and
    (7) Device removal procedures.
    Category (2) listed above was described in the proposed rule as 
``drugs and biologicals that function as supplies or devices when used 
in a surgical procedure.'' In this final rule with comment period, we 
are deleting the words ``or devices'' from the name of this category 
because the words are redundant of ``supplies.'' In this context, 
devices are a type of supply (78 FR 43571), so it is not necessary to 
include the words ``or devices'' after supplies in the name of this 
category of packaged items.
    Comment: Many commenters requested that CMS postpone finalizing all 
of the packaging proposals because of the commenters' inability to 
replicate

[[Page 74927]]

the CY 2014 proposed OPPS payment rates, which the commenters asserted 
limited their ability to fully evaluate and, therefore, meaningfully 
comment on the packaging proposals. Many commenters also stated that, 
given the significance and scope of the proposals, CMS should delay 
implementation of these policies to allow stakeholders more time to 
evaluate these packaging proposals. In addition, the Advisory Panel on 
Hospital Outpatient Payment recommended that CMS delay implementation 
of the CY 2014 packaging proposals until data can be reviewed by the 
Panel at its spring 2014 meeting regarding interactions between the 
proposals and their potential cumulative impact.
    Response: We appreciate that it requires time and effort to examine 
proposed policies. We discovered some limited methodological errors 
concentrated in a handful of APCs during the comment period. In 
response, we issued corrected data files on August 28, 2013, and 
published a correcting document in the Federal Register on September 6, 
2013 (78 FR 54842) to address these technical errors. We also afforded 
the public a 10-day extension of the comment period on those topics 
affected by the corrected proposed rates. We believe that our standard 
60-day comment period afforded commenters an adequate amount of time to 
meaningfully comment on the proposed policies. While we acknowledge 
that the OPPS is one of the more complicated Medicare payment systems 
to simulate, we make extensive data files and descriptions publicly 
available, in addition to proposed payment rates, in an effort to 
assist commenters in their review. Furthermore, the isolated technical 
errors that were corrected in the correcting document had limited 
interaction with the packaging proposals, and we believe the relativity 
(the relative magnitude of the difference between payment rates for 
different procedures) of the proposed payment rates for almost all APCs 
was sufficient for meaningful comment. Finally, we received numerous 
substantive, thoughtful, and helpful comments on our packaging 
proposals, which suggested that the public had sufficient time to 
meaningfully comment on the seven CY 2014 proposed packaging policies, 
and therefore, we do not believe a delay in implementation is 
necessary. We will review additional information regarding the impacts 
of the packaging policies with the Panel at future Panel meetings.
    Below we discuss our proposals and summarize and respond to the 
numerous substantive public comments we received on each packaging 
proposal.
(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as 
Supplies When Used in a Diagnostic Test or Procedure
    As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 
43570), in the OPPS, we currently unconditionally package the following 
six categories of drugs, biologicals, and radiopharmaceuticals (unless 
temporary pass-through status applies): (1) those with per day costs at 
or below the packaging threshold (discussed further in section V.B.2. 
of the proposed rule and this final rule with comment period); (2) 
diagnostic radiopharmaceuticals; (3) contrast agents; (4) anesthesia 
drugs; (5) drugs used as supplies according to Sec.  419.2(b)(4); and 
(6) implantable biologicals. For CY 2014, we reviewed all of the drugs, 
biologicals, and radiopharmaceuticals administered in the hospital 
outpatient setting to identify categories or classes of drugs, 
biologicals, and radiopharmaceuticals that either should be packaged 
according to existing packaging policies or should be packaged as a 
logical expansion of existing OPPS packaging policies for drugs, 
biologicals, and radiopharmaceuticals.
    Currently, two of the categories of drugs, biologicals, and 
radiopharmaceuticals that are packaged in the OPPS (contrast agents and 
diagnostic radiopharmaceuticals) have a common characteristic--they 
both describe products that function as supplies when used in a 
diagnostic test or procedure. Although in the past we identified these 
specific categories of drugs, biologicals, and radiopharmaceuticals as 
packaged unless pass-through status applied, we recognize that they 
actually represent subcategories of a broader category of drugs, 
biologicals, and radiopharmaceuticals that should be packaged in the 
OPPS according to OPPS packaging principles: drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. In particular, we are referring to drugs, 
biologicals, and radiopharmaceuticals that function as supplies as a 
part of a larger, more encompassing service or procedure, namely, the 
diagnostic test or procedure in which the drug, biological, or 
radiopharmaceutical is employed. Because diagnostic 
radiopharmaceuticals and contrast agents represent specific examples of 
a broader category of drugs, biologicals, or radiopharmaceuticals that 
function as supplies that are integral and supportive to a diagnostic 
test or procedure, we proposed to unconditionally package drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure, except when the drug, 
biological, or radiopharmaceutical has pass-through payment status.
    A diagnostic test or procedure is defined as any kind of test or 
procedure performed to aid in the diagnosis, detection, monitoring, or 
evaluation of a disease or condition. A diagnostic test or procedure 
also includes tests or procedures performed to determine which 
treatment option is optimal. A diagnostic test or procedure can have 
multiple purposes, but at least one purpose must be diagnostic. We 
proposed to revise the regulations at 42 CFR 419.2(b) to specify that 
any drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in diagnostic tests or procedures will be packaged 
as supplies in the OPPS, except when pass-through status applies. This 
proposed broader category of packaged drugs, biologicals, and 
radiopharmaceuticals includes the currently packaged categories of 
contrast agents and diagnostic radiopharmaceuticals.
    In the proposed rule, we identified one new class of drugs (stress 
agents) and one specific drug (Cysview) that we believe also fit within 
this new category of packaged items, that is, drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. We discuss the application of this policy 
to these specific drugs and the associated comments below.
(a) Stress Agents
    Our review of OPPS drugs identified pharmacologic stress agents 
(``stress agents'') as a class of drugs that is described by the 
proposed packaged category of drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. Stress agents are a class of drugs that 
are used in diagnostic tests to evaluate certain aspects of cardiac 
function. In many cases, these agents are used in patients who are 
unable to perform an exercise stress test, which typically precedes 
additional diagnostic imaging. The primary diagnostic test in which 
these agents are used is myocardial perfusion imaging (MPI), which is 
primarily reported with CPT code 78452 and is the highest cost nuclear 
medicine procedure in the OPPS, with total payments exceeding $800 
million in CY 2012. In the

[[Page 74928]]

proposed rule, we reported that approximately 96 percent of MPI is 
billed with CPT code 78452. Stress agents include the following drugs 
described by these HCPCS codes: HCPCS codes J0152 (Injection, adenosine 
for diagnostic use, 30 mg); J1245 (Injection, dipyridamole, per 10 mg); 
J1250 (Injection, dobutamine hydrochloride, per 250 mg); and J2785 
(Injection, regadenoson, 0.1 mg). For CY 2013, HCPCS codes J1245 and 
J1250 are packaged in the OPPS, and J0152 and J2785 are separately 
paid. OPPS payments for the two separately payable stress agents 
totaled approximately $111 million in CY 2012.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we proposed to 
package all stress agents that function as supplies into the diagnostic 
tests or procedures in which they are employed, consistent with the 
policy proposed above. The primary service in which stress agents are 
employed is MPI. MPI with stress encompasses the imaging service, the 
stress test, and either exercise to induce stress or the administration 
of a pharmacologic stress agent. In the proposed rule, we included 
Table 8 which showed the CY 2013 separate payment versus the proposed 
CY 2014 packaged payment for MPI (78 FR 43571). We note that some of 
the payment rates for MPI in Table 8 were corrected in the correcting 
document published in the Federal Register on September 6, 2013 (78 FR 
54842).
    Comment: Some commenters supported packaging stress agents into MPI 
because they believed that it supports CMS' goal to make OPPS payments 
more consistent with those of a prospective payment system.
    Response: We appreciate the commenters' support.
    Comment: Several commenters objected to this proposal. Some 
commenters stated that CMS should not expand packaging to any new 
categories of drugs, biologicals, and radiopharmaceuticals, including 
stress agents. One commenter objected to the proposed policy for the 
following reasons and suggested changes or alternatives to the proposed 
policy:
     Packaging stress agents into MPI could adversely affect 
patient access to stress agents;
     Because a stress agent is not used with 100 percent of MPI 
tests, CMS should only package drugs that are used at least 80 percent 
of the time with the primary procedure, to ensure that the packaged 
payment reflects the full cost of the packaged drug;
     Hospitals would have a financial incentive not to use a 
stress agent with MPI, because stress can be induced with exercise 
instead of a stress agent;
     To avoid incurring the cost of a stress agent, hospitals 
will encourage patients to exercise, and this could be dangerous for 
the patient;
     As a consequence of packaging stress agents, hospitals may 
perform inadequate MPI tests (without proper stress), resulting is 
misdiagnoses;
     CMS should require hospitals to code stress agents on MPI 
claims to ensure that costs are adequately captured; and
     CMS should create separate APCs for MPI with and without 
use of a stress agent.
    Response: We disagree with the commenter that packaging stress 
agents will limit beneficiary access to MPI tests with a stress agent 
when it is not clinically appropriate for the patient to induce stress 
through exercise. Rather, as we discuss below, we believe that a single 
payment for MPI establishes better incentives to ensure clinically 
appropriate patient care.
    We are not adopting the commenter's recommendation that we adopt a 
minimum utilization requirement of 80 percent for drug packaging. We 
package services that are typically integral, ancillary, supportive, 
dependent, or adjunctive to a primary service, irrespective of the 
frequency with which this packaged service is used in any given primary 
procedure. This policy has been a fundamental part of the OPPS since 
its implementation in August 2000. In some cases, a packaged item may 
be associated with a primary service 100 percent of the time and in 
other cases a packaged item may be rarely used with the procedure or 
service with which it is packaged. Using the geometric mean cost for an 
APC ensures that minor changes in the total for items and services from 
low volume packaged services will impact the APC payment rate. 
Receiving some incremental amount for packaged items allows the 
hospital to best determine the most efficient and clinically 
appropriate delivery of a service. An 80 percent utilization threshold 
for packaging is more reflective of a fee schedule than a prospective 
payment system, creating payment for a single service of MPI and stress 
agent that would not encourage the efficient delivery of MPI. We 
believe a minimum utilization threshold would be unduly restrictive in 
the context of a prospective payment system because such a threshold 
would exclude services or items from packaging that are typically 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service.
    Regarding the commenter's concern that hospitals will have a 
financial incentive not to use a stress agent with MPI, again we note 
that the established payment rate is based on the geometric mean cost 
of claims with and without a stress agent and that hospitals will now 
receive incrementally more payment for each MPI, proportional to 
included costs for stress agents on the claims, even when they do not 
use a stress agent. We believe that knowing the full amount of payment 
for the MPI, with or without the stress agent, will allow the hospital 
to make the most efficient decision that is clinically appropriate. As 
we state above, 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. Finally, the recent 
availability of certain generic stress agents should further mitigate 
any financial incentive not to use a stress agent with MPI.
    With regard to clinical concerns that hospitals may encourage 
physicians to order exercise rather than an MPI with stress agent, we 
disagree that hospitals and physicians are likely to settle for 
inadequate stress-MPI tests rather than incur the cost of the stress 
agent because a truly inadequate stress test would not provide the 
physician with sufficient information to arrive at a diagnosis and 
would require repeat testing. We believe that hospitals and physicians 
choose the most clinically appropriate diagnostic testing approach for 
their patients and that they will use a stress agent when necessary.
    With regard to the suggestion that we require hospitals to code 
stress agents in MPI claims, we have repeatedly stated that hospitals 
should report all codes and associated charges on the claim for the 
item and services provided to the patient, so that we will be able to 
monitor trends in stress agent utilization over time.
    Finally, we are not accepting the suggestion that we assign MPI 
tests with and without the use of a stress agent to different APCs. As 
with the minimum utilization threshold, we believe that establishing 
separate APCs would result in unnecessary differentiation between 
stress MPI with stress induced through exercise and stress MPI with 
stress induced through a stress agent, and that such a difference could 
discourage the efficient delivery of MPI. Further, the MPI CPT code 
descriptors include stress or rest, and stress can be induced either 
through exercise or use of a stress agent.
    After consideration of the public comments we received, we are

[[Page 74929]]

finalizing our proposed policy to package stress agents under our 
policy that packages all drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure. 
We are assigning HCPCS codes J0151 (which replaces HCPCS code J0152 in 
CY 2014) and J2785 the status indicator of ``N,'' indicating 
unconditional packaging in the OPPS for CY 2014.
(b) Hexaminolevulinate Hydrochloride (Cysview[supreg])--HCPCS Code 
C9275
    Cysview is a drug for which pass-through status expired on December 
31, 2012. Beginning in CY 2013, Cysview was unconditionally packaged in 
the OPPS as a contrast agent (77 FR 68364). The indications and usage 
of Cysview as listed in the FDA-approved label are as follows: 
``Cysview is an optical imaging agent indicated for use in the 
cystoscopic detection of non-muscle invasive papillary cancer of the 
bladder among patients suspected or known to have lesion(s) on the 
basis of a prior cystoscopy. Cysview is used with the Karl Storz D-
Light C Photodynamic Diagnostic (PDD) system to perform cystoscopy with 
the blue light setting (Mode 2) as an adjunct to the white light 
setting (Mode 1).''
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
42672), we described contrast agents as follows: ``Contrast agents are 
generally considered to be those substances introduced into or around a 
structure that, because of the differential absorption of x-rays, 
alteration of magnetic fields, or other effects of the contrast medium 
in comparison with surrounding tissues, permit visualization of the 
structure through an imaging modality. The use of certain contrast 
agents is generally associated with specific imaging modalities, 
including x-ray, computed tomography (CT), ultrasound, and magnetic 
resonance imaging (MRI), for purposes of diagnostic testing or 
treatment.''
    Upon reexamining this description of contrast agents and 
considering our prior application of this description to specific 
compounds, we believe that contrast agents should include those 
compounds that are used with the imaging modalities x-ray, computed 
tomography (CT), ultrasound, magnetic resonance imaging (MRI), and 
other related modalities that could represent advancements of these 
modalities. Based on the indications and usage described above for 
Cysview, we do not believe that Cysview is best described as a contrast 
agent. Rather, we believe Cysview is more appropriately described as a 
drug used in a procedure to diagnose bladder cancer.
    As discussed above, in the CY 2014 OPPS/ASC proposed rule, we 
proposed a new policy to package all drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. Cysview is a drug that functions as a 
supply when used in a diagnostic test or procedure for the purpose of 
the ``detection of non-muscle invasive papillary cancer of the 
bladder.'' Therefore, as a drug that functions as a supply when used in 
a diagnostic test or procedure, we proposed to package Cysview for CY 
2014 under the OPPS (78 FR 43571). Cysview is currently assigned to 
status indicator ``N'' for CY 2013, and under this proposal, the status 
indicator assignment of ``N'' would continue for CY 2014.
    Comment: Many of the commenters on CMS' proposal to package Cysview 
were urologists who consider Cysview to be valuable in the care of 
bladder cancer patients and who expressed concern that CMS' proposed 
packaging policy will restrict access to blue light cystoscopy, which 
is the service in which Cysview is employed. One commenter stated that:
     Packaging Cysview limits patient access to the drug;
     Cystoscopy procedures that employ Cysview are not 
clinically comparable to other procedures assigned to the same APCs;
     CMS does not have the authority to package drugs, 
biologicals, and radiopharmaceuticals used in a diagnostic test or 
procedure;
     Packaging Cysview results in an inequitable payment for 
Cysview;
     Cysview does not function as a supply and therefore should 
not be packaged;
     Cysview is a treatment and is not used in a diagnostic 
test and therefore should not be packaged under the policy that 
packages drugs, biologicals, and radiopharmaceuticals used as a supply 
in a diagnostic test or procedure.
     CMS must create a separate APC for Cysview as it has done 
for procedures that use contrast agents.
    Response: We disagree with the commenters that packaging will limit 
patient access to Cysview. As we state above, like other prospective 
payment systems, the OPPS relies on the concept of averaging, where the 
payment may be more or less than the estimated cost of providing a 
specific service or bundle of specific services for a particular 
patient. There are many items and services in the OPPS in which use of 
the item or service may increase the cost per case above that of the 
average or typical case, and there are cases where no additional items 
or services are necessary and the cost of a typical case is much less 
than the average. This is a fundamental aspect of a prospective payment 
system. Overall, we believe that OPPS payments reflect average 
estimated costs for both situations and encourage the hospital to 
assess the appropriate use of those additional items and services in 
diagnosing bladder cancer and other diseases.
    Cysview is used in blue light cystoscopy, which is an optional 
adjunct to white light cystoscopy. The various CPT codes for cystoscopy 
include white light cystoscopy with or without blue light cystoscopy. 
Cysview is packaged into the cystoscopy procedures. We believe that the 
current structure of the APCs that include the various cystoscopy 
procedures sufficiently reflects clinical and resource homogeneity as 
required by section 1833(t)(2)(B) of the Act because most of the codes 
in these APCs are cystoscopy procedures or other urological endoscopy 
procedures that, like cystoscopy, employ an endoscope. We also do not 
believe that packaging Cysview in the OPPS is inequitable. We package 
all drugs that function as supplies when used in a diagnostic test or 
procedure, and we will continue to review drugs used in the OPPS to 
assess whether they function as supplies or are otherwise integral, 
ancillary, and supportive to a diagnostic test or procedure, and 
therefore appropriately packaged into the procedure.
    We disagree with the commenters who suggested that we do not have 
the authority to package drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure. 
We discussed our authority to package drugs, biologicals, and 
radiopharmaceuticals extensively in 2008, when we packaged diagnostic 
radiopharmaceuticals and contrast agents, and refer readers to that 
discussion in the CY 2008 OPPS final rule (72 FR 66610).
    We disagree with the commenter's view that Cysview should not be 
packaged because it does not function as a supply when used in a 
diagnostic test. We believe that the commenter misunderstands the term 
``supply'' as it is used in the OPPS. Supply is a very broad term that 
describes many types of products in the OPPS. As discussed elsewhere in 
this section and in the CY 2014 OPPS/ASC proposed rule (78 FR 43571 
through 43575), supplies is a large category of items that typically 
are either for single patient use or have a shorter life span in use 
than equipment. A supply in the OPPS can be anything

[[Page 74930]]

that is not equipment, and supplies can be either expensive or 
inexpensive and either commonly or uncommonly used. According to OPPS 
policy, drugs, biologicals, radiopharmaceuticals, medical devices, and 
other items and products that are not equipment can be supplies in the 
OPPS (78 FR 43571 and 43575). Since the inception of the OPPS, 
implantable medical devices have been considered supplies in the OPPS 
(65 FR 18443). Many implantable medical devices are very 
technologically sophisticated, costly, and tailored to specific medical 
needs but they are nonetheless supplies in the OPPS. Cysview 
facilitates diagnosis through blue light cystoscopy, and therefore we 
consider it to be a drug that functions as a supply in a diagnostic 
test in the OPPS.
    We do not believe that Cysview and blue light cystoscopy are 
therapeutic. The FDA-approved label for Cysview states that Cysview is 
used for ``cystoscopic detection of non-muscle invasive papillary 
cancer of the bladder,'' which is a diagnostic purpose according to our 
definition of a diagnostic test described above and in the proposed 
rule (78 FR 43570). Also, Cysview itself does not eliminate bladder 
cancer cells. It enables better localization of the bladder cancer 
cells as compared to white light cystoscopy alone, which then requires 
a therapeutic procedure such as resection.
    Finally, we disagree with the commenter's suggestion that we must 
create a separate APC according to section 1833(t)(2)(G) of the Act for 
procedures that use Cysview. Cysview is not being packaged as a 
contrast agent. Instead, it is being packaged into the service in which 
it is used under the policy of packaging drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, which also currently includes diagnostic 
radiopharmaceuticals, contrast agents, and stress agents.
    Comment: One commenter requested clarification regarding CMS' 
definition of the term ``contrast agent,'' and requested that CMS 
recognize these products as drugs and that CMS refrain from calling 
these products supplies.
    Response: The purpose of the clarification of the term ``contrast 
agent'' in the proposed rule (78 FR 43571), which is repeated above, 
was to explain that we believe that contrast agents are products used 
in certain types of imaging techniques (or advancements of those 
techniques), namely x-ray, computed tomography (CT), ultrasound, and 
magnetic resonance imaging (MRI). Contrast agents are typically drugs 
and are eligible for pass-through as drugs in the OPPS. However, as 
mentioned above, drugs can also function as supplies, and be paid as 
such, when used in a diagnostic test or procedure in the OPPS. Contrast 
agents function as supplies when used in an imaging test and are 
packaged in the OPPS, unless pass-through status applies. This is a 
well-established OPPS packaging policy, and this policy makes no 
fundamental changes to the policy of unconditionally packaging contrast 
agents. We consider packaging of contrast agents under the more general 
packaging category of drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure, and 
this packaging category is being codified at 42 CFR 419.2(b)(15).
    After consideration of the public comments we received, we are 
finalizing our proposed policy to package Cysview as a drug under our 
policy that packages drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure. 
Therefore, HCPCS code C9275 (Cysview) will be assigned status indicator 
``N'' (unconditionally packaged) in CY 2014.
    Comment: One commenter requested that radiopharmaceuticals used for 
dosimetry not be considered diagnostic radiopharmaceuticals but instead 
be treated as therapeutic radiopharmaceuticals.
    Response: Radiopharmaceuticals used for dosimetry are packaged 
supplies in the OPPS according to established OPPS policy (68 FR 
63443). In addition, the purpose of dosimetry is to establish the 
treatment dose or the optimal treatment for the patient. As stated in 
the proposed rule (78 FR 43570) and again above, diagnostic items 
``include tests or procedures performed to determine which treatment 
option is optimal.'' Therefore, because dosimetry is performed to 
determine the optimal treatment dose of a therapeutic 
radiopharmaceutical, we believe, according to our definition of a 
diagnostic item, test, or procedure, that it is diagnostic and not 
therapeutic. Therefore, radiopharmaceuticals used for dosimetry are 
packaged in the OPPS.
(2) Drugs and Biologicals That Function As Supplies When Used in a 
Surgical Procedure
    Since the inception of the OPPS we have packaged medical devices, 
medical and surgical supplies, and surgical dressings into the related 
procedure under Sec.  419.2(b)(4). Medical and surgical supplies are a 
broad category of items used in the hospital outpatient setting. 
Supplies is a large category of items that typically are either for 
single patient use or have a shorter life span in use than equipment. 
Supplies include not only minor, inexpensive, or commodity-type items 
but also include a wide range of products used in the hospital 
outpatient setting, including certain implantable medical devices. We 
consider implantable medical devices to be integral to, dependent on, 
and supportive to a surgical implantation procedure. For further 
discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 
18443). Packaged supplies can include certain drugs, biologicals, and 
radiopharmaceuticals. Packaged supplies in the OPPS also include 
implantable biologicals, which are packaged because they function as 
implantable devices which, as noted above, are considered to be a type 
of supply in the OPPS. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68634) for a more detailed discussion 
of implantable biologicals. We believe that the existing packaging 
policy for implantable biologicals represents an example of a broader 
category of drugs and biologicals that should be packaged in the OPPS 
according to longstanding regulations and existing policies: drugs and 
biologicals that function as supplies when used in a surgical 
procedure. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43571), beginning in the CY 2014 OPPS, we proposed to unconditionally 
package all drugs and biologicals that function as supplies in a 
surgical procedure, following the current packaging policy for 
implantable biologicals.
    Skin substitutes are a class of products that we treat as 
biologicals that fit within the proposed packaging category of drugs 
and biologicals that function as supplies in a surgical procedure. The 
term ``skin substitutes'' refers to a category of products that are 
most commonly used in outpatient settings for the treatment of diabetic 
foot ulcers and venous leg ulcers. Although the term ``skin 
substitute'' has been adopted to refer to this category of products in 
certain contexts, these products do not actually function like human 
skin that is grafted onto a wound; they are not a substitute for a skin 
graft. Instead, these products are applied to wounds to aid wound 
healing and through various mechanisms of action they stimulate the 
host to regenerate lost tissue. We refer readers to the ``Skin 
Substitutes for Treating Chronic Wounds Technology Assessment Report at 
ES-2'' which is available on the AHRQ Web site at:

[[Page 74931]]

http://www.ahrq.gov/research/findings/ta/skinsubs/HCPR0610_skinsubst-final.pdf. Skin substitutes are regulated by the FDA as either medical 
devices (and classified as wound dressings) or as human cell, tissue, 
and cellular and tissue-based products (HCT/Ps) under section 361 of 
the Public Health Service Act. Most of the various skin substitutes are 
applied to a wound during a surgical procedure described by CPT codes 
under the heading in the 2013 CPT codebook ``Skin Replacement Surgery'' 
and the subheading ``Skin Substitute Grafts'' in the CPT code range 
15271 through 15278. To be properly performed, every surgical procedure 
in this CPT code range requires the use of at least one skin substitute 
product. These surgical procedures include preparation of the wound and 
application of the skin substitute product through suturing or various 
other techniques. Currently skin substitutes are separately paid in the 
OPPS as if they are biologicals according to the ASP methodology and 
are subject to the drug and biological packaging threshold.
    Because a skin substitute must be used to perform any of the 
procedures described by a CPT code in the range 15271 through 15278, 
and conversely because it is the surgical procedure of treating the 
wound and applying a covering to the wound that is the independent 
service, skin substitute products serve as a necessary supply for these 
surgical repair procedures. In addition, the FDA classifies many skin 
substitutes as wound dressings, which make them in many cases similar 
to surgical dressings that are packaged under Sec.  419.2(b)(4). 
Finally, implantable biological products are very similar to (and in 
some instances the same as) skin substitute products, except that the 
clinical applications for implantable biologicals are typically an 
internal surgery versus the application to a wound for a skin 
substitute. Some products that are used as skin substitutes have dual 
uses as both skin substitutes and implantable biologicals, which 
underscores the similarity of these overlapping classes of products. 
Some products that function as skin substitutes can also function as 
implantable biologicals. Implantable biologicals and skin substitutes 
both function as supplies that are used in surgical procedures and, 
therefore, we believe that they should be packaged with the surgical 
procedure in which the products are used. Since CY 2009, we have 
packaged implantable biologicals. We see no reason to distinguish skin 
substitutes from implantable biologicals for OPPS packaging purposes 
based on the clinical application of individual products. Therefore, in 
the CY 2014 OPPS/ASC proposed rule (78 FR 43572), we proposed to 
unconditionally package skin substitutes into their associated surgical 
procedures. Packaging payment for these skin substitutes into the APC 
payment for the related surgical procedures would result in a total 
prospective payment that is more reflective of the average resource 
costs of the procedures because prices for these products vary 
significantly from product to product. Packaging these products also 
would promote more efficient resource use by hospitals and would be 
more consistent with the treatment of similar products under the OPPS. 
Pass-through payment status would still be available to new skin 
substitutes that meet the pass-through payment criteria.
    Comment: Many commenters supported CMS' proposal to package skin 
substitutes, and believed that packaging will result in greater access 
to the full range of skin substitute products, that patients will 
benefit, and that Medicare will also benefit through cost savings from 
this proposed change in payment policy.
    Response: We appreciate the commenters' support.
    Comment: Many commenters opposed CMS' proposal to package skin 
substitutes and argued that because all skin substitutes or two skin 
substitutes in particular, Apligraf and Dermagraft, are specified 
covered outpatient drugs (SCODs) under section 1833(t)(14)(B) of the 
Act, CMS cannot package these products and instead must pay separately 
for them in the OPPS.
    Response: We disagree with the commenters' assertion that skin 
substitutes generally or Apligraf and Dermagraft specifically are 
SCODs. Section 1833(t)(14)(B) of the Act defines a SCOD as a ``covered 
outpatient drug (as defined in section 1927(k)(2)) . . . .'' Covered 
outpatient drugs under section 1927(k)(2) of the Act are generally 
limited to products approved as drugs by the FDA, biologicals licensed 
under section 351 of the Public Health Service Act, and insulin. Skin 
substitutes, including Apligraf and Dermagraft, are not within any of 
these categories of products because they were approved by the FDA as 
either medical devices or as human cell, tissue, and cellular and 
tissue-based products (HCT/Ps) under section 361 of the Public Health 
Service Act. Therefore, none of these products are covered outpatient 
drugs under section 1927(k)(2) of the Act, and therefore no skin 
substitutes are SCODs according to section 1833(t)(14)(B) of the Act. 
Furthermore, we explained in finalizing our policies of packaging 
diagnostic radiopharmaceuticals and contrast agents in the CY 2008 OPPS 
final rule (72 FR 66766) that CMS has the authority to package the 
payment of SCODs in the OPPS and that we may consider additional 
packaging options for SCODs and other separately payable drugs in the 
future.
    Comment: Many commenters believed that skin substitutes should 
continue to be separately paid and not packaged because, according to 
these commenters, they are neither supplies, nor comparable to 
implantable biologicals, nor wound dressings, and because they have a 
therapeutic purpose. Some commenters requested that CMS begin referring 
to these products as ``cellular and/or tissue based products for wounds 
(CTPs)'' instead of using the term ``skin substitutes'' to describe the 
products that are applied in the procedures described by the CPT codes 
15271 through 15278. Commenters also expressed concern about CMS' use 
of the term ``wound dressing'' to describe skin substitutes.
    Response: We disagree with the commenters that we should not 
describe skin substitutes as a type of supply used in a surgical 
procedure. As explained in the proposed rule (78 FR 43571 and 43575) 
and elsewhere in this final rule with comment period, supplies are a 
large category of items that typically are either for single patient 
use or have a shorter life span in use than equipment. Supplies can be 
anything that is not equipment and include not only minor, inexpensive, 
or commodity-type items but also include a wide range of products used 
in the hospital outpatient setting, including certain implantable 
medical devices, which we have considered supplies since the inception 
of the OPPS (65 FR 18443). Supplies can also be drugs, biologicals, or 
radiopharmaceuticals. We consider implantable medical devices to be 
integral to, dependent on, and supportive to a surgical implantation 
procedure. We consider implantable biologicals to be supplies used in a 
surgical procedure because, as a part of a surgical procedure, they 
reinforce and aid the healing of various internal structures, which 
makes them integral to, dependent on, and supportive to a surgical 
procedure. Similarly, we believe that skin substitutes are supplies 
used in a surgical procedure because, as a part of a surgical repair 
procedure, they reinforce and aid the healing of tissue like 
implantable biologicals, but with skin substitutes, the tissue is skin 
instead of internal connective tissues.

[[Page 74932]]

Like implantable biologicals, skin substitutes are integral to, 
dependent on, and supportive to the surgical procedures in which they 
are used. Therefore, we believe it is appropriate to describe skin 
substitutes as supplies, and it is consistent with OPPS policy to 
consider skin substitutes as a type of supply (like an implantable 
biological or medical device) used in a surgical repair procedure.
    We disagree with the commenters who stated that skin substitutes 
are unlike packaged implantable biologicals and therefore should not be 
packaged. Our proposal to package skin substitutes relies on our 
determination that these products act as supplies that are integral to, 
dependent on, and supportive to a surgical procedure. We also believe 
that a reasonable analogy can be made that skin substitutes are similar 
to and operate as implantable biologicals in terms of composition, 
clinical use, role in hospital outpatient care, and product function in 
healing and repair such that packaging skin substitutes represents a 
logical expansion of our current packaging policy that packages 
implantable biologicals as surgical supplies. For example, implantable 
biologicals are used in internal surgeries for healing and to improve 
the structural integrity of joints, soft tissues and nerves, among 
others, and skin substitutes do the same for external surgical repairs 
of the integumentary system. In fact, several of the skin substitute 
products that are described by HCPCS Q-codes in the Q4100 series are 
used both as implantable biologicals and skin substitutes.
    With regard to the comments relating to our use of the term ``wound 
dressing'' to describe skin substitutes, we discussed surgical 
dressings in the proposed rule as an example of packaged surgical 
supplies that have some similarities to skin substitutes, many of which 
FDA classifies as ``wound dressings.'' We believe that commenters may 
have misunderstood our description of skin substitutes in the proposed 
rule as wound dressings and assumed that we were conflating skin 
substitutes with products in the Medicare benefit category of surgical 
dressings described in section 1861(s)(5) of the Act. We are not 
conflating these two product categories. We note that the FDA uses the 
term ``wound dressing'' to classify many of the skin substitutes. For 
example, the skin substitutes Apligraf and Dermagraft are classified by 
the FDA as ``dressing, wound and burn, interactive,'' and the skin 
substitute Oasis is classified by the FDA as ``dressing, wound, 
collagen.'' Further, we assign HCPCS A-codes to surgical dressings; 
HCPCS Q-codes are typically assigned to drugs and biologicals and are 
used to describe skin substitutes, unless a HCPCS C-code has been 
assigned to a skin substitute with pass-through payment status.
    Regarding the comment that skin substitutes should not be packaged 
because they have a therapeutic purpose, we proposed for CY 2014 the 
packaging of drugs and biologicals that function as supplies when used 
in a surgical procedure, and surgical procedures typically have a 
therapeutic purpose. This CY 2014 packaging proposal for drugs and 
biologicals that function as supplies does not exclude items with a 
therapeutic purpose.
    We use the term ``skin substitute'' to describe the products that 
are used in the surgical procedures described by CPT codes 15271 
through 15278 because the CPT code descriptors for these codes include 
the term ``skin substitute graft'' for the products that are applied in 
these procedures. For example, the descriptor for CPT code 15271 is 
``Application of skin substitute graft to trunk, arms, legs, total 
wound surface area up to 100 sq cm; first 25 sq cm or less wound 
surface area.'' While we acknowledge that the term ``skin substitutes'' 
may be more or less appropriate for specific products, we believe that 
this term is currently the best term for these products in order to 
avoid ambiguity. The term ``skin substitutes'' is conventional in the 
medical vernacular for these products and it is also used in the CPT 
code descriptor for the surgical procedures that apply these products. 
In addition, we do not believe that we should adopt the term ``cellular 
and/or tissue based products for wounds (CTPs) to describe skin 
substitutes,'' because ``CTP'' is too close to the abbreviation HCT/P 
that the FDA uses to refer to human cell, tissue, and cellular and 
tissue-based products (HCT/Ps) under section 361 of the Public Health 
Service Act, which is the regulatory pathway for only some skin 
substitutes.
    We acknowledge that there are differences in composition among the 
various skin substitute products and that is why each is assigned a 
distinct HCPCS Q-code (or HCPCS C-code in some cases). If all of the 
products were identical, we would only need one code to describe all of 
them. Skin substitutes are those products that are used in wound 
healing procedures and that are typically assigned a HCPCS Q-code in 
the Q4100 series (or assigned a HCPCS C-code if OPPS pass-through 
payment status applies). We understand that some of the products 
described by HCPCS Q-codes in the HCPCS code Q4100 series function both 
as skin substitutes and implantable biologicals.
    Comment: Many commenters opposed packaging skin substitutes, but 
also requested that, if CMS does package skin substitutes, CMS exclude 
from the packaging policy any products that are approved by the FDA 
through the premarket approval (PMA) process, the biologic license 
application (BLA) process, or the new drug application (NDA) process. 
Some commenters believed that products that achieve marketability 
through one of these processes are clinically superior to the other 
skin substitutes that are regulated by FDA as either 510(k) medical 
devices or as HCT/Ps because the PMA, NDA, or BLA-approval routes are 
more rigorous. As a consequence, they believe that PMA, NDA, or BLA-
approved products deserve special recognition under the OPPS versus 
other skin substitutes that are regulated by FDA through another 
process. However, other commenters stated that the FDA regulatory 
pathway does not necessarily establish the clinical utility of the 
product. Other commenters argued that the various skin substitutes 
should not be packaged because they are different products each with 
different characteristics; for example, some skin substitutes are 
constructed of living cells while others are not.
    Commenters also stated that among the range of skin substitutes, 
some products, including those approved through the PMA process, have 
higher costs than other skin substitutes that are used in the skin 
substitute surgical procedures. They argued that surgical procedures 
using these higher cost skin substitutes should not receive the same 
payment rate as those surgical procedures using less costly skin 
substitutes. These commenters were concerned that hospitals would have 
a financial incentive to use the least expensive skin substitute. Other 
commenters suggested different approaches to payment based on 
differential skin substitute cost or other skin substitute properties.
    Response: Payment under the OPPS is established based on an 
assessment of resource and clinical homogeneity. We disagree that 
certain products with FDA regulatory approval should be exempt from 
packaging. With notable regulatory and statutory exceptions, clinical 
superiority, utility, and efficacy are not aspects of a service or 
product that we consider in developing a payment rate under the OPPS. 
However, we are persuaded by numerous public comments that there is a 
significant difference in resource costs among the numerous skin 
substitute products and

[[Page 74933]]

that multiple codes based on resource differences may be more 
appropriate.
    We do not believe that the FDA approval process should exempt 
products from this packaging proposal or factor into the level of 
Medicare payment. While some skin substitutes have been approved by FDA 
as medical devices through the PMA process, including Apligraf, 
Dermagraft, and the Integra skin substitutes, all of the other current 
skin substitutes are regulated as either 510(k) medical devices or HCT/
Ps under section 361 of the Public Health Service Act. Proponents of 
some of the products approved through the PMA process request that we 
make an exception to packaging for these products (or any products 
approved through a PMA, NDA, or BLA). We believe that this request is 
based on the presumption that, because these FDA approval routes 
typically require clinical trials, these products have stronger 
evidence that supports their clinical performance as compared to the 
non-PMA approved products, and therefore PMA approval can be used as a 
proxy for evidence of clinical superiority relative to non-PMA-approved 
skin substitutes. However, we consider factors such as clinical and 
resource homogeneity for OPPS payment. As previously stated in regard 
to implantable biologicals, ``We do not believe that 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 safety and efficacy . . .'' (74 FR 60476), but rather according 
to our established criteria of clinical and resource homogeneity. 
Therefore, as in the case of implantable biologicals, we also believe 
that the FDA regulatory pathway should not determine OPPS skin 
substitute payment policy. Generally, once a service is covered, 
clinical and resource homogeneity, as well as other considerations, 
determines APC placement and packaging status. Determinations related 
to the clinical merits of a product are outside the scope of this rule. 
We proposed to apply the packaging policy to all skin substitutes 
recognized by CMS, regardless of the FDA regulatory pathway.
    However, we agree with commenters that, among the range of skin 
substitutes, there is sufficient resource heterogeneity such that all 
of the skin substitutes should not be packaged into the same 
application procedures and placed in the same APC. As noted above, 
factors in APC assignment in the OPPS include clinical homogeneity and 
resource homogeneity. While the procedures described by CPT codes 15271 
through 15278 are clearly clinically homogeneous, there is significant 
resource heterogeneity in the payment amount for the various skin 
substitutes from approximately $6.95 per sq cm for the least expensive 
to approximately $200 per sq cm for the most expensive. In order to 
ensure adequate resource homogeneity among APC assignments, in this 
final rule with comment period, we are dividing the skin substitutes 
into two groups for packaging purposes: high cost skin substitutes and 
low cost skin substitutes. Assignments to the high cost or low cost 
groups depended upon a comparison of the July 2013 payment amount for 
the skin substitute in OPPS Addendum B to the weighted average payment 
per unit of all skin substitutes using the skin substitute utilization 
from the CY 2012 claims data and the July 2013 payment amounts in OPPS 
Addendum B; this weighted average is $32 per sq cm. Skin substitutes 
with a payment amount above $32 per sq cm are classified in the high 
cost group and those at or below $32 are classified in the low cost 
group. Table 13 below lists the skin substitutes and their assignment 
as either a high cost or low cost skin substitute. We also note that a 
few skin substitute products are applied as either liquids or powders 
per milliliter or per milligram and are employed in procedures outside 
of CPT codes 15271 through 15278. These products will not be classified 
as either high cost or low cost but will be packaged into the surgical 
procedure in which they are used. These products are not listed below 
in Table 13 but appear in Addendum B to this final rule with comment 
period (which is available via Internet on the CMS Web site).
BILLING CODE 4120-01-P

[[Page 74934]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.301


[[Page 74935]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.302

BILLING CODE 4120-01-C
    We will update the groupings of high cost and low cost skin 
substitutes annually through rulemaking for existing skin substitutes 
according to the current skin substitute prices. We also will initially 
assign new skin substitutes that do not qualify for pass-through 
payment status to either the high cost or low cost category on a 
quarterly basis using the weighted average per square centimeter number 
defining high and low cost identified in each final rule. For any new 
skin substitute products approved for payment during CY 2014, we will 
use $32 per square centimeter to determine mapping to the high or low 
cost skin substitute category. We expect manufacturers to continue 
reporting ASP to facilitate cost category assignment. Any new skin 
substitutes without pricing information will be assigned to the low 
cost category until pricing information is available.
    High cost skin substitutes will continue to be billed using the 
existing skin substitute application CPT codes 15271 through 15278. We 
are creating a new set of HCPCS C-codes that parallel the current set 
of skin substitute application CPT codes (15271 through 15278) for 
application of low cost skin substitutes beginning in CY 2014 (HCPCS 
codes C5271, C5272, C5273, C5274, C5275, C5276, C5277, and C5278). We 
are establishing code edits in our claims processing system that 
require that the high cost skin substitutes be reported with the CPT 
codes and the low cost skin substitutes be reported with the new HCPCS 
C-codes. Geometric mean costs for the various procedures were 
calculated using only claims for the skin substitutes that are assigned 
to each class; that is, claims for services described by CPT codes 
15271, 15273, 15275, and 15277, including only high cost skin 
substitutes, were used to calculate the geometric mean costs for these 
procedures and claims for HCPCS codes C5271, C5273, C5275, and C5277, 
including only low cost skin substitutes, were used to calculate the 
geometric mean costs for these procedures. The add-on CPT skin 
substitute application codes (CPT codes 15272, 15274, 15276, and 15278) 
and the add-on HCPCS C-codes for skin substitute application (HCPCS 
codes C5272, C5274, C5276, and C5278) are packaged in the OPPS under 
the add-on code packaging policy described in section II.B.3.d.(4) of 
this final rule with comment period. CPT codes 15271, 15273, 15275, and 
15277 and HCPCS C-codes C5271, C5273, C5275, and C5277 were assigned to 
one of the following four skin repair APCs according to the geometric 
mean cost for the code: APC 0326 (Level I Skin Repair); APC 0327 (Level 
II Skin Repair); APC 0328 (Level III Skin Repair); and APC 0329 (Level 
IV Skin Repair). These procedure codes and the CY 2014 APC assignments 
and status indicator for each of the procedure codes are listed in the 
Table 14 below.

BILLING CODE 4120-01-P

[[Page 74936]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.303


[[Page 74937]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.304

BILLING CODE 4120-01-C
    Skin substitutes with pass-through payment status should be 
reported with CPT codes 15271 through 15278. We will apply an offset to 
the payment for pass-through skin substitutes according to the offset 
policy described in section V.A.4.d of this final rule with comment 
period.
    Comment: A few commenters stated that CMS should not package skin 
substitutes because the claims data used for modeling the cost does not 
accurately represent the actual cost of the skin substitutes used in 
the HOPD. They suggested that inaccurate coding and reporting by 
hospitals, and charge compression, result in packaged costs that are 
lower than the actual costs of the skin substitutes used in the 
surgical procedures in which skin substitutes are employed.
    Response: It is our longstanding policy to use the claims and cost 
report data available to us, without significant editing or 
modification, to model the prospective payment year OPPS payment rates. 
We have stated previously that: ``[b]eyond our standard OPPS trimming 
methodology . . . that we apply to those claims that have passed 
various types of claims processing edits, it is not our general policy 
to judge the accuracy of hospital coding and charging for purposes of 
ratesetting'' (75 FR 71838). We do not believe that a problem exists 
with skin substitute reporting or with the associated data used in 
modeling the packaged payments for the procedures that includes the 
cost of the skin substitute. Currently, there is an incentive to code 
properly for skin substitute application services as the significant 
majority of the overall payment for these services stems from the 
separately paid and reported skin substitute, which we believe provides 
sufficient motivation for the hospitals to

[[Page 74938]]

accurately report the amount of skin substitute used. We do not have 
any evidence of systemic underreporting of these products. We have 
estimated costs for skin substitutes as we have for all other services 
in our claims data using our standard methodology outlined in section 
II.A.2.c. of this final rule with comment period, and we believe these 
costs to be sufficient for establishing payment for skin substitute 
application procedures as they are for all other services paid under 
the OPPS and ASC payment systems. Regarding charge compression, we have 
addressed charge compression in the OPPS through new cost centers. We 
refer readers to section II.A.1.c. of this final rule with comment 
period for a discussion of this topic.
    Comment: A few commenters requested that CMS not package 
implantable biologicals that are used for various surgical procedures 
in which the implantable biological product is implanted into the body 
as a part of surgical procedure.
    Response: Implantable biologicals have been packaged in the OPPS 
since 2009. We did not propose to reconsider this packaging policy for 
CY 2014. In fact, part of the rationale for extending packaging in the 
OPPS to include skin substitutes that function as surgical supplies is 
that we already package several products that are the same as or 
similar to skin substitutes in the OPPS that are described by the term 
``implantable biological'' due to their particular clinical use. 
Several of the products in the HCPCS code Q4100 series are dual use or 
multi-use products in that they serve as both skin substitutes and 
implantable biologicals. We believe that both implantable biologicals 
and skin substitutes should be packaged into the surgical procedures 
that employ these products when they function as supplies.
    Comment: Some commenters expressed concern that packaging skin 
substitutes in the OPPS will inhibit the development of biotechnology 
products and that this proposed policy will result in less investment 
in such technology.
    Response: We do not believe that this policy will result in less 
investment in biotechnology. New skin substitutes remain eligible for 
pass-through payment status for at least 2 years, but not more than 3 
years. Pass-through payments are intended to facilitate the adoption of 
certain new products. In addition, we believe that the packaged 
payments for the associated surgical procedures, including payment for 
the skin substitute are adequate and will not discourage use of the 
skin substitute products used in these procedures. Furthermore, the 
final policy that distinguishes high cost from low cost skin 
substitutes addresses the issue of differential cost among the range of 
skin substitute products. Finally, this packaging policy applies to 
skin substitutes and other drugs and biologicals used in surgical 
procedures. It does not apply broadly to all biotechnology.
    Comment: Some commenters mentioned that the skin substitute 
packaging policy will result in a site-of-service shift to the 
physician office setting where separate payment for skin substitutes 
will be made in CY 2014.
    Response: The physician, in consultation with his or her patient, 
decides the site of service for treatment and many factors are 
considered as a part of that decision. We believe that we have 
adequately addressed concerns about heterogeneous resource costs 
resulting in payment inadequacy and that these procedures will continue 
to be performed in the HOPD.
    We received a few additional public comments regarding a single 
product that we also proposed to package because it is a drug that 
functions as a supply in a surgical procedure. We summarize and respond 
to these comments below.
    Comment: A few commenters objected to the packaging of the drug 
Mitosol (HCPCS code J7315) when used as a supply in a surgical 
procedure, which was the interim assignment for new HCPCS code J7315 in 
the CY 2013 OPPS/ASC final rule with comment period. We refer readers 
to Addendum B.--Final OPPS Payment by HCPCS Code for CY 2013 available 
on the Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1589-FC.html?DLPage=1&DLSort=2&DLSortDir=descending. One commenter in 
particular complained that, although Mitosol is indicated as ``an 
adjunct for ab externo glaucoma surgery,'' OPPS packaging requires that 
an item be integral to the procedure. The commenter stated that because 
the use of Mitosol is optional in some cases of glaucoma surgery, it 
should not be packaged in the OPPS. The commenter stated that ``up to 
20% of glaucoma surgeries do not include an anti-fibrotic [including 
Mitosol].'' The commenter further stated that Mitosol serves a separate 
clinical purpose from glaucoma surgery. The commenter emphasized CMS' 
threshold packaging policy for drugs, biologicals, and 
radiopharmaceuticals, and suggested that drugs with per day costs above 
the threshold should not be packaged. Finally, the commenter stated 
that the clinical benefits and orphan drug designation are reasons to 
not package Mitosol.
    Response: Mitosol is an anti-fibrotic drug (meaning that it 
inhibits wound healing) that is used in glaucoma surgery. Since this 
comment was filed, we granted Mitosol pass-through payment status. We 
address the commenter's specific points as follows. First, we want to 
dispel the notion that packaged drugs must be used in the associated 
procedure 100 percent of the time that the procedure is performed. That 
is not our OPPS packaging policy. As stated above and throughout the 
proposed rule, we believe packaging is appropriate for items and 
services that are integral or ancillary or supportive or dependent or 
adjunctive to the primary procedure. Therefore, items and services that 
fall within any of these categories may be properly packaged in the 
OPPS. Mitosol, as an adjunct to trabeculectomy, would therefore be 
appropriately packaged as a surgical supply if pass-through payment 
status were not in effect because it functions as a supply in a 
surgical procedure, and supplies are integral to, dependent on, and 
supportive of a primary service, as noted above.
    We also disagree with the commenter's assertion that Mitosol serves 
a different clinical purpose than trabeculectomy, which is to create a 
functioning filtering bleb for control of intraocular pressure. Mitosol 
prevents the bleb from scarring, which helps to maintain a functioning 
filtering bleb, which is the purpose of the glaucoma surgery. 
Determinations related to the clinical merit of a product are outside 
the scope of this rule. As noted above, relative clinical value or 
effectiveness was not proposed as a criterion for OPPS packaging 
determinations. Finally, while FDA orphan drug designation results in 
additional exclusivity according to the Federal Food Drug, and Cosmetic 
Act, it does not exempt a drug from packaging in the OPPS. Upon 
expiration of pass-through payment status for Mitosol, it is our intent 
to package it as a supply with glaucoma surgery in the OPPS.
    After consideration of the public comments we received, we are 
packaging all skin substitutes according to the scheme described above, 
which assigns skin substitutes to either the high cost category or the 
low cost category unless pass-through payment status applies. Skin 
substitutes assigned to the high cost category will be reported with 
CPT codes 15271 through 15278 and the applicable skin substitute HCPCS 
Q-code, while skin substitutes assigned to the low cost category will 
be

[[Page 74939]]

reported with HCPCS codes C5271 through C5278 and the applicable skin 
substitute HCPCS Q-code. In addition, the few skin substitute products 
that are applied as either liquids or powders per milliliter or per 
milligram and are currently employed in procedures outside of the CPT 
code range of 15271 through 15278 will not be classified as either high 
cost or low cost, but will be packaged into the surgical procedure in 
which they are used.
    The skin substitute products that are unconditionally packaged 
under this final policy and assigned to status indicator ``N'' for CY 
2014 are listed in Addendum P to this CY 2014 OPPS/ASC final rule with 
comment period. The payment for CPT codes 15271 through 15278 for 
surgical application of high cost skin substitutes (payment rate per 
square centimeter over $32 for CY 2014) and HCPCS codes C5271 through 
C5278 for surgical application of low cost skin substitutes (payment 
rate per square centimeter $32 and under for CY 2014), including the 
cost of the packaged skin substitutes, for CY 2014, are listed in 
Addendum B to this final rule with comment period. The OPPS addenda are 
available on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
(3) Clinical Diagnostic Laboratory Tests
    Since the beginning of the OPPS, clinical diagnostic laboratory 
tests (laboratory tests) provided in the hospital outpatient setting 
have been separately paid to hospitals at Clinical Laboratory Fee 
Schedule (CLFS) rates (65 FR 18442). Section 1833(t)(1)(B)(i) of the 
Act authorizes the Secretary to designate the hospital outpatient 
services that are paid under the OPPS. Under this authority, the 
Secretary excluded from the OPPS those services that are paid under fee 
schedules or other payment systems. As stated in the April 17, 2000 
OPPS final rule with comment period: ``Rather than duplicate existing 
payment systems that are effectively achieving consistency of payments 
across different service delivery sites, we proposed to exclude from 
the outpatient PPS those services furnished in a hospital outpatient 
setting that were already subject to an existing fee schedule or other 
prospectively determined payment rate'' (65 FR 18442). Because payment 
rates for laboratory tests were based on the CLFS, laboratory tests are 
among the services excluded from the OPPS. We codified this policy at 
42 CFR 419.22(l).
    As discussed above, it is our intent to revise the structure of the 
OPPS to adopt greater aspects of a prospective payment system and 
retain less of a fee schedule structure, which makes separate payment 
for each separately coded item. We have examined the services performed 
in the hospital outpatient setting to determine those services that we 
believe should be packaged in order to make the OPPS a more complete 
and robust prospective payment system. We were guided by our 
longstanding OPPS packaging principle of packaging the payment of items 
or services when they are provided along with primary services they 
support. Based on this approach, we believe that laboratory tests 
(other than molecular pathology tests, as discussed below) that are 
integral, ancillary, supportive, dependent, or adjunctive to the 
primary services provided in the hospital outpatient setting are 
services that should be packaged. Laboratory tests and their results 
support clinical decision making for a broad spectrum of primary 
services provided in the hospital outpatient setting, including surgery 
and diagnostic evaluations. Therefore, except as discussed below for 
molecular pathology tests, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43572), we proposed to package laboratory tests when they are integral, 
ancillary, supportive, dependent, or adjunctive to a primary service or 
services provided in the hospital outpatient setting. Specifically, we 
proposed that laboratory tests would be integral, ancillary, 
supportive, dependent, or adjunctive to a primary service or services 
provided in the hospital outpatient setting and appropriate for 
packaging into the payment of the primary service when they are 
provided on the same date of service as the primary service and when 
they are ordered by the same practitioner who ordered the primary 
service. We stated that the laboratory test codes that we were 
proposing to be packaged and assigned status indicator ``N'' for CY 
2014 were listed in Addendum P to the proposed rule (which is available 
via the Internet on the CMS Web site). We also proposed to revise the 
regulation text at Sec.  419.2(b) and Sec.  419.22(l) to reflect this 
laboratory test packaging proposal.
    We stated that we would consider a laboratory test to be unrelated 
to a primary service and, therefore, not part of the proposed packaging 
policy when the laboratory test is the only service provided on a date 
of service or when the laboratory test is provided on the same date of 
service as the primary service but is ordered for a different purpose 
than the primary service by a practitioner different than the 
practitioner who ordered the primary service provided in the hospital 
outpatient setting. We stated that laboratory tests not included in the 
packaging proposal would continue to be paid separately at CLFS rates 
when billed on a 14X bill type. We note that hospitals already use the 
14X bill type to bill for referred specimens or any situation where the 
beneficiary receives laboratory tests but is not a registered 
outpatient of the hospital.
    We also proposed an exception to our proposal to package laboratory 
tests for molecular pathology tests described by CPT codes in the 
ranges of 81200 through 81383, 81400 through 81408, and 81479. We did 
not propose that these services be packaged because we believe that 
these relatively new tests may have a different pattern of clinical 
use, which may make them generally less tied to a primary service in 
the hospital outpatient setting than the more common and routine 
laboratory tests that we proposed to package. As we gain more 
experience with molecular pathology tests, we stated that we will 
consider if packaging them in the OPPS in the future would be 
appropriate. These services would continue to be billed on a 13x claim 
and be assigned status indicator ``A.''
    In addition to the laboratory packaging policy proposals described 
above, we considered proposing an alternative laboratory packaging 
policy that would package those laboratory tests meeting the proposed 
policies above, but exclude laboratory tests with costs greater than 
some dollar threshold similar to the approach we use for separately 
paid drugs and biologicals in the OPPS so that only laboratory tests 
(meeting the proposed standards above) with CLFS payment rates below a 
certain dollar threshold amount would be packaged. Under this 
alternative policy, tests meeting the proposed standards above, but for 
which the CLFS payment rates are above the threshold amount, would 
continue to be separately paid. We decided not to propose this 
alternative policy because, as discussed above in the background 
section, our packaging policies generally do not consider the cost of 
the individual items and services that are packaged, meaning that we 
package both inexpensive and expensive items according to OPPS 
packaging principles.
    We recognize that the Medicare Part B deductible and coinsurance 
generally do not apply for laboratory tests paid to hospitals at CLFS 
rates and that the deductible and coinsurance would apply to laboratory 
tests packaged into other services in the OPPS. The purpose

[[Page 74940]]

of the laboratory packaging proposal was not to shift program costs 
onto beneficiaries. It is to encourage greater efficiency by hospitals 
and the most economical delivery of medically necessary laboratory 
tests which would contain unnecessary growth in hospital outpatient 
spending over the long run, which benefits all stakeholders. We stated 
that we estimate that the combination of packaging laboratory tests 
into a wide array of primary services provided in the hospital 
outpatient setting combined with our longstanding methodology to adjust 
the copayment percentages to 20 percent as provided in section 
1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. of the 
proposed rule (78 FR 43586 through 43587), and the limitation on the 
copayment amount for a procedure to the inpatient hospital deductible 
as set forth at section 1833(t)(8)(C)(i) of the Act would fully offset 
the financial impact on Medicare beneficiaries receiving laboratory 
tests that would be subject to the proposed packaging policy.
    Further, we stated that we believe that creating these larger 
bundles will result in a more efficient use of laboratory tests when 
they are adjunctive to an outpatient service. In addition, to the 
extent that the coinsurance and deductible do not apply under the CLFS, 
they would continue not to apply for tests that are ordered, provided, 
and billed independently from a primary service as discussed above, or 
for molecular pathology tests. We invited public comments on the effect 
of packaging laboratory tests on beneficiary coinsurance.
    Comment: Some commenters supported the proposal to package 
laboratory tests because they believed that packaging laboratory tests 
is consistent with CMS' goal to move the structure of the OPPS closer 
to a prospective payment system and away from a fee schedule 
construction.
    Response: We appreciate the commenters' support.
    Comment: A few commenters opposed the proposal to package 
laboratory tests because they believed that it could harm beneficiary 
access to these laboratory tests.
    Response: We disagree. We believe that beneficiaries will continue 
to receive laboratory tests that are medically necessary. We are 
continuing to pay for these laboratory tests and have included the cost 
of the associated laboratory tests with the estimated cost of primary 
hospital outpatient services when establishing payment for these 
services. We believe that packaged payment will allow hospitals to 
better assess when and which laboratory tests are appropriate and 
provide these services more efficiently, but that this policy will not 
affect beneficiaries' access to reasonable and appropriate care.
    Comment: A few commenters opposed the proposal to package 
laboratory tests because they believed that it would not achieve CMS' 
objective of greater cost efficiency in hospitals.
    Response: We disagree. Packaging encourages efficiency and is an 
essential component of a prospective payment system. Packaging payment 
for items and services that are typically integral, ancillary, 
supportive, dependent, or adjunctive to a primary service has been a 
fundamental part of the OPPS since its implementation in August 2000. 
We believe that packaging encourages hospitals to furnish services in 
the most efficient way by enabling hospitals to manage their resources 
with the maximum flexibility, thereby encouraging long-term cost 
containment. Therefore, our packaging policies support our strategic 
goal of incentivizing hospitals to provide appropriate care in the most 
efficient manner.
    Comment: One commenter suggested that CMS does not have the 
legislative authority to package laboratory tests in the OPPS. The 
commenter states that section 1833(h)(1)(A) of the Act requires that 
CMS pay for laboratory tests (except inpatient laboratory tests) in all 
settings according to the CLFS.
    Response: We disagree. Although section 1833(h)(1)(A) of the Act 
established the CLFS, it does not prohibit outpatient laboratory tests 
from being paid either separately or as part of a packaged payment 
under the OPPS. Section 1833(t) of the Act gives the Secretary 
discretion to designate which services are covered OPD services, with 
the exception of those listed in section 1833(t)(1)(B)(iv) of the Act, 
and laboratory tests are not among the services listed in section 
1833(t)(1)(B)(iv) of the Act. Laboratory tests provided in the hospital 
outpatient department have always been considered hospital outpatient 
services. However, until this proposal, we have since the inception of 
the OPPS elected to separately pay for laboratory tests in the hospital 
outpatient setting at the CLFS payment rates. For CY 2014, we proposed 
to include certain laboratory tests as covered OPD services under the 
OPPS, and we proposed to package payment for certain tests, similar to 
other covered outpatient services that are typically integral, 
ancillary, supportive, dependent, or adjunctive to a primary hospital 
outpatient services under the OPPS.
    Comment: A few commenters expressed concern about increased 
beneficiary liability associated with laboratory tests being paid under 
the OPPS, which has a coinsurance obligation, unlike payment for 
laboratory tests under the CLFS, which does not have an associated 
coinsurance obligation by statute. One commenter also requested that, 
if CMS does finalize the laboratory test packaging policy for CY 2014, 
it exclude laboratory tests from the services into which they are 
packaged for the purpose of determining the coinsurance amount.
    Response: We appreciate the commenters' concern about the welfare 
of Medicare beneficiaries. We assessed the financial impact of 
packaging laboratory tests on beneficiaries for the proposed rule and 
reassessed the impact for this final rule with comment period. We 
estimated in the proposed rule that the combination of packaging 
laboratory tests into a wide array of primary services provided in the 
hospital outpatient setting combined with our longstanding methodology 
to adjust the copayment percentages to 20 percent, as provided in 
section 1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. 
of the proposed rule (78 FR 43573, 43586 through 43587), and the 
limitation on the copayment amount for a procedure to the inpatient 
hospital deductible as set forth at section 1833(t)(8)(C)(i) of the 
Act, would offset the financial impact on Medicare beneficiaries 
receiving laboratory tests that will be subject to the finalized 
packaging policy.
    In this final rule with comment period, we are not finalizing our 
proposed policy to package ancillary services with a CY 2013 status 
indicator of ``X'' and diagnostic tests on the bypass list in response 
to public comments. We estimate that, in aggregate, the percentage of 
beneficiary liability for OPPS payments for CY 2014, including payment 
for certain clinical diagnostic laboratory tests, will be 21.7 percent 
in CY 2014, consistent with aggregate beneficiary liability under the 
OPPS in recent years. We believe that our final policy to create 29 
comprehensive APCs for CY 2015 will reduce the aggregate beneficiary 
liability in CY 2015.
    In addition, we believe that creating larger payment bundles will 
result in a more efficient use of clinical diagnostic laboratory tests 
when they are integral or supportive of an outpatient service. 
Furthermore, to the extent that the coinsurance and deductible do not 
apply under the CLFS, they would

[[Page 74941]]

continue not to apply for tests that are ordered, provided, and billed 
independently from a primary service as discussed above, or for 
molecular pathology tests, which will continue to be paid under the 
CLFS.
    Regarding the commenter's request that CMS exclude laboratory tests 
from the services into which they are packaged for the purpose of 
determining the coinsurance amount, we do not have the authority under 
section 1833(t)(8) of the Act to exclude laboratory tests from the 
services into which they are packaged for the purpose of determining 
the coinsurance amount.
    Comment: Some commenters expressed concern about CMS' proposed 
exception to packaging for laboratory tests provided on the same date 
of service as another hospital outpatient service or services, but that 
are ordered by a different practitioner than the practitioner who 
ordered the primary hospital outpatient service or services and where 
the ordered laboratory test also is for a different purpose than the 
primary service. Commenters were concerned about hospitals' 
administrative burden associated with billing for separately paid 
laboratory tests. Commenters suggested that CMS implement claims 
processing changes and instructions in advance of adopting the 
laboratory packaging policy to ease hospitals' transition to this 
policy and the exceptions to this policy.
    Response: We believe that these commenters may have misunderstood 
the nature of the proposed laboratory packaging policy. We proposed to 
package laboratory tests when they are integral, ancillary, supportive, 
dependent, or adjunctive to a primary service or services provided in 
the hospital outpatient setting; that is, when they are provided on the 
same date of service as the primary service and when they are ordered 
by the same practitioner who ordered the primary service. One exception 
to our proposal to package laboratory tests is to exempt molecular 
pathology tests, which would continue to be separately paid when billed 
on a 13x claim.
    A laboratory test can be separately paid when (1) the laboratory 
test is the only service provided to that beneficiary on that date of 
service; or (2) the laboratory test is on the same date of service as 
the primary service but is ordered for a different purpose than the 
primary service by a practitioner different than the practitioner who 
ordered the primary service. When a laboratory test is the only service 
provided to a beneficiary at the hospital, the hospital can receive 
separate payment for those laboratory tests by billing for these 
services on a 14x claim; we would pay hospitals for these laboratory 
tests based on the CLFS payment rate. To illustrate the second 
scenario, a beneficiary has eye surgery scheduled with physician A, an 
ophthalmologist, but also has an order from physician B, a 
cardiologist, for unrelated laboratory tests. The beneficiary goes to 
the hospital for the eye procedure and decides to have the laboratory 
tests that have been ordered by physician B for a different purpose 
than the eye procedure on the same date of service. While the 
laboratory test is on the same date of service as the eye procedure, 
the laboratory tests are ordered for a different purpose than the 
primary service by a practitioner different than the practitioner who 
ordered the eye procedure. In this situation, the hospital can bill 
Medicare for the unrelated laboratory tests on a 14x claim and receive 
separate payment under the CLFS, similar to when the laboratory tests 
are the only service performed in the hospital outpatient department on 
a given date of service. However, if, in this example, physician A also 
ordered some laboratory tests as a part of a preoperative evaluation 
for the eye procedure and the beneficiary had the tests on the same 
date of service as the eye procedure, then the hospital would report 
those laboratory tests on a 13x claim along with the eye surgery. 
Payment for those preoperative laboratory tests would be packaged into 
the payment for the surgery, which is the primary procedure that would 
be paid separately. It will be the hospital's responsibility to 
determine when to separately bill laboratory tests on the 14x claim 
according to this description of these limited exceptions. We plan to 
issue revised contractor instructions for billing for these laboratory 
tests on a 14x bill type in January 2014, and we also will install 
claims processing edits.
    Comment: A few commenters suggested that CMS adopt the alternative 
laboratory packaging policy discussed briefly above and in the proposed 
rule (78 FR 43573) to package only those laboratory tests with payment 
rates below some dollar threshold, similar to the approach that CMS 
uses for most drugs, biologicals, and therapeutic radiopharmaceuticals 
in the OPPS. Commenters stated that such a policy would enable hospital 
specialty clinics to perform more complex, expensive, and esoteric 
laboratory tests.
    Response: We appreciate the commenters' thoughts on this 
alternative. We continue to believe that a dollar packaging threshold 
is not appropriate for laboratory tests because almost all laboratory 
tests are inexpensive (97 percent of all laboratory tests have CLFS 
national limitation amounts of less than $100) relative to other 
services that are provided in the hospital outpatient department. This 
is unlike many of the drugs and biologicals that are used in the 
hospital outpatient department that not uncommonly cost thousands of 
dollars per dose. Therefore, we continue to believe that it is not 
necessary to adopt a payment threshold policy for packaging laboratory 
tests similar to the threshold policy for packaging drugs and 
biologicals.
    Comment: A few commenters requested additional exceptions to the 
proposal to package specific laboratory tests, including, for example, 
tests for in situ hybridization and cardiovascular screening. These 
commenters stated that, like molecular pathology tests for which CMS 
proposed an exception to the proposal to conditionally package 
laboratory tests, these tests have a different pattern of clinical use 
than most other laboratory tests and, therefore, should continue to be 
separately paid in the hospital outpatient setting.
    Response: After considering the various requests for exceptions for 
specific laboratory tests that we received, we do not believe that 
additional exceptions to the laboratory packaging policy are necessary. 
We understand that there are laboratory tests that are less common and 
frequent than a standard panel, such as new tests. We do not believe 
that the tests described by the commenters or other laboratory tests 
that were proposed to be packaged are similar to the tests in the 
molecular pathology test series such that additional exceptions are 
warranted. We proposed to exclude the molecular pathology tests from 
our packaging proposal because, as a class of laboratory tests, their 
overall pattern of clinical use has not yet developed and we believe 
that these tests are less tied to a primary service than other 
laboratory tests. Once their pattern of use develops, we will assess 
whether we believe these laboratory tests also should be conditionally 
packaged. We do not believe that in situ hybridization and 
cardiovascular screening or other types of laboratory tests are a 
developing class of laboratory tests for which we do not know the 
pattern of use. For example, in situ hybridization may be a part of a 
comprehensive evaluation for a suspected malignancy. In response to 
commenter requests for additional exceptions, we also reviewed all of 
the laboratory tests listed in Addendum P to the proposed rule and do 
not believe that further exceptions to

[[Page 74942]]

our proposal to conditionally package laboratory tests are necessary.
    After consideration of the public comments we received, for CY 
2014, we are finalizing our proposal without modification to package 
laboratory tests in the OPPS when they are integral, ancillary, 
supportive, dependent, or adjunctive to a primary service or services 
provided in the hospital outpatient setting; that is, when they are 
provided on the same date of service as the primary service and when 
they are ordered by the same practitioner who ordered the primary 
service. This means that a laboratory test will not be packaged when 
(1) a laboratory test is the only service provided to that beneficiary 
on that date of service; or (2) a laboratory test is conducted on the 
same date of service as the primary service but is ordered for a 
different purpose than the primary service by a practitioner different 
than the practitioner who ordered the primary service. We also are 
finalizing our proposal without modification to except molecular 
pathology tests described by CPT codes in the ranges of 81200 through 
81383, 81400 through 81408, and 81479 from this packaging proposal. In 
addition, we are finalizing our proposal without modification to revise 
the regulation text at Sec.  419.2(b) and Sec.  419.22(l) to reflect 
this conditional laboratory test packaging policy.
    The laboratory test codes subject to this packaging policy will be 
assigned status indicator ``N'' because any laboratory tests reported 
on a 13x bill type will be packaged for CY 2014. These codes are listed 
in Addendum P to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
(4) Procedures Described by Add-On Codes
    Add-on codes describe procedures that are always performed in 
addition to a primary procedure. CPT defines add-on codes as codes that 
describe ``procedures [that] are commonly carried out in addition to 
the primary procedure performed,'' and also states that ``[a]dd-on 
codes are always performed in addition to the primary service or 
procedure and must never be reported as a stand-alone code'' (2013 CPT 
Codebook Professional Edition, page xi). CPT add-on codes are listed in 
Appendix D of the CPT codebook. Add-on codes can also be Level II HCPCS 
codes. For example, the procedure described by CPT code 11001 is 
``Debridement of extensive eczematous or infected skin; each additional 
10% of the body surface, or part thereof (list separately in addition 
to code for primary procedure).'' This code is used for additional 
debridement beyond that described by the primary procedure code. 
Historically, the OPPS has generally paid separately for add-on codes 
based on an APC assignment with status indicator ``T'' indicating that 
the multiple procedure payment reduction for surgeries applies.
    Procedures described by add-on codes represent an extension or 
continuation of a primary procedure, which means that they are 
typically supportive, dependent, or adjunctive to a primary service, 
which is usually a surgical procedure. The primary code defines the 
purpose and typical scope of the patient encounter and the add-on code 
describes incremental work, when the extent of the procedure 
encompasses a range rather than a single defined endpoint applicable to 
all patients. The CPT codebook states that an add-on code describes 
``additional intra-service work associated with the primary procedure'' 
(2013 CPT Codebook Professional Edition, page xi). For example, add-on 
CPT code 11001 is used for each additional 10 percent of debridement 
beyond that described by the primary code. Given the dependent nature 
and adjunctive characteristics of procedures described by add-on codes 
and in light of longstanding OPPS packaging principles described above, 
we believe add-on procedures should be packaged with the primary 
procedure. In the CY 2014 OPPS/ASC proposed rule (78 FR 43573), we 
proposed to unconditionally package all procedures described by add-on 
codes in the OPPS.
    Aside from advancing the OPPS as a prospective payment system by 
packaging add-on codes, an additional benefit to packaging add-on codes 
is more accurate OPPS payment for procedures described by add-on codes. 
Currently, calculating geometric mean costs for procedures described by 
add-on codes is problematic in the OPPS because, as with many claims 
with multiple procedures, we cannot determine which costs on a claim 
are attributable to the primary procedure and which costs are 
attributable to the add-on procedure. Furthermore, because we use 
single claims and pseudo single procedure claims for ratesetting, we 
generally must rely on incorrectly coded claims containing only the 
add-on code to determine payment rates for add-on procedures. Claims 
containing only an add-on code are incorrectly coded because they 
should be reported with (or ``added-on'' to) a primary procedure. 
Packaging the line item costs associated with an add-on code into the 
cost of the primary procedure will help address this ratesetting 
problem because the costs of the add-on code would be packaged into the 
primary procedure, and we would no longer have to use miscoded claims 
to calculate estimated costs for add-on codes. Packaging add-on codes 
also would increase the number of single bills available for 
ratesetting for the primary procedures. We discuss how we model claims 
to establish relative payment weights, including definitions of 
multiple, single, and pseudo single claims in section II.A.2. of this 
final rule with comment period.
    We proposed to revise the regulations at Sec.  419.2(b) to include 
the packaging of add-on codes. The specific add-on codes that we 
proposed to be unconditionally packaged and assigned status indicator 
``N'' for CY 2014 are listed in Addendum P to the proposed rule, which 
is available via the Internet on the CMS Web site.
    Comment: Some commenters supported the proposal to package add-on 
codes, and agreed with CMS that packaging add-on codes is consistent 
with a prospective payment system and will improve OPPS ratesetting.
    Response: We appreciate the commenters' support.
    Comment: Several commenters objected to the proposal to package 
add-on codes for the following reasons:
     According to the commenters, procedures described by add-
on codes are not necessarily integral, ancillary, supportive, 
dependent, or adjunctive to the primary service into which they would 
be packaged.
     Some procedures described by add-on codes include 
expensive implantable medical devices, and although they are integral 
to the primary procedure, commenters note that packaging these 
procedures into the primary procedure risks significant underpayment 
for the overall procedure that includes additional medical devices, 
which could negatively affect patient access to these devices.
     Add-on code packaging should not apply to infrequently 
performed add-on codes as the cost of these infrequent services will 
not be sufficiently reflected in the payment for the primary procedure.
     Some add-on codes are not related to the primary procedure 
but represent incremental additional physician work, and for this 
reason should not be packaged.
    To insure continued patient access to these procedures, commenters 
requested that CMS establish exceptions to its proposal to package add-
on codes for specific services that commenters believed would be 
underpaid under the policy, including, but not limited to,

[[Page 74943]]

kyphoplasty add-on procedure, endoscopic retrograde 
cholangiopancreatography add-on procedure, pelvic reconstruction add-on 
procedures, neurolysis, and pathology services.
    Response: We disagree with commenters that add-on services are not 
integral, ancillary, supportive, dependent, or adjunctive to the 
primary service. The fundamental nature of an add-on code procedure is 
that it typically describes some form of a related extension of or 
addition to the primary procedure or service described by the primary 
procedure. The very definition of an add-on code is that it is an 
extension of a primary, base service. CPT states that ``add-on codes 
describe additional intra-service work associated with the primary 
procedure'' (emphasis added) (2013 CPT Codebook Professional Edition, 
page xi). Therefore, we believe that add-on code procedures are related 
extensions, supportive, integral, or adjunctive of the primary 
procedure and, therefore, it is appropriate to package the cost of the 
add-on codes into the payment calculation for the primary procedure. 
For the same reasons, we also do not agree with commenters that some 
add-on codes are not related to the primary procedure but represent a 
separate procedure that should be paid separately from the primary 
procedure.
    Regarding the packaging of add-on procedures that use expensive 
medical devices, we note that the most expensive medical devices used 
in procedures to insert or implant devices in the outpatient setting 
are included in procedures we proposed to be assigned to comprehensive 
APCs. In section II.A.2.e. of this final rule with comment period, we 
discuss this policy, which we are adopting, but delaying the 
implementation until CY 2015. We will continue to separately pay for 
procedures described by add-on codes that are currently assigned to 
device-dependent APCs. We note that almost all such codes will be 
included in a comprehensive APC for CY 2015. Therefore, until the 
comprehensive APC policy is implemented, we will continue to pay 
separately for procedures described by add-on codes that are assigned 
to device-dependent APCs. The device-dependent add-on codes that will 
continue to be separately paid in CY 2014 are listed below in Table 15.

BILLING CODE 4120-01-P

[[Page 74944]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.306

BILLING CODE 4120-01-C
    However, in general the cost of all medical devices used along with 
all of the other costs associated with the add-on code procedures are a 
part of the costs used to calculate the payment for a primary procedure 
when add-on codes are packaged. Most important, a prospective payment 
system pays an average amount for a unit of service, which may be more 
or less costly on a case-by-case basis. Unless an ancillary service is 
always performed with a primary procedure or service, a prospective 
payment will not reflect the full estimated cost of the packaged 
procedure or service. Payment for the primary procedure rather would 
reflect

[[Page 74945]]

some payment for the ancillary procedure, but each time the primary 
procedure is performed, the hospital receives additional payment, even 
when the ancillary service is not provided. Unless an add-on code is 
always performed with a primary procedure, we would not expect the 
relative payment weight to reflect the full costs associated with 
performing the primary procedure and certain add-on procedures, 
especially if the add-on procedures are performed relatively 
infrequently as compared to the primary procedure. Our experience with 
packaging services under the OPPS, where we continue to see packaged 
services furnished with the primary procedure, leads us to believe that 
hospitals will continue to provide the full range of medically 
necessary care to beneficiaries under overall prospective payment for 
the primary procedure and any add-on procedures. Therefore, we do not 
believe that it is necessary to create additional exceptions to the 
add-on code policy for select infrequently performed services that may 
cost more (in addition to the cost of the primary procedure) to pay 
more than the prospective payment for the primary service with add-on 
code procedures packaged into them.
    However, we acknowledge that, under certain circumstances, certain 
primary code and add-on code combinations could be more likely to 
result in a relatively highly costly case as compared to the packaged 
payment for the primary code. Therefore, in light of this new policy to 
unconditionally package most add-on codes, we will examine our 
estimated OPPS outlier percentage in light of all final packaging 
policies contained in this final rule with comment period and consider 
increasing it in the future to accommodate greater potential risk from 
high cost outlier cases that would result from packaging of certain 
add-on codes. An increase in the outlier percentage would accommodate 
more relatively high cost cases.
    Comment: Some commenters objected to packaging drug administration 
add-on codes, which typically describe each additional hour of infusion 
or each additional intravenous push, etc. in addition to the initial 
drug administration service. The commenters believed that such a policy 
could disadvantage providers of longer drug administration services, 
which are often protocol driven and are not necessarily dictated by the 
hospital but by the characteristics of the specific drug or biological 
being administered to the patient.
    Response: We believe that, given the frequency of drug 
administration services in the hospital outpatient department and their 
use in such a wide variety of different drug treatment protocols for 
various diseases in all types of hospitals, further study of the 
payment methodology for these services is warranted at this time. 
Therefore, we are not finalizing our proposal to package the drug 
administration add-on codes in CY 2014. However, we may continue to 
explore other payment options, including packaging and variations on 
packaging, in future years.
    After consideration of the public comments we received, we are 
finalizing our proposal to unconditionally package procedures described 
by add-on codes, with the exception of add-on codes for drug 
administration services and for CY 2014 add-on codes assigned to 
device-dependent APCs. In addition, for CY 2014 only, we will continue 
to separately pay for procedures described by add-on codes that are 
currently assigned to device-dependent APCs. We also are revising Sec.  
419.2(b) to include add-on code procedures among the services that are 
packaged in the OPPS. The specific add-on codes that we are 
unconditionally packaging and assigning status indicator ``N'' for CY 
2014 are listed in Addendum P and Addendum B to this final rule with 
comment period (which are available via the Internet on the CMS Web 
site).
(5) Ancillary Services (Status Indicator ``X'')
    Under the OPPS, we currently pay separately for certain ancillary 
services that are assigned to status indicator ``X,'' defined as 
``ancillary services.'' Those ancillary services assigned status 
indicator ``X'' in the OPPS and paid separately are, by definition, 
ancillary to primary services provided in the OPPS and include many 
minor diagnostic tests and procedures that are typically performed with 
a primary service, although there are instances where hospitals provide 
such services alone and without another primary service on the same 
date.
    As mentioned above, our intent is that the OPPS be more of a 
prospective payment system through expanded packaging. Given that the 
longstanding OPPS policy is to package items and services that are 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43573) 
that we believe that these ancillary services, which are assigned 
status indicator ``X,'' should be packaged when they are performed with 
another service, but should continue to be separately paid when 
performed alone. We indicated that this packaging approach is most 
consistent with a prospective payment system and the regulation at 
Sec.  419.2(b) that packages ancillary services into primary services 
while preserving separate payment for those instances in which one of 
these services is provided alone (not with a separate primary service) 
to a hospital outpatient.
    In summary, in the proposed rule, we proposed to conditionally 
package all ancillary services that were previously assigned a status 
indicator of ``X'' and assign these services to status indicator ``Q1'' 
(packaged when provided with a service assigned a status indicator of 
``S,'' ``T,'' or ``V''). Status indicator ``X'' would be discontinued. 
To encourage maximum flexibility to beneficiaries across different 
sites of service, we did not propose to conditionally package 
preventive services assigned to status indicator ``X'' and instead 
proposed to change the status indicator for preventive services from 
the currently assigned status indicator ``X'' to status indicator 
``S.'' The specific codes for procedures assigned to status indicator 
``X'' that were proposed to be conditionally packaged and assigned to 
status indicator ``Q1'' for CY 2014 were listed in Addendum P to the 
proposed rule (which is available via the Internet on the CMS Web 
site).
    Comment: A few commenters agreed with CMS' proposal to package 
services assigned the status indictor ``X'' (ancillary services) 
because they believed that this proposal was consistent with CMS' 
policy of packaging services that are typically integral, ancillary, 
supportive, dependent, or adjunctive to a primary HOPD service.
    Response: We appreciate the commenters' support.
    Comment: Many commenters opposed the proposal to conditionally 
package services currently assigned status indicator ``X.'' These 
commenters stated that this category of services is too varied and that 
the services in this category are not always ancillary to the services 
into which they would be packaged. The commenters specifically 
mentioned radiation oncology planning services and pathology services 
as examples of services that, under the proposal, could be packaged 
into a visit but would not be ancillary to that visit. They also 
objected because, in some cases, relatively costly services could be 
packaged into services with a low payment, especially a visit code 
because there is so much volume in visit codes that high cost, low 
volume ancillary

[[Page 74946]]

services would not measurably impact visit payments.
    Response: We believe that the commenters have raised some valid 
points regarding whether all of the services currently assigned status 
indicator ``X'' are in all cases ancillary to the services into which 
their payment would be packaged. We believe that a reexamination of 
this group of services is warranted to determine which services are 
best described as ancillary services and packaged on that basis and 
which services should either be packaged under a different policy or 
separately paid in the OPPS.
    However, we will finalize the conditional packaging of one 
ancillary service described by CPT code 93017 (Cardiovascular stress 
test using maximal or submaximal treadmill or bicycle exercise, 
continuous electrocardiographic monitoring, and/or pharmacological 
stress; tracing only, without interpretation and report). Stress 
testing is often performed as a part of myocardial perfusion imaging 
(MPI). MPI is most commonly reported with CPT code 78452 (Myocardial 
perfusion imaging, tomographic (SPECT) (including attenuation 
correction, qualitative or quantitative wall motion, ejection fraction, 
by first pass or gated technique, additional quantification, when 
performed); multiple studies, at rest and/or stress (exercise or 
pharmacologic) and/or redistribution and/or rest reinjection). As 
indicated by the code descriptor, MPI includes stress testing as 
described by CPT code 93017, and approximately 96 percent of MPI is 
performed under stress. Therefore, we believe that, because stress 
testing is both integral and ancillary to MPI, it should be packaged 
into MPI when a stress test accompanies MPI.
    After consideration of the public comments we received, we are not 
finalizing our proposal to conditionally package codes currently 
assigned the ancillary service status indicator ``X'' for CY 2014 when 
performed with another service, with the exception that CPT code 93017 
will be conditionally packaged. We may review the services assigned 
status indicator ``X'' (ancillary services) to determine which may be 
appropriate for packaging as ancillary services in the OPPS in future 
years.
(6) Diagnostic Tests on the Bypass List
    For the CY 2013 OPPS, we continued our policy to use a bypass list 
to convert lines from multiple procedure claims into ``pseudo'' single 
procedure claims. In the CY 2014 OPPS/ASC proposed rule (78 FR 43574), 
we proposed to continue developing ``pseudo'' single procedure claims 
using a bypass list for the CY 2014 OPPS, as discussed in section 
II.A.1.b. of the proposed rule. The bypass list of separately paid 
services is used to convert claims with multiple separately payable 
procedures, which are generally not used for ratesetting purposes, into 
claims with the isolated costs of a single separately paid procedure 
that can be used for ratesetting. Services on the bypass list have 
limited associated packaged costs so they can be bypassed when 
assigning packaged costs on a claim to a separately paid procedure on 
the same claim.
    As noted above, beginning in CY 2008, we packaged several 
diagnostic items and services including guidance services, image 
processing services, intraoperative services, imaging supervision and 
interpretation services, diagnostic radiopharmaceuticals, and contrast 
agents. In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we also 
proposed to conditionally package several diagnostic items and 
services, including drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure, 
ancillary services (many of which are diagnostic tests), and certain 
clinical laboratory tests. We stated that we believe that the 
diagnostic tests on the bypass list share many of the characteristics 
with these other conditionally or unconditionally packaged or proposed 
packaged categories of items and services in that they are diagnostic 
and are integral, ancillary, supportive, dependent, or adjunctive to a 
primary service. Examples include a barium swallow test (CPT code 
74220) and a visual field examination (CPT code 92081). Given the 
nature of these services, we proposed to conditionally package these 
procedures. We recognize that some of these services are sometimes 
provided without other services and, therefore, they will continue to 
be separately paid in those circumstances.
    We proposed to conditionally package codes on the bypass list and 
to assign them the appropriate status indicator ``Q1'' beginning in the 
CY 2014 OPPS. Some of these diagnostic tests on the bypass list are 
currently assigned to status indicator ``X'' and, therefore, would be 
conditionally packaged under the proposed policy to conditionally 
package ancillary services currently assigned status indicator ``X.'' 
The only diagnostic codes on the bypass list affected by this proposal 
are currently assigned to status indicator ``S.'' The specific codes 
for the diagnostic tests on the bypass list that we proposed to be 
conditionally packaged and assigned to status indicator ``Q1'' for CY 
2014 were listed in Addendum P to the proposed rule (which is available 
via the Internet on the CMS Web site). Similar to our conditional 
packaging proposal for services previously assigned to status indicator 
``X,'' we did not propose to conditionally package preventive services 
that are diagnostic tests on the bypass list.
    Comment: Some commenters supported CMS' proposal to package 
diagnostic codes on the bypass list because they believed that they are 
generally ancillary and supportive to other HOPD services.
    Response: We appreciate the commenters' support.
    Comment: Some commenters opposed packaging diagnostic tests on the 
bypass list for the following reasons:
     Some of the tests, for example, echocardiography, included 
in this category are not typically integral, ancillary, supportive, 
dependent, or adjunctive to the service into which they would be 
packaged.
     Some of the procedures on the bypass list would be 
packaged into significantly lower paying procedures, including visits.
     The interaction between conditional packaging of these 
diagnostic tests and other status indicator logic sometimes produces 
anomalous payments.
     Hospitals have an incentive to schedule procedures on 
different days to avoid packaging.
     Access to some of these tests may be negatively impacted 
by packaging.
    Response: We believe that the commenters have raised some valid 
points regarding whether all of the services included in the category 
``diagnostic codes on the bypass list'' are integral, ancillary, 
supportive, dependent, or adjunctive to the service into which their 
payment is packaged. We believe that a reexamination of this group of 
services is warranted to determine which services are best described as 
integral, ancillary, supportive, dependent, or adjunctive services to 
the service into which it would be packaged to determine which services 
should either be packaged under a different policy or separately paid 
in the OPPS.
    Therefore, after consideration of the public comments we received, 
we are not finalizing our proposal to conditionally package diagnostic 
tests on the bypass list for CY 2014, or our proposal to assign these 
codes a status indicator of ``Q1.'' We will review the services 
currently listed in Addendum P under ``diagnostic tests on the bypass 
list'' to determine which tests may be

[[Page 74947]]

appropriate for packaging in the OPPS in future years. Codes that would 
have been affected by the CY 2014 packaging proposal for this category 
of services will remain on the bypasss list for the CY 2014 OPPS, as 
discussed in section II.A.1.b. of this final rule with comment period.
(7) Device Removal Procedures
    Implantable devices frequently require a procedure to remove or 
replace the device due to wear, failure, recall, and infection, among 
other reasons. Since the beginning of the OPPS, implantable devices 
have been packaged (either as supplies, implantable prosthetics, or 
implantable DME) into their associated procedures. A device removal 
procedure is sometimes described by a code that may include repair or 
replacement. In other cases, a device removal procedure is described by 
a separate code that only describes the surgical procedure to remove a 
device. Device removal procedures are frequently performed with 
procedures to repair or replace devices, although it is possible that a 
device removal procedure may occur without repair or replacement if the 
clinical indication for the device that was removed no longer exists. 
When a separately coded device removal procedure is performed with a 
separately coded device repair or replacement procedure, the device 
removal procedure should be considered as one part of an overall 
procedure for removing a device with repair or replacement of the 
device.
    Given that a separately coded device removal procedure that 
accompanies a device repair or replacement procedure represents a 
service that is integral and supportive to a primary service, in the CY 
2014 OPPS/ASC proposed rule (78 FR 73574), we proposed to conditionally 
package device removal codes when they are billed with other surgical 
procedures involving repair or replacement and assign a status 
indicator of ``Q2.'' We stated that we believe that this conditional 
packaging policy is appropriate under longstanding OPPS packaging 
principles because these device removal procedures are an integral and 
supportive step in a more comprehensive overall procedure. Furthermore, 
conditionally packaging these device removal procedures with the 
replacement or revision codes would be consistent with our packaging 
policies for other dependent services. The specific codes for the 
device removal procedures that we proposed to be conditionally packaged 
and assigned to status indicator ``Q2'' for CY 2014 were listed in 
Addendum P to the proposed rule (which is available via the Internet on 
the CMS Web site).
    Comment: Some commenters agreed with CMS' proposal to conditionally 
package device removal procedures in the OPPS because they are often 
part of a larger procedure to revise or replace a device.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our policy to conditionally package device removal 
procedures in the OPPS when performed together with a repair or 
replacement of a device and to assign a status indicator of ``Q2.'' The 
specific device removal procedure codes that we are conditionally 
packaging and assigning to status indicator ``Q2'' for CY 2014 are 
listed in Addendum P to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
e. Clarification Regarding Supplies That Are Packaged in the OPPS
    Under the regulations at Sec.  419.2(b)(4), medical and surgical 
supplies and equipment are unconditionally packaged in the OPPS and 
have been since the beginning of the payment system. Supplies is a 
large category of items that typically are either for single patient 
use or have a shorter life span in use than equipment. Packaged 
supplies can include certain drugs, biologicals, and 
radiopharmaceuticals. The only supplies that are sometimes paid 
separately in the hospital outpatient setting are prosthetic supplies 
under Sec.  419.22(j), and if paid separately, they are paid according 
to the DMEPOS fee schedule. As we discussed in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43575), in our annual review of the OPPS for CY 
2014, we discovered many supplies that should be packaged in the OPPS 
according to Sec.  419.2(b)(4), but that are currently assigned to 
status indicator ``A'' and are separately paid in the hospital 
outpatient setting according to the DMEPOS fee schedule. For CY 2014, 
we proposed to revise the status indicator for all supplies described 
by Level II HCPCS A-codes (except for prosthetic supplies) from status 
indicator ``A'' to ``N,'' so that these supplies would be 
unconditionally packaged as required by Sec.  419.2(b)(4).
    Comment: A few commenters supported CMS' proposed change in the 
status indicators for these supplies from ``A'' to ``N.'' One commenter 
urged CMS not to finalize this proposal because the commenter believed 
that hospitals should be separately paid for supplies given to the 
patient to take home.
    Response: Our longstanding regulations at Sec.  419.2(b)(4) require 
that we package all supplies in the OPPS except prosthetic supplies.
    After consideration of the public comments we received, we are 
updating the status indicators for all supplies (except prosthetic 
supplies) to ``N.'' The specific Level II HCPCS A-codes whose status 
indicator are revised from ``A'' to ``N'' are listed in Addendum P to 
this CY 2014 OPPS/ASC final rule with comment period (which is 
available via the Internet on the CMS Web site).
f. Revision and Clarification of the Regulations at 42 CFR 419.2(b) and 
42 CFR 419.22
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68272), after consideration of public comments we received on the 
proposed rule, we clarified the regulatory language at Sec.  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. 
In the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to 
further revise this regulation to add the packaging categories that 
were adopted in CYs 2008 and 2009 in addition to the new proposed 
policies described above. We also proposed to make some further minor 
revisions and editorial clarifications to the existing language of 
Sec.  419.2(b) to make it more clearly reflect current packaging 
policy. Finally, we proposed to revise the list of services excluded 
from the OPPS at Sec.  419.22.
    Comment: Some commenters urged CMS not to revise the regulations at 
42 CFR 419.2(b) as a part of their request that CMS not adopt any of 
the packaging proposals.
    Response: We believe that codifying the new policies will promote 
clarity regarding OPPS packaging policy, and therefore we are 
finalizing our revision of the regulations.
    After consideration of the public comments received, we are 
finalizing our revision of the regulations at 42 CFR 419.2(b) and 
419.22 to reflect the new packaging policies.
g. Comment Solicitation on Increased Packaging for Imaging Services
    We currently package several kinds of imaging services in the OPPS, 
including image guidance services, image processing services, 
intraoperative imaging, and imaging supervision and interpretation 
services. In addition to

[[Page 74948]]

these imaging services that are either packaged or proposed to be 
packaged, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43575) 
that we are considering a proposal for CY 2015 that would conditionally 
package all imaging services with any associated surgical procedures. 
We stated that imaging services not provided with a surgical procedure 
would continue to either be separately paid according to a standard 
clinical APC or a composite APC. We requested public comments on this 
potential CY 2015 proposal.
    Comment: Some commenters objected to this potential future proposal 
on the grounds that such a packaging policy could result in less access 
to imaging in the HOPD. One commenter asked about the claims logic 
hierarchy for packaging imaging into surgery as it relates to the 
imaging composites.
    Response: We appreciate these thoughtful comments, and we will 
consider them as we further consider packaging imaging services in the 
OPPS.
4. Calculation of OPPS Scaled Payment Weights
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43576), for CY 2014, 
we proposed to calculate the relative payment weights for each APC for 
CY 2014 shown in Addenda A and B to the proposed rule (which are 
available via the Internet on the CMS Web site) using the APC costs 
discussed in sections II.A.1. and II.A.2. of the proposed rule. For 
this CY 2014 final rule with comment period, we are continuing to use 
this methodology to calculate the relative payment weights for each APC 
for CY 2014. 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 the CY 2013 OPPS (77 FR 68283), we established a policy of 
using geometric mean-based APC costs to calculate relative payment 
weights. For the CY 2014 OPPS, we proposed to continue basing the 
relative payment weights on which OPPS payments will be made by using 
geometric mean costs (78 FR 43576). As we discuss in section VII. of 
the proposed rule and this final rule with comment period, we proposed 
to reconfigure the CY 2014 visit APCs so that they would include a 
single level for each visit type. 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 use the 
cost of the clinic visit APC in calculating unscaled weights, which for 
CY 2014 was proposed APC 0634. While we have previously used APC 0606 
as the base from which to develop the OPPS budget neutral weight 
scaler, under our proposal to reconfigure the visit APCs, we proposed 
to have a single APC for each visit type. The proposal to reconfigure 
the visit APCs is discussed in more detail in section VII. of the 
proposed rule and this final rule with comment period. Following our 
general methodology for establishing relative payment weights derived 
from APC costs, but using the proposed CY 2014 geometric mean cost for 
APC 0634, for CY 2014, we proposed to assign APC 0634 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 0634 to derive the 
proposed unscaled relative payment weight for each APC. 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 2014 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, as we proposed, we compare the estimated 
aggregate weight using the CY 2013 scaled relative payment weights to 
the estimated aggregate weight using the CY 2014 unscaled relative 
payment weights.
    For CY 2013, we multiplied the CY 2013 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2012 claims to calculate the total relative 
payment weight for each service. We then added together the total 
relative payment weight for each of these services in order to 
calculate an estimated aggregate weight for the year. For CY 2014, we 
are applying the same process using the CY 2014 unscaled relative 
payment weights rather than scaled relative payment weights. We 
calculate the weight scaler by dividing the CY 2013 estimated aggregate 
weight by the CY 2014 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. We note that, as a result of the CY 2014 OPPS packaging 
policy for laboratory tests described in section II.A.3.b.(3) of this 
final rule with comment period, we need to incorporate the estimated 
relative payment weights from those services. Therefore, the CY 2013 
estimated OPPS aggregate weight include payments for outpatient 
laboratory tests paid at the CLFS rates.
    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.
    We include estimated payments to CMHCs in our comparison of the 
estimated unscaled relative payment weights in CY 2014 to the estimated 
total relative payment weights in CY 2013 using CY 2012 claims data, 
holding all other components of the payment system constant to isolate 
changes in total weight. Based on this comparison, we adjusted the CY 
2014 unscaled relative payment weights for purposes of budget 
neutrality. The CY 2014 unscaled relative payment weights were adjusted 
by multiplying them by a weight scaler of 1.2732 to ensure that the CY 
2014 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 with 
comment period) is included in the budget neutrality calculations for 
the CY 2014 OPPS.
    Comment: One commenter expressed the concern that CMS may have 
underfunded the OPPS in developing the budget neutral weight scaler for 
the additional costs associated with laboratory tests for CY 2014.

[[Page 74949]]

    Response: We appreciate the commenter's concern. We discussed the 
calculation of the proposed CY 2014 budget neutral weight scaler in the 
CY 2014 OPPS/ASC proposed rule (78 FR 43576) as well as the claims 
accounting narrative that we make available via the Internet on the CMS 
Web site. In calculating the CY 2014 OPPS budget neutral weight scaler, 
we calculated the CY 2013 aggregate payment weight associated with the 
laboratory tests paid at CLFS rates by applying the CY 2013 CLFS 
payment rates to the laboratory tests performed in the hospital 
setting. We note that this is the standard process we use to develop 
relative payment weights for budget neutrality for items and services 
that have predetermined payment rates, such as separately paid OPPS 
drugs and New Technology APCs. We note that we released corrected data 
files on August 28, 2013, and extended the comment period to September 
16, 2013, on the technical corrections noted in the correcting document 
published in the Federal Register on September 6, 2013 (78 FR 54842). 
However, there were no corrections associated with the amount of the 
estimated payment weight being budget neutralized from these clinical 
diagnostic laboratory tests.
    After consideration of the public comments we received, we are 
finalizing our proposed methodology for calculating the OPPS scaled 
relative payment weights without modification, including updating of 
the budget neutrality scaler for this final rule with comment period. 
Under this methodology, the final unscaled relative payment weights 
were adjusted by a weight scaler of 1.2732 for this final rule with 
comment period. The CY 2014 unscaled 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 2014 IPPS/LTCH PPS 
final rule (78 FR 50607), consistent with current law, based on IHS 
Global Insight, Inc.'s second quarter 2013 forecast of the FY 2014 
market basket increase, the final FY 2014 IPPS market basket update is 
2.5 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iii) of 
the Act, as added by section 3401(i) of the Patient Protection and 
Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 
10319(g) of that law and further amended by section 1105(e) of the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), 
provide adjustments to the OPD fee schedule increase factor for CY 
2014.
    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 2014 IPPS/LTCH PPS proposed rule 
(78 FR 27572), we discussed the calculation of the proposed MFP 
adjustment for FY 2014, which was 0.4 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 2014 market 
basket update and the MFP adjustment, components in calculating the OPD 
fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 
1833(t)(3)(F) of the Act, in this CY 2014 OPPS/ASC final rule with 
comment period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607), 
we discussed the calculation of the final MFP adjustment for FY 2014, 
which is 0.5 percentage point.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that, 
for each of years 2010 through 2019, the OPD fee schedule increase 
factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the 
adjustment described in section 1833(t)(3)(G) of the Act. For CY 2014, 
section 1833(t)(3)(G)(iii) of the Act provides a 0.3 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)(iii) of the Act, in the CY 2014 
OPPS/ASC proposed rule (78 FR 43577), we proposed to apply a 0.3 
percentage point reduction to the OPD fee schedule increase factor for 
CY 2014.
    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 results in an OPD fee schedule increase factor of 1.7 
percent for the CY 2014 OPPS (which is 2.5 percent, the final estimate 
of the hospital inpatient market basket percentage increase, less the 
final 0.5 percentage point MFP adjustment, and less the 0.3 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 -0.3 
percent (which is 2.5 percent, the final estimate of the hospital 
inpatient market basket percentage increase, less the final 0.5 
percentage point MFP adjustment, less the 0.3 percentage point 
additional adjustment, and less 2.0 percentage points for the Hospital 
OQR Program reduction). For further discussion of the Hospital OQR 
Program, we refer readers to section XIII. of this final rule with 
comment period.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed to 
amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (5) to 
reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, 
for CY 2014, 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)(iii) 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 0.3 percentage point for CY 2014.

[[Page 74950]]

    We did not receive any public comments on our proposed adjustments 
to the OPD fee schedule increase factor or on the proposed changes to 
Sec.  419.32(b)(1)(iv)(B) to add a new paragraph (5). For the reasons 
discussed above, we are adjusting the OPD fee schedule increase factor 
and adopting, as final, the amendment to Sec.  419.32(b)(1)(iv)(B), as 
proposed.
    We did not receive any public comments on our proposed methodology 
for calculating the CY 2014 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 2014, we 
are increasing the CY 2013 conversion factor of $71.313 by 1.7 percent. 
In accordance with section 1833(t)(9)(B) of the Act, we are further 
adjusting the conversion factor for CY 2014 to ensure that any 
revisions made to the updates for a revised wage index and rural 
adjustment are made on a budget neutral basis. We are calculating an 
overall budget neutrality factor of 1.0002 for wage index changes by 
comparing total estimated payments from our simulation model using the 
final FY 2014 IPPS wage indices to those payments using the FY 2013 
IPPS wage indices, as adopted on a calendar year basis for the OPPS.
    For CY 2014, 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 2014, 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 2014 budget neutrality adjustment factor for the 
cancer hospital payment adjustment by comparing the estimated total CY 
2014 payments under section 1833(t) of the Act, including the CY 2014 
cancer hospital payment adjustment, to the estimated CY 2014 total 
payments using the CY 2013 final cancer hospital payment adjustment as 
required under section 1833(t)(18)(B) of the Act. The difference in the 
CY 2014 estimated payments as a result of applying the CY 2014 cancer 
hospital payment adjustment relative to the CY 2013 final cancer 
hospital payment adjustment has a limited impact on the budget 
neutrality calculation. Therefore, we are applying a budget neutrality 
adjustment factor of 1.0005 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 2014 
will equal approximately $12.3 million, which represents 0.02 percent 
of total projected CY 2014 OPPS spending. Therefore, the conversion 
factor is also adjusted by the difference between the 0.15 percent 
estimate of pass-through spending for CY 2013 and the 0.02 percent 
estimate of CY 2014 pass-through spending, resulting in an adjustment 
for CY 2014 of 0.13 percent. Finally, estimated payments for outliers 
remain at 1.0 percent of total OPPS payments for CY 2014.
    The final OPD fee schedule increase factor of 1.7 percent for CY 
2014 (that is, the estimate of the hospital inpatient market basket 
percentage increase of 2.5 percent less the final 0.5 percentage point 
MFP adjustment and less the 0.3 percentage point required under section 
1833(t)(3)(F)(ii) of the Act), the required wage index budget 
neutrality adjustment of approximately 1.0002, the cancer hospital 
payment adjustment of 1.0005, and the adjustment of 0.13 percent of 
projected OPPS spending for the difference in the pass-through spending 
result in a conversion factor for CY 2014 of $72.672.
    As we stated in the proposed rule (78 FR 43578), 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 XIII.G. of this final rule 
with comment period. To calculate the CY 2014 reduced market basket 
conversion factor for those hospitals that fail to meet the 
requirements of the Hospital OQR Program for the full CY 2014 payment 
update, we are making all other adjustments discussed above, but using 
a reduced OPD fee schedule update factor of -0.3 percent (that is, the 
OPD fee schedule increase factor of 1.7 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 2014 of $71.219 for those 
hospitals that fail to meet the Hospital OQR requirements (a difference 
of -$1.453 in the conversion factor relative to those hospitals that 
met the Hospital OQR requirements).
    In summary, for CY 2014, we are using a final conversion factor of 
$72.672 in the calculation of the national unadjusted payment rates for 
those items and services for which payment rates are calculated using 
geometric mean costs. We are finalizing our proposed amendment to Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2014 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(iii) of the Act. We also are using a 
reduced conversion factor of $71.219 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 adjust the portion of payment 
and coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner'' (codified at 42 CFR 419.43(a)). This 
portion of the OPPS payment rate is called the OPPS labor-related 
share. Budget neutrality is discussed in section II.B. of this final 
rule with comment period.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). Therefore, we did not propose to revise 
this policy for the CY 2014 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

[[Page 74951]]

same FY 2014 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.
    Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original 
OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 
18545)), the OPPS adopted the final fiscal year IPPS 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 added 
section 1886(d)(3)(E)(iii)(II) to the Act, which defines ``frontier 
State,'' and amended section 1833(t) of the Act to add new paragraph 
(19), which requires a ``frontier State'' wage index floor of 1.00 in 
certain cases, and states that the frontier State floor shall not be 
applied in a budget neutral manner. We codified these requirements in 
Sec.  419.43(c)(2) and (c)(3) of our regulations. In the CY 2014 OPPS/
ASC proposed rule, we stated that, for the CY 2014 OPPS, we will 
implement this provision in the same manner as we have since CY 2011. 
That is, frontier State hospitals will receive a wage index of 1.00 if 
the otherwise applicable wage index (including reclassification, rural 
and imputed floor, and rural floor budget neutrality) is less than 
1.00. 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 following sections in the FY 2011 through FY 2014 IPPS/LTCH PPS 
final rules for discussions regarding this provision, including our 
methodology for identifying which areas meet the definition of frontier 
States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: FY 
2011 (75 FR 50160 through 50161), FY 2012 (76 FR 51793, 51795, and 
51825), FY 2013 (77 FR 53369 through 53370), and FY 2014 (78 FR 50590 
through 50591).
    In addition to the changes required by the Affordable Care Act, we 
note that the final FY 2014 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 and imputed floor provisions, an adjustment 
for occupational mix, and an adjustment to the wage index based on 
commuting patterns of employees (the out-migration adjustment). We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50585 
through 50596) for a detailed discussion of all changes to the FY 2014 
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.
    For purposes of the OPPS, we proposed to continue our policy for CY 
2014 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) (Pub. L. 108-173)). We 
noted that, because non-IPPS hospitals cannot reclassify, they are 
eligible for the out-migration wage adjustment. Table 4J from the FY 
2014 IPPS/LTCH PPS final rule as corrected (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 2014. We also noted 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 2014 IPPS/LTCH PPS final rule 
(78 FR 50592) 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 2014 IPPS/LTCH PPS final 
rule as corrected 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 2014 OPPS. Addendum L is 
available via the Internet on the CMS Web site.
    As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), 
the Office of Management and Budget (OMB) issued revisions to the 
current geographic area designations on February 28, 2013, that 
included a number of significant changes such as new CBSAs, urban 
counties that become rural, rural counties that become urban, and 
splitting existing CBSAs (OMB Bulletin 13-01). This bulletin can be 
found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. All of these designations have corresponding effects 
on the wage index system and its adjustments. In order to allow for 
sufficient time to assess the new revisions and their ramifications, we 
intend to propose changes to the IPPS wage index based on the newest 
CBSA designations in the FY 2015 IPPS/LTCH PPS proposed rule. 
Similarly, in the OPPS, which uses the IPPS wage index, we intend to 
propose changes based on the new OMB revisions in the CY 2015 OPPS/ASC 
proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH 
PPS proposed rule.
    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 did not 
propose to change our current regulations which require that we use the 
FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014.
    We did not receive any public comments on our proposals. Therefore, 
we are finalizing our proposals without modification and are adopting 
the FY 2014 IPPS wage index for the CY 2014 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

[[Page 74952]]

HOPD within the hospital overall. Therefore, we are using the final FY 
2014 IPPS wage indices for calculating OPPS payments in CY 2014. 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 2014 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 2014 
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). In the CY 2014 OPPS/ASC proposed rule (78 FR 
43579), we proposed to update the default ratios for CY 2014 using the 
most recent cost report data. We discuss our policy for using default 
CCRs, including setting the ceiling threshold for a valid CCR, in the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 
68599) in the context of our adoption of an outlier reconciliation 
policy for cost reports beginning on or after January 1, 2009.
    For CY 2014, 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 2014 OPPS relative payment 
weights. Table 9 published in the proposed rule (78 FR 43580 through 
43581) listed the proposed CY 2014 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.
    We did not receive any public comments on our CY 2014 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 2014 OPPS relative payment weights. We used this 
methodology to calculate the statewide average default CCRs listed in 
Table 16 below.
    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 2013 and CY 2014 are modest and the few significant 
changes are associated with areas that have a small number of 
hospitals.
    Table 16 below lists the finalized statewide average default CCRs 
for OPPS services furnished on or after January 1, 2014.

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

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). 
Section 1833(t)(13) of the Act provided the Secretary the authority to 
make an adjustment to OPPS payments for rural hospitals, effective 
January 1, 2006, if justified by a study of the difference in costs by 
APC between hospitals in rural areas and hospitals in urban areas. Our 
analysis showed a difference in costs for rural SCHs. Therefore, for 
the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 
7.1 percent for all services and procedures paid

[[Page 74956]]

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) of the 
regulations to clarify that EACHs also are eligible to receive the 
rural SCH adjustment, assuming these entities otherwise meet the rural 
adjustment criteria. Currently, 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 2013. 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 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed to 
continue our policy of a 7.1 percent payment adjustment that is done in 
a budget neutral manner for rural SCHs, including EACHs, for all 
services and procedures paid under the OPPS, excluding separately 
payable drugs and biologicals, devices paid under the pass-through 
payment policy, and items paid at charges reduced to costs.
    Comment: Several commenters supported the proposed continuation of 
the 7.1 percent rural SCH adjustment. One commenter also recommended 
that CMS update the analysis in the near future to assess if the 7.1 
percent payment adjustment remains a valid figure. One commenter 
recommended that any potential future changes to the rural adjustment 
be implemented 12 months after the changes are finalized, to address 
concerns about budgeting.
    Response: We appreciate the commenters' support. We agree that it 
is appropriate to continue the 7.1 percent adjustment for rural SCHs 
(including EACHs) as we proposed for CY 2014. As we indicated in the 
proposed rule (78 FR 43582), we may reassess the 7.1 percent rural 
adjustment in the near future by examining differences between urban 
hospitals' costs and rural hospitals' costs using updated claims, cost 
reports, and provider information. We recognize the concerns that 
commenters present regarding budgeting concerns and will take into 
consideration these concerns for any review and revision of the 
adjustment in the future.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 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 2014, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs.

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

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid 
cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act 
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 that are exempted from payment under the 
IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement 
Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) 
of the Act, ``Transitional Adjustment to Limit Decline in Payment,'' to 
hold harmless cancer hospitals and children's hospitals based on their 
pre-BBA amount under the OPPS. As required under section 
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full 
amount of the difference between payments for covered outpatient 
services under the OPPS and a ``pre-BBA amount.'' That is, cancer 
hospitals are permanently held harmless to their ``pre-BBA amount,'' 
and they receive transitional outpatient payments (TOPs) or hold 
harmless payments to ensure that they do not receive a payment that is 
lower 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 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 defined in section 1833(t)(7)(F)(ii) of the Act. 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 of 2010 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 1833(t)(18)(A) of the 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 
1833(t)(18)(B) of the Act provides that if the Secretary determines 
that costs by these cancer hospitals 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 1833(t)(18)(A) of the Act, we determined in 2011 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

[[Page 74957]]

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 CYs 2012 and 2013, the target PCR for 
purposes of the cancer hospital payment adjustment was 0.91.
2. Payment Adjustment for Certain Cancer Hospitals for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), 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 development of the proposed rule. To calculate the 
proposed CY 2014 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 2014 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 90 percent of reasonable cost (weighted average PCR of 
0.90). Based on these data, we proposed a target PCR of 0.90 that would 
be used to determine the CY 2014 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 
0.90 for each cancer hospital.
    Comment: Similar to public comments received in response to the CY 
2013 OPPS/ASC proposed rule that we addressed in the CY 2013 OPPS/ASC 
final rule with comment period, commenters representing the cancer 
hospitals again stated 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 indicated would result in a target 
PCR equal to 0.94 for CY 2014.
    Response: As we indicated in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68293), section 3138 of the Affordable Care Act 
provides that if the Secretary determines under section 1833(t)(18)(A) 
of the Act that costs incurred by cancer hospitals exceed those costs 
of other hospitals furnishing services under section 1833(t) of the 
Act, 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: As we stated in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68294) in response to this same comment, 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, 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.
    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 2014 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 2014 
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 2012 claims data that we used to model 
the impact of the final CY 2014 APC relative payment weights (4,044 
hospitals) because it is appropriate to use the same set of hospitals 
that we are using to calibrate the modeled CY 2014 OPPS. The cost 
report data for the hospitals in this dataset were from cost report 
periods with fiscal year ends ranging from 2011 to 2012. 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 116 
hospitals because these hospitals had cost report data that were not 
complete (missing aggregate OPPS payments, missing aggregate cost data, 
or missing both), so that all cost reports in the study would have both 
the payment and cost data necessary to calculate a PCR for each 
hospital, leading to an analytic file of 3,880 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 89 percent of reasonable cost 
(weighted average PCR of 0.89). Based on these data, we used a target 
PCR of 0.89 to determine the CY 2014 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 0.89 for each cancer hospital.

[[Page 74958]]

    Table 17 below indicates the estimated percentage increase in OPPS 
payments to each cancer hospital for CY 2014 due to the cancer hospital 
payment adjustment policy. The actual amount of the CY 2014 cancer 
hospital payment adjustment for each cancer hospital will be determined 
at cost report settlement and will depend on each hospital's CY 2014 
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.

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BILLING CODE 4120-01-C

G. Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. In CY 2012, 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 2012 OPPS payment, 
using available CY 2012 claims and the revised OPPS expenditure 
estimate for the 2013 Trustee's Report, is approximately 1.2 percent of 
the total aggregated OPPS payments. Therefore, for CY 2012, we estimate 
that we paid 0.2 percent above the CY 2012 outlier target of 1.0 
percent of total aggregated OPPS payments.
    As explained in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68295 through 68297), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2013. The outlier thresholds were set so 
that estimated CY 2013 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2012 claims data and CY 2013 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2013 will be approximately 
1.1 percent of the total CY 2013 OPPS payments. The difference between 
1.1 percent and 1.0 percent is reflected in

[[Page 74959]]

the regulatory impact analysis in section XXIII. of this final rule 
with comment period. We note that we provide estimated CY 2014 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 2014 OPPS/ASC proposed rule (78 FR 43584), we proposed to 
continue our policy of estimating outlier payments to be 1.0 percent of 
the estimated aggregate total payments under the OPPS for outlier 
payments. We proposed that a portion of that 1.0 percent, an amount 
equal to 0.18 percent of outlier payments (or 0.0018 percent of total 
OPPS payments) would be allocated to CMHCs for PHP outlier payments. 
This is the amount of estimated outlier payments that would result from 
the proposed CMHC outlier threshold as a proportion of total estimated 
OPPS outlier payments. As discussed in section VIII.D. of the CY 2014 
OPPS/ASC proposed rule (78 FR 43622), 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.D. of this final rule with comment 
period.
    To ensure that the estimated CY 2014 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 $2,775 fixed-dollar 
threshold.
    We calculated the proposed fixed-dollar threshold using largely the 
standard methodology, most recently used for CY 2013 (77 FR 68295 
through 68297). For purposes of estimating outlier payments for the 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2013 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 2014 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2012 claims using the 
same inflation factor of 1.0993 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2014 IPPS/LTCH PPS proposed 
rule (78 FR 27767). We used an inflation factor of 1.0485 to estimate 
CY 2013 charges from the CY 2012 charges reported on CY 2012 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767) as 
well as the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). 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, in the CY 2014 OPPS/ASC proposed rule, we 
proposed to apply the same CCR inflation adjustment factor that we 
apply for the FY 2014 IPPS outlier calculation to the CCRs used to 
simulate the CY 2014 OPPS outlier payments to determine the fixed-
dollar threshold. Specifically, for CY 2014, we proposed to apply an 
adjustment factor of 0.9732 to the CCRs that were in the April 2013 
OPSF to trend them forward from CY 2013 to CY 2014. The methodology for 
calculating this proposed adjustment was discussed in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27766 through 27768) as well as the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50978 through 50982).
    Therefore, to model hospital outlier payments for the proposed 
rule, we applied the overall CCRs from the April 2013 OPSF file after 
adjustment (using the proposed CCR inflation adjustment factor of 
0.9732 to approximate CY 2014 CCRs) to charges on CY 2012 claims that 
were adjusted (using the charge inflation factor of 1.0993 to 
approximate CY 2014 charges). We simulated aggregated CY 2014 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 2014 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $2,775, combined 
with the proposed multiple threshold of 1.75 times the APC payment 
rate, would allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. We 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 
$2,775 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 XIII. of this final rule with 
comment period.
    Comment: Several commenters urged CMS to reconsider the increase in 
the CY 2014 OPPS outlier threshold. The commenters believed that the 
thresholds were being set higher than was

[[Page 74960]]

necessary to achieve the OPPS outlier spending target, based on their 
analysis of the thresholds and aggregate outlier spending in prior 
years. Commenters also desired transparency about why an outlier 
threshold increase was necessary, when historical evidence suggested 
that such a change is unwarranted. One commenter recommended that the 
OPPS outlier percentage spending target be reduced to 0.5 percent of 
the system because patients who develop complications requiring complex 
care are highly likely to be admitted to inpatient care.
    Response: Many of the commenters who recommended changes to the 
OPPS fixed-dollar outlier threshold relied on direct comparisons 
between aggregate spending and the OPPS outlier thresholds. As 
discussed earlier in this section, OPPS outliers are paid and modeled 
based on comparisons between APC payment and estimated cost. As a 
result, changing the OPPS fixed-dollar outlier threshold by any 
increment does not result in an evenly distributed change in OPPS 
outlier spending as well as services that receive OPPS outlier 
payments.
    There are a variety of factors that may affect the OPPS fixed-
dollar outlier threshold, including data changes such as hospital 
charging practices and fluctuations in the overall ancillary CCRs as 
well as changes in OPPS payment policy such as those involving 
packaging and compositing. Those changes can influence the individual 
comparisons between APC service payment and estimated costs. While the 
OPPS outlier threshold has been relatively stable in the past several 
years, historically the OPPS fixed-dollar outlier threshold has 
fluctuated from year to year as identified in the Annual Policy Files 
which are available via the Internet on the CMS Web site. In the CY 
2014 OPPS/ASC proposed rule, we proposed to update several OPPS 
packaging policies which would have a corresponding effect on the OPPS 
fixed-dollar outlier threshold by potentially increasing APC payment 
for certain paid service lines while moving affected services from 
previously being on the payment portion of the OPPS outlier payment 
comparison into the cost portion. In particular, by conditionally 
packaging certain clinical diagnostic laboratory tests previously paid 
at CLFS rates, the CY 2014 fixed-dollar OPPS outlier threshold would 
have to account for significant changes to both the APC payment and 
estimated cost portions of the OPPS outlier payment comparison.
    We appreciate the recommendation regarding revisiting the correct 
OPPS outlier spending target and will continue to consider whether a 
1.0 percent OPPS outlier percentage spending target continues to remain 
appropriate.
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 
2014, we are applying the overall CCRs from the October 2013 OPSF with 
a CCR adjustment factor of 0.9645 to approximate CY 2014 CCRs to 
charges on the final CY 2012 claims that were adjusted to approximate 
CY 2014 charges (using the final 2-year charge inflation factor of 
1.0969). These are the same CCR adjustment and charge inflation factors 
that were used to set the IPPS fixed dollar threshold for the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50982). We simulated aggregated CY 2014 
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 2014 OPPS 
payments. We estimate that a fixed-dollar threshold of $2,900, 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 2014, 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 $2,900 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 0.16 percent of outlier payments to CMHCs for PHP outlier 
payments.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR Part 419, Subparts C and D. For this CY 2014 OPPS/ASC final rule 
with comment period, the payment rate for most services and procedures 
for which payment is made under the OPPS is the product of the 
conversion factor calculated in accordance with section II.B. of this 
final rule with comment period and the relative payment weight 
determined under section II.A. of this final rule with comment period. 
Therefore, the national unadjusted payment rate for most APCs contained 
in Addendum A to this final rule with comment period (which is 
available via the Internet on the CMS Web site) and for most HCPCS 
codes to which separate payment under the OPPS has been assigned in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
CY 2014 scaled weight for the APC by the CY 2014 conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital OQR Program (formerly referred to as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) 
requirements. For further discussion of the payment reduction for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we refer readers to section XIII. of this final rule with 
comment period.
    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 74961]]

although blood and blood products with status indicator ``R'' and 
brachytherapy sources with status indicator ``U'' are not subject to 
wage adjustment, they are subject to reduced payments when a hospital 
fails to meet the Hospital OQR Program requirements. We note that we 
had proposed to create status indicator ``J1'' to reflect the 
comprehensive APCs discussed in section II.A.2.e. of this final rule 
with comment period. However, the comprehensive APCs will not be 
implemented in the CY 2014 OPPS, and therefore status indicator ``J1'' 
will not apply. We also note that we had proposed to delete status 
indicator ``X'' as part of the CY 2014 packaging proposal for ancillary 
services, discussed in section II.A.4. of this final rule with comment 
period. We are not finalizing the ancillary services packaging policy, 
and therefore status indicator ``X'' will continue to be active in the 
CY 2014 OPPS.
    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 2014 OPPS fee schedule increase factor of 1.7 
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. During our regression analysis for the payment adjustment 
for rural hospitals in the CY 2006 OPPS final rule with comment period 
(70 FR 68553), we confirmed that this labor-related share for hospital 
outpatient services is appropriate.
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.
    X is the labor-related portion of the national unadjusted payment 
rate.
    X =.60 * (national unadjusted payment rate).
    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. 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 2014 under the IPPS, 
reclassifications through the MGCRB, section 1886(d)(8)(B) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in Sec.  412.103 of the regulations, and hospitals designated 
as urban under section 601(g) of Pub. L. 98-21. (For further discussion 
of the changes to the FY 2014 IPPS wage indices, as applied to the CY 
2014 OPPS, we refer readers to section II.C. of this final rule with 
comment period.) As we proposed, we are continuing to apply a wage 
index floor of 1.00 to frontier States, in accordance with section 
10324 of the Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Pub. L. 
108-173. Addendum L to this final rule with comment period (which is 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2014 IPPS and listed as Table 4J in the FY 2014 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).
    Xa = .60 * (national unadjusted payment rate) * applicable wage 
index.
    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted payment rate 
for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.
    Y is the nonlabor-related portion of the national unadjusted 
payment rate.
    Y = .40 * (national unadjusted payment rate).
Adjusted Medicare Payment = Y + Xa.
    Step 6. If a provider is an SCH, 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 (Level I 
Excision/Biopsy). The CY 2014 full national unadjusted payment rate for 
APC 0019 is approximately $318.79. The reduced national unadjusted 
payment rate for APC 0019 for a hospital that fails to meet the 
Hospital OQR Program requirements is approximately $312.41. This 
reduced rate is calculated by multiplying the reporting ratio of 0.980 
by the full unadjusted payment rate for APC 0019.

[[Page 74962]]

    The FY 2014 wage index for a provider located in CBSA 35644 in New 
York is 1.3129. The labor-related portion of the full national 
unadjusted payment is approximately $251.12 (.60 * $318.79 * 1.3129). 
The labor-related portion of the reduced national unadjusted payment is 
approximately $246.10 (.60 * $312.41 * 1.3129). The nonlabor-related 
portion of the full national unadjusted payment is approximately 
$127.52 (.40 * 318.79). The nonlabor-related portion of the reduced 
national unadjusted payment is approximately $124.96 (.40 * $312.41). 
The sum of the labor-related and nonlabor-related portions of the full 
national adjusted payment is approximately $378.64 ($251.12 + $127.52). 
The sum of the reduced national adjusted payment is approximately 
$371.06 ($246.10 + $124.96).

I. Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure performed in a year to the amount of the inpatient 
hospital deductible for that year.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011, may be found in section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43586), for CY 2014, 
we proposed to determine copayment amounts for new and revised APCs 
using the same methodology that we implemented beginning in CY 2004. 
(We refer readers to the November 7, 2003 OPPS final rule with comment 
period (68 FR 63458).) In addition, we proposed to use the same 
standard rounding principles that we have historically used in 
instances where the application of our standard copayment methodology 
would result in a copayment amount that is less than 20 percent and 
cannot be rounded, under standard rounding principles, to 20 percent. 
(We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66687) in which we discuss our rationale for applying 
these rounding principles.) The proposed national unadjusted copayment 
amounts for services payable under the OPPS that would be effective 
January 1, 2014, were shown in Addenda A and B to the proposed rule 
(which are available via the Internet on the CMS Web site). As 
discussed in section XIII.G. of the proposed rule, for CY 2014, the 
proposed Medicare beneficiary's minimum unadjusted copayment and 
national unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.
    We noted that OPPS copayments may increase or decrease each year 
based on changes in the calculated APC payment rates due to updated 
cost report and claims data, and any changes to the OPPS cost modeling 
process. However, as described in the CY 2004 OPPS/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).
    We did not receive any public comments regarding the proposed 
methodology for calculating copayments for CY 2014. Therefore, for the 
reasons set forth in this final rule with comment period, we are 
finalizing our CY 2014 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, approximately $63.76 is 20 percent of the 
full national unadjusted payment rate of approximately $318.79. For 
APCs with only a minimum unadjusted copayment in Addenda A and B to 
this final rule with comment period (which are available via the 
Internet on the CMS Web site), the beneficiary payment percentage is 20 
percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.
    B is the beneficiary payment percentage.
    B = National unadjusted copayment for APC/national unadjusted 
payment rate for APC.
    Step 2. Calculate the appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in Steps 2 through 4 
under section II.H. of this final rule with comment period. Calculate 
the rural adjustment for eligible providers as indicated in Step 6 
under section II.H. of this final rule with comment period.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary payment percentage to the adjusted payment rate 
for a service calculated under section II.H. of this final rule with 
comment period, with and without the rural adjustment, to calculate the 
adjusted beneficiary copayment for a given service.
    Wage-adjusted copayment amount for the APC = Adjusted Medicare 
Payment * B.
    Wage-adjusted copayment amount for the APC (SCH or EACH) = 
(Adjusted Medicare Payment * 1.071) * B.
    Step 4. For a hospital that failed to meet its Hospital OQR Program

[[Page 74963]]

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, 2014, 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 2014 OPD fee schedule increase 
factor discussed in section II.B. of this final rule with comment 
period.
    In addition, as noted above, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     Category I CPT codes, which describe surgical procedures 
and medical services;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
and the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and HCPCS code changes that affect the OPPS are published both through 
the annual rulemaking cycle and through the OPPS quarterly update 
Change Requests (CRs). CMS releases new Level II HCPCS codes to the 
public or recognizes the release of new CPT codes by the AMA and makes 
these codes effective (that is, the codes can be reported on Medicare 
claims) outside of the formal rulemaking process via OPPS quarterly 
update CRs. 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 2014 OPPS/ASC proposed rule (78 FR 43587), in 
Table 18 below (Table 11 of the proposed rule), we summarized 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 2013 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 2013 OPPS quarterly update were included in 
Addendum B. Nevertheless, we requested public comments on the codes 
included in the July 2013 OPPS quarterly update and included these 
codes in the preamble of the proposed rule.

[[Page 74964]]

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    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 2014 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this CY 2014 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2013 
OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2013. We also sought public 
comments in the CY 2013 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2012. These new codes, 
with an effective date of October 1, 2012, or January 1, 2013, 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 2013 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 2013 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 
2014 OPPS/ASC final rule with comment period.
    We received public comments on several new codes that were assigned 
to comment indicator ``NI'' in Addendum B of the CY 2013 OPPS/ASC final 
rule with comment period. We respond to those comments in sections 
II.A.2., III.C., V.A., and V.B. of this CY 2014 OPPS/ASC final rule 
with comment period. Table 19 below lists the long descriptors for the 
CPT and Level II HCPCS codes that were assigned to comment indicator 
``NI'' for which we received public comments on the CY 2013 OPPS/ASC 
final rule with comment period and the specific sections where the 
comments are addressed.

[[Page 74965]]

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[[Page 74966]]


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[[Page 74967]]


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[[Page 74968]]


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1. Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective 
April 1, 2013 and July 1, 2013 for Which We Solicited Public Comments 
in the CY 2014 OPPS/ASC Proposed Rule
    Through the April 2013 OPPS quarterly update CR (Transmittal 2664, 
Change Request 8228, dated March 1, 2013), and the July 2013 OPPS 
quarterly update CR (Transmittal 2718, Change Request 8338, dated June 
7, 2013), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2013, we made 
effective 18 new Level II HCPCS codes and 6 Category III CPT codes. 
Specifically, 8 new Level II HCPCS codes were effective for the April 
2013 quarterly update and another 10 new Level II HCPCS codes were 
effective for the July 2013 quarterly update for a total of 18. In 
addition, six new Category III CPT codes were effective for the July 
2013 quarterly update. Of the 24 new HCPCS and CPT codes, we recognized 
for separate payment under the OPPS 14 new codes from the April and 
July 2013 OPPS quarterly updates.
    Through the April 2013 OPPS quarterly update CR, we allowed 
separate payment for five new Level II HCPCS codes. Specifically, as 
displayed in Table 12 of the proposed rule, we provided separate 
payment for HCPCS codes C9130, C9297, C9298, C9734, and C9735. HCPCS 
codes Q0507, Q0508, and Q0509 were assigned to OPPS status indicator 
``A'' to indicate that they are paid through another Medicare payment 
system other than the OPPS. Although HCPCS codes Q0507, Q0508, and 
Q0509 were effective April 1, 2013, they were previously described by 
HCPCS code Q0505, which was deleted on March 31, 2013.
[GRAPHIC] [TIFF OMITTED] TR10DE13.317

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43588), we solicited 
public comments on the proposed status indicators and APC assignments 
for Level II HCPCS codes C9130, C9297, C9298, C9734, C9735, Q0507, 
Q0508, and Q0509, which were listed in Table 12 of the proposed rule 
(78 FR 43588) and now appear in Table 20 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 C9130, C9297, C9298, 
Q0507, Q0508, and Q0509. However, we

[[Page 74969]]

received several public comments on HCPCS codes C9734 and C9735, which 
are addressed in sections III.C.10.c. and III.C.3.b., respectively, of 
this final rule with comment period.
    For CY 2014, the HCPCS Workgroup replaced HCPCS codes C9130, C9297, 
and C9298 with permanent HCPCS J-codes. Table 21 below lists 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 for HCPCS codes C9130, C9297, and C9298, which are effective 
January 1, 2014, in Table 21.
    In this final rule with comment period, we are assigning the Level 
II HCPCS codes listed in Table 21 below to the specified APCs and 
status indicators for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.318

    For CY 2014, we note that we are not making any changes to the 
status indicator and APC assignment for HCPCS code C9735. Specifically, 
HCPCS code C9735 will continue to be assigned to APC 0150 for CY 2014 
with a status indicator of ``T.'' However, we are reassigning HCPCS 
code C9734 from APC 0067 (Level II Stereotactic Radiosurgery) to APC 
0065 (IORT, MRgFUS, and MEG), as discussed in section III.C.10.c. of 
this final rule with comment period. In addition, we are reassigning 
HCPCS codes Q0507, Q0508, and Q0509 from status indicator ``A'' to 
``N'' to indicate that they are now packaged under the hospital OPPS, 
consistent with our packaging guidelines, which are discussed in 
section II.A.3. of this final rule with comment period.
    Furthermore, because HCPCS codes J1556, J9262, and J7316 describe 
the same drug and the same dosage currently described by HCPCS codes 
C9130, C9297, and C9298, respectively, these drugs will continue their 
pass-through status in CY 2014. Therefore, we are assigning HCPCS codes 
J1556, J9262, and J7316 to the same APCs and the same status indicators 
as their predecessor HCPCS codes, as shown in Table 21.
    As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43589), 
through the July 2013 OPPS quarterly update CR, which included HCPCS 
codes that were made effective July 1, 2013, we allowed separate 
payment for 5 of the 10 new Level II HCPCS codes. Specifically, as 
displayed in Table 22 below (also Table 13 of the proposed rule), we 
provided separate OPPS payment for HCPCS codes C9131, C9736, G0460, 
Q2050, and Q2051.

[[Page 74970]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.319

    We note that two of the Level II HCPCS Q-codes that were made 
effective July 1, 2013, were previously described by HCPCS J-codes that 
were separately payable under the hospital OPPS. First, the HCPCS 
Workgroup replaced HCPCS code J9002 (Injection, doxorubicin 
hydrochloride, liposomal, Doxil, 10 mg) with new HCPCS code Q2050, 
effective July 1, 2013, to appropriately identify and pay for both the 
brand and generic forms of doxorubicin hydrochloride liposome. 
Consequently, the status indicator for HCPCS code J9002 was changed to 
``E'' (Not Payable by Medicare), effective July 1, 2013. Because HCPCS 
code Q2050 describes the same product as HCPCS code J9002, we continued 
its separate payment status and assigned HCPCS code Q2050 to status 
indicator ``K'' (Nonpass-through drugs and nonimplantable biologicals, 
including therapeutic radiopharmaceuticals; paid under OPPS; separate 
APC payment). We also assigned HCPCS code Q2050 to the same APC as 
HCPCS code J9002, specifically APC 7046 (Doxil injection), effective 
July 1, 2013.
    Secondly, the HCPCS Workgroup replaced HCPCS codes J3487 
(Injection, zoledronic acid (Zometa), 1 mg) and J3488 (Injection, 
zoledronic acid (Reclast), 1 mg) with one new HCPCS code, specifically 
Q2051, effective July 1, 2013, to appropriately identify and pay for 
both the brand and generic forms of zoledronic acid. Consequently, the 
status indicators for HCPCS codes J3487 and J3488 were changed to 
``E,'' effective July 1, 2013, to indicate that the codes were not 
separately payable by Medicare. Because HCPCS code Q2051 described the 
same product as HCPCS codes J3487 and J3488, we assigned HCPCS code 
Q2051 to separate payment status indicator ``K,'' effective July 1, 
2013. Because HCPCS codes J3487 and J3488, which were assigned to two 
separate APCs, were replaced with only one code, we assigned HCPCS code 
Q2051 to a new APC to maintain data consistency for future rulemaking. 
Specifically, HCPCS code Q2051 was

[[Page 74971]]

assigned to APC 1356 (Zoldedronic acid 1 mg), effective July 1, 2013.
    Of the 10 Level II HCPCS codes that were made effective July 1, 
2013, we did not recognize for separate payment the following 5 HCPCS 
codes: HCPCS codes K0008, K0013, and K0900, which were assigned to 
status indicator ``Y'' (Non-implantable durable medical equipment; not 
paid under OPPS); HCPCS code Q2033, which was assigned to status 
indicator ``L'' (Not paid under OPPS; paid at reasonable cost); and 
HCPCS code Q0090, which was assigned to status indicator ``E'' (Not 
payable/Non-covered by Medicare; not paid under OPPS).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we solicited 
public comments on the proposed status indicators and APC assignments 
for the HCPCS codes that were listed in Table 13 of the proposed rule 
and now appear in Tables 22 and 23 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 C9131, K0008, K0013, 
K0900, Q0090, Q2033, Q2050, and Q2051. Therefore, we are adopting as 
final, without modification, our proposal to assign these eight Level 
II HCPCS codes to the APCs and status indicators as proposed for CY 
2014.
    We received several public comments on HCPCS codes C9736 and G0460, 
which are addressed in section III.C. of this final rule with comment 
period.
    Table 23 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2013, with their final status 
indicators and APC assignments for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.320


[[Page 74972]]


    We note that the HCPCS Workgroup replaced HCPCS codes C9131, Q0090, 
and Q2051 with HCPCS codes J9354, J7301, and J3489, respectively, 
effective January 1, 2014. Because HCPCS code J9354 describes the same 
drug currently described by HCPCS code C9131, this drug will continue 
its pass-through status in CY 2014. Therefore, we are assigning HCPCS 
code J9354 to the same APC and status indicator as its predecessor 
HCPCS code, which shares the same dosage descriptor, as shown in Table 
23. We note that because HCPCS code Q2051 is assigned to status 
indicator ``K'' (Nonpass-Through Drugs; Paid under OPPS; Separate APC 
payment), its replacement HCPCS code J3489, which describes the same 
item as its predecessor code, will also continue its nonpass-through 
status and APC assignment in CY 2014. In addition, because HCPCS code 
Q0090 is assigned to status indicator ``E'' to indicate that this drug 
is not covered by Medicare, its replacement HCPCS code J7301 will also 
continue its noncovered status in CY 2014. We note that two HCPCS 
codes, specifically, HCPCS codes C9736 and Q2033, will be replaced with 
CPT codes 0336T and 90673, respectively, effective January 1, 2014. As 
noted in Table 23, CPT code 90673, which is the replacement code for 
HCPCS code Q2033, will be assigned to status indicator ``L.'' However, 
CPT code 0336T, which replaces HCPCS code C9736, will be assigned to 
APC 0174. We refer readers to section III.C.10.b. of this final rule 
with comment period for further discussion of the APC assignment of CPT 
code 0336T, which replaced HCPCS code C9736.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), 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 2013 quarterly 
update, there were no new Category I CPT vaccine codes. However, we 
note that Level II HCPCS code Q2033, which is listed in Tables 22 and 
23, describes a flu vaccine that was effective July 1, 2013, and is 
separately payable by Medicare at reasonable cost.
    Through the July 2013 OPPS quarterly update CR (Transmittal 2718, 
Change Request 8338, dated June 7, 2013), we allowed separate payment 
for four of the six new Category III CPT codes effective July 1, 2013. 
Specifically, as displayed in Table 24 (also shown in Table 14 of the 
CY 2014 OPPS/ASC proposed rule), we allowed separate payment for 
Category III CPT codes 0330T, 0331T, 0332T, and 0334T. We did not 
recognize for separate payment Category III CPT code 0329T because the 
device associated with this procedure has not received FDA approval. In 
addition, we did not recognize for separate payment Category III CPT 
code 0333T because this procedure is not covered by Medicare. As listed 
in Table 24, both CPT codes 0329T and 0333T were assigned to status 
indicator ``E'' (Not payable/Non-covered by Medicare; not paid under 
OPPS).
    We received public comments on several of the Category III CPT 
codes that were implemented in July 2013, specifically on CPT codes 
0330T, 0331T, 0332T, and 0334T, which are addressed in section III.C. 
of this final rule with comment period. Table 24 below lists the 
Category III CPT codes that were implemented in July 2013, along with 
their final status indicators, APC assignments, and payment rates for 
CY 2014.

[[Page 74973]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.322


    In the CY 2014 OPPS/ASC proposed rule (78 FR 43588 through 43590), 
we proposed to continue our process of soliciting public comments on 
our status indicators and APC assignments for the CPT/HCPCS codes 
effective April 1 and July 1. For the CY 2014 update, we solicited 
public comments on the CY 2014 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, 2013, and 
July 1, 2013, through the respective OPPS quarterly update CRs. These 
codes were listed in Tables 12, 13, and 14 of the proposed rule. We 
proposed to finalize their status indicators and their APC assignments 
and payment rates, if applicable, in this CY 2014 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, 
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 13 and 14, 
respectively, of the proposed rule. We proposed to incorporate these 
codes into Addendum B to this CY 2014 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 2013 
OPPS update CR and displayed in Table 12 were included in Addendum B to 
the proposed rule (which is available via the Internet on the CMS Web 
site), where their proposed CY 2014 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 2013 or July 2013 
OPPS update CR can be found in Tables 21, 23, and 24, or 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 Were Effective October 1, 
2013 and New CPT and Level II HCPCS Codes That Will Be Effective 
January 1, 2014 for Which We Are Soliciting Public Comments in This CY 
2014 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 Workgroup Web site (for Level II HCPCS codes) 
and the AMA Web site (for CPT codes), and also through the January OPPS 
quarterly update CRs. In the past, we also have released new Level II

[[Page 74974]]

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 2014, these codes are flagged with comment indicator ``NI'' in 
Addendum B to this 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, 2014, are flagged with comment indicator ``NI'' 
in Addendum B to this 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 final rule with comment period for 
the next calendar year's OPPS/ASC update. In the CY 2014 OPPS/ASC 
proposed rule (78 FR 43590), we proposed to continue this process for 
CY 2014. Specifically, for CY 2014, we proposed to include in Addendum 
B to this CY 2014 OPPS/ASC final rule with comment period the new 
Category I and III CPT codes effective January 1, 2014 (including the 
Category III CPT codes that were released by the AMA in July 2013) that 
would be incorporated in the January 2014 OPPS quarterly update CR and 
the new Level II HCPCS codes, effective October 1, 2013, or January 1, 
2014, that would be released by CMS in its October 2013 and January 
2014 OPPS quarterly update CRs. As proposed, in this final rule with 
comment period, the October 1, 2013 and January 1, 2014 codes are 
flagged with comment indicator ``NI'' in Addendum B to this CY 2014 
OPPS/ASC final rule with comment period to indicate that we have 
assigned them an interim OPPS payment status for CY 2014. 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 2015 OPPS/ASC final rule 
with comment period.
    For the CY 2014 update, we are finalizing our proposal to flag new 
Level II HCPCS codes that become effective October 1, 2013, and new CPT 
and Level II HCPCS codes that become effective January 1, 2014 with 
comment indicator ``NI'' in Addendum B to this CY 2014 OPPS/ASC final 
rule with comment period to indicate that these codes have been 
assigned an interim OPPS payment status for CY 2014. 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 
2015 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 also have developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to, and supportive of, performing the main independent 
procedures or furnishing the primary and complete services. Therefore, 
we do not make separate payment for these packaged items or services. 
In general, according to the regulations at Sec.  419.2(b), packaged 
items and services include, but are not limited to:
    (1) Use of an operating suite, procedure room, or treatment room;
    (2) Use of recovery room;
    (3) Use of an observation bed;
    (4) Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies and equipment; surgical 
dressings; and devices used for external reduction of fractures and 
dislocations;
    (5) Supplies and equipment for administering and monitoring 
anesthesia or sedation;
    (6) Intraocular lenses (IOLs);
    (7) Incidental services such as venipuncture;
    (8) Capital-related costs;
    (9) Implantable items used in connection with diagnostic X-ray 
tests, diagnostic laboratory tests, and other diagnostic tests;
    (10) Durable medical equipment that is implantable;
    (11) Implantable prosthetic devices (other than dental) which 
replace all or part of an internal body organ (including colostomy bags 
and supplies directly related to colostomy care), including replacement 
of these devices;
    (12) Costs incurred to procure donor tissue other than corneal 
tissue.
    Significant revisions to the regulations at Sec.  419.2(b) were 
proposed. Further discussion of our packaging proposals was included in 
section II.A.3. of the proposed rule (78 FR 43568 through 43575).
    In CY 2008, we implemented composite APCs to provide a single 
payment for groups of services that are typically performed together 
during a single clinical encounter and that result in the provision of 
a complete service (72 FR 66650 through 66652). Under the CY 2013 OPPS 
(77 FR 68243 through 68258), we provided composite APC payments for 10 
categories of services:
    (1) Mental Health Services (APC 0034);
    (2) Cardiac Electrophysiologic Evaluation and Ablation (APC 8000);
    (3) Low Dose Rate (LDR) Prostate Brachytherapy (APC 8001);
    (4) Level I Extended Assessment & Management Composite (APC 8002);
    (5) Level II Extended Assessment & Management Composite (APC 8003);
    (6) Ultrasound (APC 8004);
    (7) CT and CTA without Contrast (APC 8005);
    (8) CT and CTA with Contrast (APC 8006);
    (9) MRI and MRA without Contrast Composite (APC 8007); and
    (10) MRI and MRA with Contrast Composite (APC 8008).
    Further discussion of composite APCs is included in section 
II.A.2.f. 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 relative payment weight represents the hospital cost of the 
services included in that APC, relative to the hospital cost of the 
services included in new proposed APC 0634 (Hospital Clinic Visits). 
The APC relative payment weights are scaled to

[[Page 74975]]

new APC 0634 because it is the hospital clinic visit APC and because 
clinic visits are among the most frequently furnished services in the 
hospital outpatient setting. We refer readers to section VII. of the 
proposed rule and this final rule with comment period for further 
discussion of the establishment of new APC 0634.
    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 Panel 
recommendations for specific services for the CY 2014 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''). 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 of 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 criterion to determine 
when a HCPCS code is significant for purposes of the 2 times rule was 
established 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 2014 OPPS/ASC 
proposed rule (78 FR 43592), 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 2014.
    In the CY 2014 OPPS/ASC proposed rule, we identified APCs with 2 
times rule violations, 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 2014 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 HCPCS 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 2014 included in the proposed rule are related 
to changes in costs of services that were observed in the CY 2012 
claims data newly available for CY 2014 ratesetting. We also proposed 
changes to the status indicators for some HCPCS codes that were not 
specifically and separately discussed in the CY 2014 OPPS/ASC proposed 
rule. In these cases, we proposed to change the status indicators for 
some HCPCS 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 2014. Addendum B to the 
CY 2014 OPPS/ASC proposed rule identified with comment indicator ``CH'' 
those HCPCS codes for which we proposed a change to the APC assignment 
or status indicator, or both, that were initially assigned in the April 
2013 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 to this 
final rule with comment period (available via the Internet on the CMS 
Web site) identifies with the ``CH'' comment indicator the final CY 
2014 changes compared to the HCPCS codes' status as reflected in the 
October 2013 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 2014, 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;
     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).
    For the CY 2014 OPPS/ASC proposed rule, the list of 10 APCs that 
appeared in Table 15 of the CY 2014 OPPS/ASC proposed rule (78 FR 
43592) that were excepted from the 2 times rule were based on claims 
data for dates of service between January 1, 2012, and December 31, 
2012, that were processed before January 1, 2013. For this final rule 
with comment period, we used claims data for dates of service between 
January 1, 2012, and December 31, 2012, that were processed on or 
before June 30, 2013 and updated CCRs, if available. Therefore, after 
considering the public comments we received on the CY 2014 OPPS/ASC 
proposed rule and making changes to APC assignments based on those 
comments, we analyzed the CY 2012 claims data used for this final rule 
with comment period to identify the APCs with 2 times rule violations. 
Based on the final CY 2012 claims data, we found 10 APCs with 2 times 
rule

[[Page 74976]]

violations, which is the same number of APCs that violated the 2 times 
rule in the proposed rule. We applied the criteria as described earlier 
to identify the APCs that are exceptions to the 2 times rule for CY 
2014, and identified six new APCs that meet the criteria for exception 
to the 2 times rule for this final rule with comment period, but that 
did not meet the criteria using proposed rule claims data. 
Specifically, we found that the following six new APCs violated the 2 
times rule: APC 0066 (Level I Stereotactic Radiosurgery); APC 0067 
(Level II Stereotactic Radiosurgery); APC 0193 (Level V Female 
Reproductive Procedures); APC 0342 (Level I Pathology); APC 0370 
(Multiple Allergy Tests); and APC 0634 (Hospital Clinic Visits).
    After consideration of the public comments we received and our 
review of the CY 2012 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 proposal to except 4 of the proposed 10 original APCs from the 2 
times rule for CY 2014, specifically, APCs 0057, 0272, 0330, and 0690. 
In contrast, we are not finalizing our proposal to except 6 of the 
proposed 10 original APCs from the 2 times rule, specifically, APCs 
0060 (Manipulation Therapy), 0075 (Level V Endoscopy Upper Airway), 
0105 (Repair/Revision/Removal of Pacemakers, AICDs, or Vascular 
Devices), 0148 (Level I Anal/Rectal Procedures), 0278 (Diagnostic 
Urography), and 0402 (Level II Nervous System Imaging). Our data 
analysis for this final rule with comment period revealed that these 
six APCs no longer violate the 2 times rule. Table 25 below lists 10 
APCs that we are excepting from the 2 times rule for CY 2014 based on 
the criteria above and a review of updated claims data. 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. The geometric mean costs for hospital outpatient 
services for these and all other APCs that were used in the development 
of this final rule with comment period can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
[GRAPHIC] [TIFF OMITTED] TR10DE13.323

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services
a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)
    We created HCPCS code C9733 (Non-ophthalmic fluorescent vascular 
angiography (FVA)), effective April 1, 2012, for a service that became 
known to us through the new technology APC application process. We 
assigned HCPCS code C9733 to APC 0397 (Vascular Imaging), which had a 
CY 2012 payment rate of $154.87 and a status indicator of ``Q2.'' The 
``Q2'' status indicator shows that payment for the service will be 
packaged in the APC payment if billed on the same date of service as a 
HCPCS code assigned status indicator ``T''; and in all other 
circumstances, a separate APC payment for the service will be made. We 
maintained the assignment of HCPCS code C9733 to APC 0397 for CY 2013, 
which has a payment rate of $330.97, and continued the assignment of 
status indicator ``Q2.''
    Comment: One commenter objected to the continued assignment of 
status indicator ``Q2'' to the service described by HCPCS code C9733, 
as well as packaging payment for the service as a result of the breast 
reconstruction surgery primary code being included in a comprehensive 
APC, because the commenter believed that both of these proposed 
policies would result in packaging the payment for the service 
described by HCPCS code C9733. The commenter stated that packaging 
payment for a service or item is only appropriate when the cost of the 
service or item can be taken into account in establishing the payment 
rate for the separately paid services. The commenter pointed out that 
there were no single claims reporting HCPCS code C9733 in the claims 
data used for the proposed rule ratesetting, and asserted that, because 
HCPCS code C9733 described a new service with no single claims, payment 
should not be packaged until several years after the code's creation, 
when there will be sufficient claims data. The commenter further 
asserted that the proposed packaging payment for the service described 
by HCPCS code C9733 with payment for CPT code 19357 (Breast 
reconstruction, immediate or delayed, with tissue expander, including 
subsequent expansion) does not comport with CMS'

[[Page 74977]]

principle that packaging payment for services should reflect how the 
service is reported. The commenter stated that its disagreement with 
the packaging proposals is supported by CMS' acknowledgement that none 
of the 10 claims reporting HCPCS code C9733 were identified as single 
claims and, according to an analysis that the commenter conducted, 
HCPCS code C9733 was reported in combination with CPT code 19357 
approximately 90 percent of the time. The commenter also believed that 
packaging payment for HCPCS code C9733 contradicts the principle that 
CMS should be able to map the costs of the packaged service to the 
separately payable services with which it is performed.
    Response: We disagree with the commenter that payment for the 
service described by HCPCS code C9733 should not be packaged when it is 
used intraoperatively on the same date of service as the primary 
procedure. While it is true that HCPCS code C9733 is a relatively new 
service, the commenter stated that its own data analysis shows that the 
service is being reported in combination with CPT code 19357 
approximately 90 percent of the time. Therefore, payment for the 
service described by HCPCS code C9733 is being taken into account in 
establishing the payment rate for the separately paid services with 
which it is performed. In addition, we believe that packaging payment 
for the service described by HCPCS code C9733 does reflect how the 
service is furnished and how it is being reported on a claim in 
combination with CPT code 19357. Although none of the 10 claims 
available for the proposed rule ratesetting were single claims, the 
services reported on the 10 claims appear to have been mapped to 
appropriate separately paid procedures. The procedure described by 
HCPCS code C9733 is often performed intraoperatively in combination 
with a number of primary procedures, including facial reconstruction 
and reanimation, muscle flaps, trauma reconstruction, and digital and 
limb reattachment and, as the commenter stated, breast reconstruction, 
which appears to be the focus of the commenter's concern. In other 
words, there are a number of plastic and reconstructive surgical 
procedures with which the imaging procedure described by HCPCS code 
C9733 can be used, not just breast reconstruction surgery.
    While we proposed to maintain the assignment of HCPCS code C9733 to 
APC 0397, in this final rule with comment period, we are deleting APC 
0397 because of multiple 2 times rule violations in APC 0397 based on 
the final rule claims data. Once we removed the high-cost services from 
APC 0397, only several low-volume services remained in this APC, 
including HCPCS code C9733, which we reassigned to another APC. We have 
reassigned HCPCS code C9733 to APC 0263 (Level I Miscellaneous 
Radiology Procedures) for CY 2014, with a final rule geometric mean 
cost of approximately $319.
    After consideration of the public comment we received, we are 
finalizing our proposal to maintain the assignment of ``Q2'' status 
indicator to HCPCS code C9733. However, we are reassigning HCPCS code 
C9733 to APC 0263 when the service described by HCPCS code C9733 is 
performed and reported separately. Further discussion of comprehensive 
APCs is included in section II.A.2.e. of this final rule with comment 
period. However, we note that we are not implementing our comprehensive 
APC policy until CY 2015.
b. Subcutaneous Defibrillator (APC 0107)
    For CY 2014, we proposed to continue to assign CPT code 0319T 
(Insertion or replacement of subcutaneous implantable defibrillator 
system with subcutaneous electrode) to APC 0107 (Level I Implantation 
of Cardioverter-Defibrillators (ICDs)), for which we proposed a CY 2014 
geometric mean cost of approximately $25,447. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: Commenters objected to the proposed assignment of CPT code 
0319T to APC 0107 and requested that CMS reassign CPT code 0319T to APC 
0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)), for 
which we proposed a CY 2014 geometric mean cost of approximately 
$31,911. The commenters believed that CPT code 0319T is similar in 
clinical application and resource use to CPT code 33249 (Insertion or 
replacement of permanent pacing cardioverter-defibrillator system with 
transvenous lead(s), single or dual chamber), which is currently 
assigned to APC 0108.
    Response: We believe that the procedure described by CPT code 0319T 
is sufficiently clinically similar to the other procedures assigned to 
APC 0107. In addition, because we do not have CY 2012 claims data for 
CPT code 0319T for the CY 2014 ratesetting cycle, we cannot determine 
the resource costs for this procedure at this time. We expect to have 
claims data for CPT code 0319T in preparation for the CY 2015 
rulemaking cycle and will reevaluate the APC assignment of CPT code 
0319T at that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign CPT code 0319T to APC 0107, which has a final CY 2014 APC 
geometric mean cost of approximately $25,106.
c. Thrombolytic Therapy (APC 0621)
    For CY 2014, we proposed to continue to assign CPT code 37211 
(Transcatheter therapy, arterial infusion for thrombolysis other than 
coronary, any method, including radiological supervision and 
interpretation, initial treatment day) and CPT code 37212 
(Transcatheter therapy, venous infusion for thrombolysis other than 
coronary, any method, including radiological supervision and 
interpretation, initial treatment day) to APC 0621 (Level I Vascular 
Access Procedures), for which we proposed a CY 2014 geometric mean cost 
of approximately $866. (The proposed payment rate reflects the 
corrected proposed rate included in the September 6, 2013 OPPS Addendum 
B, which was posted on the CMS Web site.)
    Comment: One commenter objected to the proposed continued 
assignment of CPT codes 37211 and 37212 to APC 0621. The commenter 
stated that CPT codes 37211 and 37212, which both are assigned status 
indicator ``T,'' are often times performed in conjunction with CPT code 
75710 (Angiography, spinal selective, radiological supervision and 
interpretation) which is assigned status indicator ``Q2'' and is 
assigned to APC 0279 (Level II Angiography and Venography), for which 
we proposed a CY 2014 geometric mean cost of approximately $2,700. The 
commenter stated that, because CPT code 75710 is not separately paid 
when it appears on a claim in combination with other services assigned 
to status indicator ``T'' (such as CPT codes 37211 and 37212), 
providers receive significantly lower payment for CPT code 75710 when 
performed and reported in conjunction with CPT code 37211 or CPT code 
37212, compared to payment for the services when performed and reported 
separately, although significantly more resources are used. The 
commenter stated that payment for CPT codes 37211 and 37212 should not 
be packaged with payment for CPT code 75710 when the services described 
by CPT codes 37211 and 37212 are performed on the same date as CPT code 
75710.

[[Page 74978]]

    Response: We believe that the procedure described by CPT codes 
37211 and 37212 are sufficiently clinically similar to the other 
procedures assigned to APC 0621. In addition, CPT codes 37211 and 37212 
are new codes for CY 2013, and because we do not have claims data 
available for these two new CPT codes for CY 2013 ratesetting, we do 
not have a way to validate or substantiate the claims made by 
commenters. We expect to have claims data for CPT codes 37211 and 37212 
in preparation for the CY 2015 rulemaking cycle and will reevaluate the 
APC assignment of CPT codes 37211 and 37212 at that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign CPT codes 37211 and 37212 to APC 0621, which has a final CY 2014 
APC geometric mean cost of approximately $853.
d. Vascular Ligation (APCs 0091 and 0092)
    For CY 2014, we proposed to continue to assign CPT codes 36475 
(Endovenous ablation therapy of incompetent vein, extremity, inclusive 
of all imaging guidance and monitoring, percutaneous, radiofrequency; 
first vein treated) and 37191 (Insertion of intravascular vena cava 
filter, endovascular approach including vascular access, vessel 
selection, and radiological supervision and interpretation, 
intraprocedural roadmapping, and imaging guidance (ultrasound and 
fluoroscopy), when performed) to APC 0091 (Level II Vascular Ligation), 
which had a proposed payment rate of approximately $2,882.
    In addition, we proposed to continue to assign CPT code 36478 
(Endovenous ablation therapy of incompetent vein, extremity, inclusive 
of all imaging guidance and monitoring, percutaneous, laser; first vein 
treated) to APC 0092 (Level I Vascular Ligation), which had a proposed 
payment rate of approximately $2,047.
    (The proposed payment rates reflect the corrected proposed rates 
included in the September 6, 2013 OPPS Addendum B, which was posted on 
the CMS Web site.)
    Comment: One commenter stated that the CPT codes assigned to APCs 
0091 and 0092 do not meet the CMS requirement of clinical and cost 
homogeneity, and requested that CMS consider restructuring APCs 0091 
and 0092. The commenter requested that CMS review the clinical and cost 
characteristics of all the procedures assigned to these APCs and 
consider either combining APCs 0091 and 0092 or reassigning specific 
procedures to more appropriate APCs in order to establish clinical 
homogeneity. In particular, the commenter requested that CMS review the 
APC assignments for CPT codes 37191 and 36475 (assigned to APC 0091) 
and CPT code 36478 (assigned to APC 0092). The commenter stated that 
CPT code 37191 is not similar to the other procedures assigned to APC 
0091 because it is not a ligation procedure, and is the only procedure 
assigned to APC 0091 that requires an expensive implanted device. The 
commenter further stated that the cost associated with CPT code 37191 
is significantly higher than the cost of most of the other procedures 
assigned to APC 0091. The commenter also recommended that CPT codes 
36475 and 36478 be assigned to the same APC because they are nearly 
identical procedures. The commenter stated that the CPT clinical 
vignettes for CPT code 36475 (radiofrequency) and CPT code 36478 
(laser) show similarities between these two procedures, which further 
support the clinical homogeneity of these two procedures. The commenter 
believed that assigning both of these procedures to two different APCs, 
and maintaining a payment differential between CPT code 36475 and CPT 
code 36478, incentivizes providers to choose radiofrequency instead of 
laser, which is a clinically comparable procedure. The commenter 
believed that assigning the two procedures to the same APC would 
encourage providers to make treatment decisions based solely on 
clinical characteristics.
    Response: We appreciate the commenter's suggestions. We agree with 
the commenter's recommendations for reassignment of CPT codes 36475, 
36478, and 37191. With respect to CPT codes 36475 and 36478, we have 
further analyzed updated hospital outpatient claims data and determined 
that both procedures are comparable in terms of clinical homogeneity 
and resource costs and should be assigned to the same APC. Analysis of 
updated CY 2012 hospital outpatient claims data for the CY 2014 final 
rule shows a geometric mean cost of approximately $1,966 for CPT code 
36478, which is comparable to the geometric mean cost of approximately 
$2,382 for CPT code 36475. We also agree with the commenter that CPT 
code 37191 should be reassigned to another APC that is more appropriate 
based on the nature of the procedure. Based on our review of the 
existing vascular-related APCs and input from our medical advisors, we 
believe that CPT code 37191 would be more appropriately reassigned to 
APC 0093 (Vascular Reconstruction/Fistula Repair) because of the 
clinical homogeneity and similar resource costs of other procedures 
assigned to APC 0093.
    By accepting the commenter's recommendation to reassign CPT code 
37191 from APC 0091 to APC 0093, and after taking into consideration 
all of the procedures in APCs 0091 and 0092, we have determined that 
combining APCs 0091 and 0092 into one APC is appropriate. To accomplish 
this reconfiguration, we are establishing new APC 0219 (Vascular 
Ligation), which has a geometric mean cost of approximately $2,147. The 
geometric mean cost of new APC 0219 is based on the costs of all of the 
22 procedures assigned to APCs 0091 and 0092; the most significant cost 
among these 22 procedures ranged between $1,455 (for CPT code 37765) 
and $2,382 (for CPT code 36475). In addition, because of the 
reassignment of CPT code 37191 to APC 0093, we are modifying the title 
of APC 0093 to read: ``Vascular Reconstruction/Fistula Repair'' to 
appropriately describe all the procedures assigned to this APC.
    After further consideration of the public comment that we received, 
we are revising the APC assignment for CPT codes 36475, 36478, and 
37191. Specifically, we are reassigning CPT codes 36475 and 36478 to 
new APC 0219, reassigning CPT code 37191 to APC 0093, and modifying the 
title of APC 0093 to read: ``Vascular Reconstruction/Fistula Repair''. 
The final CY 2014 geometric mean cost of APC 0219 is approximately 
$2,147, and approximately $2,857 for APC 0093. The final CY 2014 
payment rates for CPT codes 36475, 36478, and 37191 can be found in 
Addendum B to this CY 2014 OPPS/ASC final rule with comment period 
(which is available via the Internet on the CMS Web site).
2. Gastrointestinal Services
a. Fecal Microbiota Transplantation (APC 0340)
    For CY 2014, we proposed to continue to assign HCPCS code G0455 
(Preparation with instillation of fecal microbiota by any method, 
including assessment of donor specimen) to APC 0340 (Level I Minor 
Procedures), which had a proposed payment rate of approximately $74. 
Although the CPT Editorial Panel established CPT code 44705 
(Preparation of fecal microbiota for instillation, including assessment 
of donor specimen), effective January 1, 2013, to describe a fecal 
microbiota procedure, we did not recognize the

[[Page 74979]]

CPT code for payment under the OPPS. As we stated in the CY 2013 MPFS 
final rule with comment period (77 FR 69052), by policy, Medicare's 
payment for the preparation of the donor specimen would only be made if 
the specimen is ultimately used for the treatment of a beneficiary. 
Because of this policy, we believe that it was appropriate to bundle 
the preparation and instillation of fecal microbiota into one payable 
HCPCS code. Consequently, we established HCPCS code G0455, effective 
January 1, 2013, for Medicare reporting of the fecal microbiota 
procedure.
    Comment: One commenter stated that the CY 2013 payment rate of 
approximately $50 for HCPCS code G0455 is insufficient. The commenter 
further stated that this payment rate does not appear to recognize the 
patient preparation for the implantation or the instillation of the 
donor microbes, the supplies, or the overall work involved in providing 
this procedure. The commenter stated that if the microbiota 
instillation is performed via colonoscopy or esophagogastroduodenoscopy 
(EGD), the CY 2013 payment rate for the procedure does not include the 
cost of the endoscopic portion of the procedure. To pay appropriately 
for this procedure, the commenter recommended that CMS delete existing 
HCPCS code G0455 and replace it with three new HCPCS G-codes. The 
commenter suggested that the three recommended HCPCS G-codes 
differentiate the various preparation methods used in performing the 
procedure and be assigned accordingly to appropriate APCs. 
Specifically, the commenter recommended that one HCPCS G-code describe 
instillation by oronasogastric tube or enema, the second HCPCS G-code 
describe instillation by upper endoscopy, and the third HCPCS G-code 
describe instillation by colonoscopy.
    Response: We appreciate the commenter's suggestions. However, we 
believe that the existing HCPCS code G0455 appropriately describes the 
procedure for which Medicare should pay. Under Medicare, payment for 
the preparation of the donor specimen would only be made if the 
specimen is ultimately used for the treatment of a beneficiary because 
Medicare is not authorized to pay for the costs of any services not 
directly related to the diagnosis and treatment of a beneficiary. 
Because of this policy, we believe that it is appropriate to bundle the 
preparation and instillation of fecal microbiota under HCPCS code 
G0455.
    Based on our understanding of the procedure, we believe that HCPCS 
code G0455 is appropriately assigned to APC 0340 for CY 2014. Because 
this code was new for CY 2013, we expect to have claims data for HCPCS 
code G0455 for the CY 2015 ratesetting process. 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. We will reevaluate the status 
indicator and APC assignment for HCPCS code G0455 for the CY 2015 OPPS 
rulemaking cycle.
    After consideration of the public comment that we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign HCPCS code G0455 to APC 0340. The final CY 2014 geometric mean 
cost of HCPCS code G0455 is approximately $54. The final CY 2014 
payment rate for HCPCS code G0455 can be found in Addendum B to this CY 
2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site).
b. Transoral Incisionless Fundoplication (APC 0422)
    For CY 2014, we proposed to continue to assign CPT code C9724 
(Endoscopic full-thickness plication of the stomach using endoscopic 
plication system (eps); includes endoscopy) to APC 0422 (Level III 
Upper GI Procedures), which had a proposed payment rate of 
approximately $1,967. (The proposed payment rate reflects the corrected 
proposed rate included in the September 6, 2013 OPPS Addendum B, which 
was posted on the CMS Web site.)
    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. Of the three 
existing upper GI APCs, APC 0422 is the highest paying APC.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68333), we stated that a presenter at the August 2012 HOP Panel meeting 
requested that CMS either reassign HCPCS code C9724 from APC 0422 to 
New Technology APC 1565 (New Technology--Level XXVIII ($5000-$5500)) or 
create a new APC with a descriptor of ``Level IV Upper GI Procedures.'' 
We also stated that, based on the Panel's review and discussion of the 
claims data, we accepted the Panel's recommendation to continue to 
assign HCPCS code C9724 to APC 0422 for the CY 2013 update.
    Furthermore, because of concerns related to the descriptor of HCPCS 
code C9724, in that same final rule with comment period, we revised the 
long descriptor of HCPCS code C9724 to read ``Endoscopic full-thickness 
plication of the stomach using endoscopic plication system (eps); 
includes endoscopy,'' effective January 1, 2013, to accurately describe 
how the procedure is currently performed.
    At the August 2013 HOP Panel meeting, the same presenter at the 
August 2012 HOP Panel meeting requested that the Panel recommend that 
CMS reassign HCPCS code C9724 from APC 0422 to a new APC with a 
descriptor of ``Level IV Upper GI Procedures.'' The Panel did not make 
this recommendation at the meeting.
    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 does not adequately pay for the cost 
of performing the procedure. These commenters urged CMS to establish a 
new APC with a descriptor of ``Level IV Upper GI Procedures'' or 
``Level IV Upper GI Transoral Procedures,'' with a payment rate of 
between $3,000 and $5,000, and reassign HCPCS code C9724 and CPT code 
43257 to this newly created APC.
    Response: Because HCPCS code C9724 became effective April 1, 2005, 
we have several years of claims data. We examined the latest hospital 
outpatient claims data for HCPCS code C9724, based on claims data for 
dates of service between January 1, 2012, and December 31, 2012, that 
were processed on or before June 30, 2013. Our analysis of these latest 
claims data shows a geometric mean cost of approximately $6,801 based 
on 12 single claims (out of 73 total claims) for HCPCS code C9724. 
Overall, APC 0422 has a geometric mean cost of approximately $1,976, 
which is based on the seven procedures assigned to this APC. Of the 
seven procedures assigned to APC 0422, three procedures have geometric 
mean cost ranging between approximately $1,431 (for CPT code 43830) and 
approximately $2,042 (for CPT code 43228).
    APC 0422 consists of other procedures that manipulate the natural 
or an artificial entrance to the stomach, similar to the procedure 
described by TIF. We believe that maintaining the assignment of HCPCS 
code C9724 to

[[Page 74980]]

APC 0422 continues to be appropriate because several other procedures 
assigned to this APC are highly clinically similar to the procedure 
described by HCPCS code C9724 in that they are upper gastrointestinal 
endoscopy procedures. In particular, CPT code 43257 describes an upper 
gastrointestinal endoscopy procedure for the treatment of GERD, which 
is also the method and purpose of HCPCS code C9724. Consistent with our 
longstanding policy since the implementation of OPPS in 2000, we will 
reevaluate the APC assignment for every code during our annual 
rulemaking cycle.
    After consideration of the public comments that we received, we are 
finalizing our CY 2014 proposal, without modification, to maintain the 
assignment of HCPCS code C9724 to APC 0422. The final CY 2014 geometric 
mean costs for APC 0422 is approximately $1,976. The final CY 2014 
payment rate for HCPCS code C9724 can be found in Addendum B to this CY 
2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site).
3. Genitourinary Services
a. Percutaneous Renal Cryoablation (APC 0423)
    For CY 2014, we proposed to continue to assign CPT code 50593 
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to 
APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), with 
a proposed payment rate of approximately $4,114. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.) CPT code 
50593 became effective in CY 2008; however, the same service was 
previously described by CPT code 0135T (Ablation renal tumor(s), 
unilateral, percutaneous, cryotherapy). We note that, for CY 2007, 
based upon the APC Panel's recommendation made at its March 2006 
meeting, we reassigned CPT code 0135T (now CPT code 50593) from APC 
0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) to 
APC 0423, effective January 1, 2007.
    Comment: One commenter expressed concern that the proposed payment 
rate of approximately $4,114 for APC 0423, the APC to which CPT code 
50593 is assigned, is inadequate because the proposed payment rate does 
not accurately account for the costs incurred by hospitals in 
performing the procedure described by CPT code 50593. Further, the 
commenter indicated that hospitals are hesitant to perform this 
procedure because of the inadequate APC payment rate assigned to the 
procedure. The commenter asked CMS to designate CPT code 50593 as a 
``device-dependent'' procedure and require hospitals to submit claims 
with the appropriate device C-code, specifically, HCPCS code C2618 
(Probe, cryoablation). The commenter believed that the inadequacy of 
the proposed payment rate for APC 0423 is attributable to claims data 
that do not accurately capture the full costs of the procedure 
described by CPT code 50593. The commenter stated that approximately 
half of the single claims reporting CPT code 50593 do not contain the 
associated charge for the required device used in performing the 
service, specifically HCPCS code C2618 (Probe, cryoablation). The 
commenter stated that designating CPT code 50593 as a device-dependent 
procedure would result in a more accurate payment for the procedure and 
continued Medicare beneficiary access to percutaneous renal 
cryoablation in the HOPD.
    Response: We continue to believe that CPT code 50593 is 
appropriately assigned to APC 0423 based on clinical and resource 
similarities compared to other procedures also proposed for assignment 
to APC 0423 for CY 2014. As we stated in the CY 2007 OPPS final rule 
with comment period (71 FR 68049 through 68050), the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66709), the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68611), the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60444), and the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71910), we initially revised the 
APC assignment for the percutaneous renal cryoablation procedure from 
APC 0163 to APC 0423 in CY 2007 based on the APC Panel's 
recommendation. In addition, based on our CY 2012 claims data, the 
resource use associated with CPT code 50593 is comparable to the other 
procedures assigned to APC 0423. Specifically, our latest hospital 
outpatient claims data shows that the geometric mean cost for CPT code 
50593, based on 667 single claims (out of 1,357 total claims), is 
approximately $5,047. Overall, APC 0423 has a geometric mean cost of 
approximately $4,121, which is based on claims data for the eight 
procedures assigned to this APC. Of the eight procedures, six 
procedures have the most significant geometric mean cost, ranging 
between approximately $3,117 (for CPT code 47511) and approximately 
$5,047 (for CPT code 50593). Based on our latest claims data, and the 
clinical homogeneity and resource similarity of the procedure described 
by CPT code 50593 to the other procedures assigned to APC 0423, we 
believe that CPT code 50593 is appropriately assigned to APC 0423.
    Moreover, we disagree with the commenter's assertion that hospitals 
are reluctant to perform this procedure because of the inadequate 
payment rate. We believe that the payment rate for APC 0423, the APC to 
which CPT code 50593 is assigned, is sufficient to ensure Medicare 
beneficiary access to this service.
    With regard to the commenter's request to designate CPT code 50593 
as a device-dependent procedure in an APC, we do not agree that CPT 
code 50593 should be designated as a device-dependent procedure. We do 
not identify individual HCPCS codes as device-dependent HCPCS codes 
under the OPPS. Rather, we first consider the clinical and resource 
characteristics of a procedure and determine the most appropriate APC 
assignment. When we determine that we should assign a procedure to an 
APC that is device-dependent, based on whether that APC has been 
historically identified under the OPPS as having very high device 
costs, we then consider the implementation of device edits, as 
appropriate. We again note that the identification of device-dependent 
APCs was particularly important in the early years of the OPPS when 
separate pass-through payment for many implantable devices expired. At 
that time, a variety of methodologies to package the costs of those 
devices into procedural APCs was utilized over several years to ensure 
appropriate incorporation of the device costs into the procedure 
payments. At this point in time, hospitals have significantly more 
experience reporting HCPCS codes for packaged and separately payable 
items and services under the OPPS and the payment groups are more 
mature. We believe that our standard ratesetting methodology typically 
results in appropriate payment rates for new procedures that utilize 
devices, as well as those that do not use high-cost devices. In recent 
years, we have not encountered circumstances whereby we have had to 
establish new device-dependent APCs because we were not able to 
accommodate the clinical and resource characteristics of a procedure by 
assigning it to an existing APC (whether device-dependent or non-
device-dependent), and the procedure described by CPT code 50593 is no 
exception.
    While all of the procedures assigned to APC 0423 require the use of

[[Page 74981]]

implantable devices, for many of the procedures, there are no Level II 
HCPCS codes that describe all of the technologies that may be used in 
the procedures. Therefore, it would not be possible for us to develop 
procedure-to-device edits for all of the CPT codes assigned to APC 
0423. Under the OPPS, there are many other procedures that require the 
use of implantable devices that, because they are assigned to OPPS APCs 
that are not device-dependent, do not have procedure-to-device edits 
applied, even if those claims processing edits would be feasible. We 
continue to believe that our payments for procedures that utilize high-
cost devices are appropriate for those services, even when those 
services are grouped with other procedures that either do not require 
the use of implantable devices or which utilize devices that are not 
described by specific Level II HCPCS codes. When reporting CPT code 
50593, we expect hospitals to also report the device HCPCS code C2618, 
which is associated with this procedure. We also remind hospitals that 
they must report all of the HCPCS codes that appropriately describe the 
items used to provide services, regardless of whether the HCPCS codes 
are packaged or paid separately. If hospitals use more than one probe 
in performing the procedure described by CPT code 50593, we expect 
hospitals to report this information on the claim and adjust their 
charges accordingly. Hospitals should report the number of cryoablation 
probes used to perform the procedure described by CPT code 50593 as the 
number of units of HCPCS code C2618, which describes these devices, 
with their charges for the probes. Since CY 2005, we have required 
hospitals to report device HCPCS codes for all devices used in 
procedures if there are appropriate HCPCS codes available. In this way, 
we can be confident that hospitals have included charges on their 
claims for costly devices used in procedures when they submit claims 
for those procedures. For further discussion of device-dependent edits, 
we refer readers to section II.A.2.d. of this CY 2014 OPPS/ASC final 
rule with comment period.
    Comment: One commenter requested that CMS revise the code 
descriptor for device HCPCS code C2618 consistent with how cryoablation 
probes are now classified by the medical industry. The commenter stated 
that since the implementation of the OPPS and the development of device 
descriptions, cryoablation probes have improved and these devices are 
now referred to as cryoablation needles. The commenter believed that 
modifying the description of HCPCS code C2618 will enable hospitals to 
appropriately report the use of the device when submitting claims to 
CMS and other payers.
    Response: Based on input from our medical advisors, we agree that a 
change in the description of HCPCS code C2618 is appropriate. 
Therefore, for the CY 2014 update, we are revising the description for 
HCPCS code C2618 from ``Probe, cryoablation'' to ``Probe/needle, 
cryoablation'' effective January 1, 2014.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign CPT code 50593 to APC 0423, which has a final CY 2014 geometric 
mean cost of approximately $4,121. In addition, we are revising the 
code descriptor for HCPCS code C2618 to read: ``Probe/needle, 
cryoablation'' effective January 1, 2014. The final CY 2014 payment 
rate for CPT code 50593 can be found in Addendum B to this CY 2014 
OPPS/ASC final rule with comment period (which is available via the 
Internet on the CMS Web site).
b. Anoscopy With Directed Submucosal Injection (APC 0150)
    We created HCPCS code C9735 (Anoscopy; with directed submucosal 
injection(s), any substance) effective April 1, 2013, and assigned the 
code to APC 0150 (Level IV Anal/Rectal Procedures) for CY 2013, which 
has a payment rate of $2,365.97. The procedure described by HCPCS code 
C9735 involves injection of a bulking agent, L8605 (Injectable bulking 
agent dextranomer/hyaluronic acid copolymer implant, anal canal, 1 ml, 
includes shipping and necessary supplies). For CY 2014, we proposed to 
maintain the assignment of HCPCS code C9735 to APC 0150, with a 
proposed payment rate of approximately $2,520. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: One commenter believed that the proposed assignment of 
HCPCS code C9735 to APC 0150 is inappropriate. The commenter stated 
that the bulking agent used in the performance of the procedure 
described by HCPCS code C9735 costs $4,900 for the 4 mL required for 
the injections, and that the total cost of the procedure described by 
HCPCS code C9735 is more than the proposed payment rate of 
approximately $2,519 for APC 0150. The commenter recommended creating a 
new Level V Anal/Rectal Procedures APC, composed of HCPCS code C9735, 
and two other procedures, CPT code 46762 (Sphincteroplasty, anal, for 
incontinence, adult; implantation artificial sphincter), and CPT code 
0184T (Excision of rectal tumor, transanal endoscopic microsurgical 
approach (ie, TEMS), including muscularis propria (ie, full 
thickness)). The commenter stated that the procedure described by CPT 
code 46762 is clinically similar to the procedure described by HCPCS 
code C9735 because both procedures involve implantation of a product to 
treat fecal incontinence, and that the procedure described by HCPCS 
code C9735 is similar to the procedure described by CPT code 0184T 
because both procedures involve new technology with significant 
procedure costs.
    Alternatively, the commenter recommended assigning HCPCS code C9735 
to New Technology APC 1526, with a CY 2014 proposed payment rate of 
approximately $4,250.
    Response: HCPCS code C9735 was created effective April 1, 2013. 
Therefore, we do not have claims data on this procedure at this time. 
Our longstanding policy is to wait until claims data are available on a 
new procedure before reassigning the procedure to another clinical APC. 
We do not agree with the commenter that creating a Level V Anal/Rectal 
Procedures APC is warranted at this time. The three codes recommended 
for assignment to such an APC, all of which are currently assigned to 
the Level IV Anal/Rectal Procedures APC, are low volume or no volume 
services. According to our CY 2012 claims data, CPT code 0184T has 104 
single frequency claims, CPT code 46762 has 8 single claims, and HCPCS 
code C9735 has no claims volume. The low volume of claims for such an 
APC would contribute to APC cost and payment volatility. Regarding the 
commenter's recommendation to assign HCPCS code C9735 to a New 
Technology APC, we believe that HCPCS code C9735 is clinically similar 
to the other services assigned to APC 0150, which includes another 
anoscopy service, and, therefore, APC 0150 is an appropriate APC 
assignment for HCPCS code C9735. Based on our established OPPS 
ratesetting methodology, we will review the APC assignment for HCPCS 
code C9735 once we have OPPS claims data for this service during our 
annual OPPS update process. Therefore, we are finalizing our proposal 
to maintain the assignment of HCPCS code C9735 to APC 0150 for CY 2014. 
The final CY 2014 geometric mean cost for APC 0150 is approximately 
$2,510.

[[Page 74982]]

4. Musculoskeletal Services
a. Arthroplasty (APC 0425)
    APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) 
contains arthroplasty procedures as well as osseointegrated implant 
procedures. For CY 2014, we proposed to convert APC 0425 to a 
comprehensive APC, with a proposed geometric mean cost of approximate 
$9,939. (The proposed payment rate reflects the corrected proposed rate 
included in the September 6, 2013 OPPS Addendum B, which was posted on 
the CMS Web site.)
    Comment: One commenter requested that CMS review the current 
composition of APC 0425 for clinical homogeneity and resource cost 
cohesion, including the newly added adjunctive costs that would result 
from converting APC 0425 to a comprehensive APC. The commenter 
recommended that CMS remove the following osseointegrated implant 
procedure codes from APC 0425 and assign them to a more clinically 
appropriate APC: CPT code 69714 (Implantation, osseointegrated implant, 
temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; without mastoidectomy); CPT code 69715 
(Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; with mastoidectomy); CPT code 69717 (Replacement (including 
removal of existing device), osseointegrated implant, temporal bone, 
with percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy); and CPT code 69718 (Replacement 
(including removal of existing device), osseointegrated implant, 
temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; with mastoidectomy).
    Response: In response to the commenter's request, we have again 
reviewed the composition of APC 0425 for clinical and resource 
homogeneity. Although we are not making comprehensive APCs effective 
until CY 2015, the proposed procedural composition of APC 0425 is the 
same whether this APC is a comprehensive APC or not. We found in our 
review that the clinical and resource composition of proposed APC 0425 
is appropriate because all of the procedures assigned to the APC 
involve surgical procedures that use high-cost devices, including the 
osseointegrated device procedures represented by CPT codes 69714, 
69715, 69717, and 69718. Therefore, we do not believe that it is 
necessary to reconfigure the proposed APC 0425.
    After consideration of the public comment we received, we are 
finalizing the proposed composition of APC 0425 for CY 2014 with the 
modification that APC 0425 will not be made a comprehensive APC until 
CY 2015. The final CY 2014 geometric mean cost of APC 0425 is 
approximately $9,766.
b. Joint Stabilization (APC 0052)
    The CPT Editorial Panel created CPT Code 0334T (Sacroiliac joint 
stabilization for arthrodesis, percutaneous or minimally invasive 
(indirect visualization), includes obtaining and applying autograft or 
allograft (structural or morselized) when performed, includes image 
guidance when performed (eg., CT or fluoroscopic)), effective July 1, 
2013. For CY 2013, we assigned CPT code 0334T to APC 0208 (Laminotomies 
and Laminectomies) with a payment rate of $3,758.59. For CY 2014, we 
proposed to maintain the assignment of CPT code 0334T to APC 0208, with 
a proposed payment rate of approximately $4,109. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: A few commenters objected to our proposed assignment of 
CPT code 0334T to APC 0208, and stated that APC 0208 is not an 
appropriate assignment for CPT code 0334T either in terms of resources 
or clinical homogeneity. The commenters stated that the proposed 
payment rate for APC 0208 is insufficient to cover the approximately 
$10,500 in implant costs. The commenters further stated that the other 
procedures assigned to APC 0208 do not have appreciable device costs. 
One commenter performed a cost analysis on claims reporting CPT code 
27280 (Arthrodesis, sacroiliac joint (including obtaining graft)), the 
CPT code that would have been used for minimally invasive Sacroiliac 
(SI) fusion procedures in CY 2012, the year used for the CY 2014 
ratesetting. Based on the commenter's analysis, 38 hospitals submitted 
outpatient claims reporting CPT code 27280. However, no claims were 
used for CY 2014 Medicare ratesetting because CPT code 27280 was 
included on the OPPS inpatient only list for CY 2012 (and currently 
remains on this list). The commenter calculated a geometric mean cost 
of $14,733 based on these 38 claims. The commenter believed that these 
38 claims represented migration of the procedure described by CPT code 
27280, which uses minimally invasive techniques and implants, to the 
hospital outpatient setting. Some commenters also stated that other 
procedures assigned to APC 0208 are primarily used for decompressing 
the disc and neural structures, which differ in location and purpose 
from the procedure described by CPT code 0334T. The commenters 
recommended that CMS consider assigning CPT code 0334T to a New 
Technology APC with a payment rate range between $14,500 and $15,000, 
based on the commenter's analysis of the claims reporting CPT code 
27280; or creating a new clinical APC and assigning CPT code 0334T to 
that APC based on the cost estimate for performing the procedure 
described by CPT code 27280 because there are no other clinical APCs 
that are appropriate to assign CPT code 0334T.
    Response: We appreciate the commenters' suggestions. However, in 
regard to the commenter's cost analysis performed using the 38 CY 2012 
claims for CPT code 27280, we do not believe that these 38 claims 
likely represent the cost of performing the procedure described by CPT 
code 0334T. As the commenter stated, CPT code 27280 was listed as an 
inpatient only service for CY 2012, currently remains on the inpatient 
only list for CY 2013, and is proposed to remain on the inpatient only 
list for CY 2014. CPT code 27280 is used primarily to report open 
sacroiliac joint fusion procedures, rather than minimally invasive SI 
joint fusion procedures. Therefore, while some of the 38 claims may 
involve the minimally invasive techniques, we are not convinced that 
these claims represent minimally invasive techniques, but consist 
mainly of open SI joint fusion procedures, which are the primarily 
reported procedures for this code. Regarding the commenters' suggested 
option to create a new device pass-through category, we do not discuss 
the merits of OPPS pass-through status applications in our proposed or 
final rules. Regarding the commenters' recommended option to assign CPT 
code 0334T to a New Technology APC or to create a new clinical APC for 
CPT code 0334T, we agree with the commenters that there may be a more 
appropriate APC to which we could assign CPT code 0334T based on 
resource use and clinical homogeneity. However, we believe that CPT 
code 0334T can be appropriately assigned to an existing clinical APC, 
which is preferable because other clinically similar procedures 
populate the APC. The final geometric mean cost of APC 0208 is 
approximately $4,017. We agree that the resource use associated with 
the

[[Page 74983]]

procedure described by CPT code 0334T is likely to be greater than the 
resource use associated with the typical procedures assigned to APC 
0208. Therefore, we believe that a more appropriate initial APC 
assignment based on clinical and resource homogeneity for this new 
procedure is APC 0052 (Level IV Musculoskeletal Procedures Except Hand 
and Foot). APC 0052 includes several orthopedic fusion procedures that 
are clinically similar to the procedure described by CPT code 0334T, 
and we believe that it is appropriate clinically to assign CPT code 
0344T to APC 0052, which has a final geometric mean cost of 
approximately $6,530. In accordance with our longstanding policy, we 
will review the assignment of CPT code 0334T in a future annual OPPS 
update, when we have available claims data for ratesetting.
    After consideration of the public comments we received, we are not 
finalizing our CY 2014 proposal to maintain the assignment of CPT code 
0334T to APC 0208. Rather, for CY 2014, we are assigning CPT code 0334T 
to APC 0052, which has a final geometric mean cost of approximately 
$6,530.
5. Nervous System Services
a. Chemodenervation (APCs 0161 and 0204)
    CPT codes 64615 (Chemodenervation of muscle(s); muscle(s) 
innervated by facial, trigeminal, cervical spinal and accessory nerves, 
bilateral (e.g., for chronic migraine)) and 52287 (Cystourethroscopy, 
with injection(s) for chemodenervation of the bladder) both became 
effective January 1, 2013. For CY 2014, we proposed to continue to 
assign CPT code 52287 to APC 0161 (Level II Cystourethroscopy and Other 
Genitourinary Procedures), with a proposed payment rate of 
approximately $1,201. In addition, we proposed to continue to assign 
CPT code 64615 to APC 0204 (Level I Nerve Injections), with a proposed 
payment rate of approximately $214. (The proposed payment rates reflect 
the corrected proposed rates included in the September 6, 2013 OPPS 
Addendum B, which was posted on the CMS Web site.)
    Comment: One commenter requested that CMS reassign CPT code 64615 
from APC 0204 to APC 0206 (Level II Nerve Injections) because of the 
clinical similarity to the procedure described by CPT code 64613 
(Chemodenervation of muscle(s); neck muscle(s) (eg, for spasmodic 
torticollis, spasmodic dysphonia)), which is assigned to APC 0206. This 
commenter stated that the payment rate for APC 0204 does not adequately 
pay for the cost of providing the procedure. The commenter submitted 
this same request in response to the CY 2013 OPPS/ASC final rule with 
comment period.
    Response: We disagree with the commenter's assertion that the 
procedure described by CPT code 64615 is more similar to the procedure 
described by CPT code 64613. Based on the description of the procedure, 
the procedure described by CPT code 64615 is most similar to the 
procedure described by CPT code 64612 (Chemodenervation of muscle(s); 
muscle(s) innervated by facial nerve, unilateral (eg, for 
blepharospasm, hemifacial spasm)), which is assigned to APC 0204. The 
procedures described by CPT codes 64612 and 64615 both involve facial 
nerve muscles, whereas the procedure described by CPT code 64613 
involves the neck muscles. Consequently, we believe that CPT code 64615 
is appropriately assigned to APC 0204 based on its clinical homogeneity 
to CPT code 64612.
    We note that, in addition to the payment for the procedure, 
hospitals would receive separate payment for the drug 
onabotulinumtoxina, which is described by HCPCS code J0585 (Injection, 
onabotulinumtoxina, 1 unit), when the drug is administered during the 
procedure.
    Consistent with CMS' longstanding policy since the implementation 
of the OPPS in 2000, we evaluate, on an annual basis, all of the APC 
assignments for appropriateness. We note that because CPT code 64615 is 
a new code that became effective for CY 2013, we will have a full year 
of claims data available next year, and as with every HCPCS code or CPT 
code, we will reevaluate its APC assignment during the annual 
rulemaking cycle.
    Comment: One commenter requested that CMS reassign CPT code 52287 
from APC 0161 to APC 0162 (Level III Cystourethroscopy and Other 
Genitourinary Procedures). The commenter stated that the proposed APC 
assignment for CPT code 52287 is economically and clinically 
inappropriate. The commenter further stated that the procedure 
described by CPT code 52287 is more clinically similar to the procedure 
described by CPT code 52283 (Cystourethroscopy, with steroid injection 
into stricture), which is assigned to APC 0162. The commenter submitted 
this same request in response to the CY 2013 OPPS/ASC final rule with 
comment period.
    Response: APC 0161 consists of a variety of procedures, some of 
which describe cystourethroscopic procedures of the urethra and 
bladder. We believe that the procedure described by CPT code 52287 is 
more clinically similar to the other cystourethroscopic procedures 
assigned to APC 0161, such as the procedure described by CPT code 
52281, than to procedures assigned to APC 0162, such as the procedure 
described by CPT code 52287 as mentioned by the commenter. We also note 
that in addition to a payment for the procedure at the payment rate for 
APC 0161, hospitals also receive separate payment for the 
chemodenervation drug. For the CY 2014 update, the payment rate for APC 
0161 is approximately $1,205. As has been our practice since the 
implementation of the OPPS, we annually review all of the items and 
services within an APC group to determine, with respect to 
comparability of the use of resources, any 2 times rule violations. In 
making this determination, we review all claims data and determine 
whether we need to make changes to the current APC assignments for the 
following year. We will reevaluate the status indicator and APC 
assignment for CPT code 52287 for the CY 2015 OPPS rulemaking cycle.
    After consideration of the public comments received, we are 
finalizing our CY 2014 proposals, without modification, to continue to 
assign CPT code 64615 to APC 0204, and to continue to assign CPT code 
52287 to APC 0161. The final CY 2014 geometric mean costs for APCs 0204 
and 0161 are approximately $203 and $1,209, respectively.
b. Nerve Conduction Studies (APCs 0216 and 0218)
    For CY 2013, the AMA's CPT Editorial Panel established seven new 
CPT codes to describe nerve conduction tests, which were effective 
January 1, 2013. For CY 2014, we proposed to continue to assign CPT 
codes 95907, 95908, 95909, and 95910 to APC 0215 (Level I Nerve and 
Muscle Services), with a proposed payment rate of approximately $67. In 
addition, we proposed to reassign CPT codes 95911, 95912, and 95913 
from APC 0218 (Level II Nerve and Muscle Services) to APC 0215. The 
descriptors for these seven CPT codes and our proposed APC assignments 
are listed in Table 26 below.
    Comment: Some commenters expressed concern with the proposed APC 
assignments of CPT codes that describe the nerve conduction tests. The 
commenters stated that the proposed payment of $67 for APC 0215 is 
inadequate because it does not cover the

[[Page 74984]]

expenses associated with providing these services. The commenters urged 
CMS to reconsider the proposed APC assignments for CPT codes 95907 
through 95913, and suggested specific alternative APC assignments for 
these specific codes. Specifically, the commenters recommended the 
reassignment of CPT code 95907 from APC 0215 to APC 0218, the 
reassignment of CPT codes 95908, 95909, and 95910 from APC 0215 to APC 
0216 (Level III Nerve and Muscle Services), and the reassignment of CPT 
codes 95911, 95912, and 95913 from APC 0218 to APC 0216.
    We also received a comment in response to the CY 2013 OPPS/ASC 
final rule with comment period relating to these codes. The commenter 
stated that the CY 2013 OPPS payment rates for these new codes were 
significantly lower for these services when they were performed in the 
hospital outpatient setting compared to when they were performed in the 
physician office setting, and suggested that the lower payment rates 
would negatively impact beneficiary access to neurologic care.
    Response: After further consultation with our medical advisors, we 
agree with the commenters that a revision to the APC assignments for 
CPT codes 95907 through 95913 is necessary. Based on the nature of the 
procedures described by these codes and the additional information 
submitted to us by the commenters on the CY 2013 OPPS/ASC final rule 
with comment period and the CY 2014 OPPS/ASC proposed rule, we believe 
that the nerve conduction tests described by CPT codes 95908, 95909, 
95910, 95911, 95912, and 95913 would be more appropriately assigned to 
APC 0216. In addition, we believe that the nerve conduction test 
described by CPT code 95907 would be more appropriately assigned to APC 
0218.
    Therefore, after consideration of the public comments we received, 
we are revising our CY 2014 proposed APC reassignment of CPT codes 
95908, 95909, 95910, 95911, 95912, and 95913 from APC 0215 to APC 0216. 
In addition, we are revising our CY 2014 proposed APC reassignment of 
CPT code 95907 from APC 0215 to APC 0218. The final APC assignments for 
these codes, along with the final status indicators are listed in Table 
26 below. The final CY 2014 payment rates for CPT codes 95907 through 
95913 are included in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    We remind hospitals that, consistent with our longstanding policy 
since the implementation of OPPS in 2000, we will reevaluate the APC 
assignments for these codes in next year's rulemaking cycle. As has 
been our practice, we annually review all the items and services within 
an APC group to determine, with respect to comparability of the use of 
resources, if the geometric mean cost of the highest cost item or 
service within an APC group is more than 2 times greater than the 
geometric mean cost of the lowest cost item or service within that same 
group. In making this determination, we review our claims data and 
determine whether we need to make changes to the current APC 
assignments for the following year. We note that, because CPT codes 
95907 through 95913 became effective for CY 2013, we will not have 
applicable claims data available for these services for ratesetting 
until the CY 2015 rulemaking cycle.
[GRAPHIC] [TIFF OMITTED] TR10DE13.324

c. Parasympathetic Function and Sympathetic Function (APC 0215)
    In CY 2013, the AMA's Editorial Panel created two new codes to 
describe testing of parasympathetic and sympathetic functions of the 
autonomic nervous system at the same time, with and without use of 
passive tilt: CPT code 95943 (Simultaneous, independent, quantitative 
measures of both parasympathetic function and sympathetic function) and 
CPT code

[[Page 74985]]

95924 (Testing of autonomic nervous system function; combined 
parasympathetic and sympathetic adrenergic function testing with at 
least 5 minutes of passive tilt). For CY 2013, we assigned CPT code 
95943 to APC 0215 (Level I Nerve and Muscle Tests), which has a CY 2013 
payment rate of approximately $43. We also assigned comment indicator 
``NI'' to CPT code 95943 to indicate that the code was new for CY 2013 
with an interim APC assignment that was subject to public comment 
following the publication of the CY 2013 final rule with comment 
period. We assigned CPT code 95924 (Testing of autonomic nervous system 
function; combined parasympathetic and sympathetic adrenergic function 
testing with at least 5 minutes of passive tilt) to APC 0218 (Level II 
Nerve and Muscle Tests), which has a CY 2013 payment rate of 
approximately $80.
    Comment: One commenter who addressed the interim APC assignment of 
CPT code 95943 believed that the test described by CPT code 95943 is 
more similar in terms of clinical homogeneity and resource use to the 
services assigned to APC 0218, and requested that CMS reassign CPT code 
95943 to APC 0218 for CY 2014, which has a final rule geometric mean 
cost of approximately $128. APC 0215 has a final rule geometric mean 
cost of approximately $50. The commenter noted that the predecessor 
codes for CPT code 95943, CPT code 95921 (Testing of autonomic nervous 
system function; cardiovagal innervation (parasympathetic function)) 
and CPT code 95922 (Testing of autonomic nervous system function; 
vasomotor adrenergic innervation (sympathetic adrenergic function)), 
were assigned to APC 0218. In addition, the commenter stated that the 
test described by CPT code 95943 is almost identical to the test 
described by CPT code 95924, which is assigned to APC 0218. The 
commenter stated that, although the test described by CPT code 95924 is 
the only test that uses a tilt table, the monitor used to perform the 
test described by CPT code 95943 is more expensive than the monitor 
used to perform the test described by CPT code 95924.
    Response: We agree with the commenter that the service described by 
CPT code 95943 is clinically similar to the other services assigned to 
APC 0218, including its predecessor codes, CPT codes 95921 and 95922. 
Therefore, for CY 2014, we are reassigning CPT code 95943 from APC 0215 
to APC 0218.
    We will reconsider the APC assignments for this code once claims 
data are available, as part of our usual ratesetting methodology for CY 
2015.
d. Epidural Lysis (APCs 0203 and 0207)
    For CY 2013, CPT code 62263 (Epidural lysis, multiple sessions) and 
CPT code 62264 (Epidural lysis on single day) are assigned to APC 0203 
(Level IV Nerve Injections), with a payment rate of approximately $857. 
For CY 2014, we proposed to reassign CPT code 62264, which had a 
proposed rule geometric mean cost of approximately $874 from APC 0203 
(which had a proposed rule geometric mean cost of approximately $1,574) 
to APC 0207 (Level III Nerve Injections), which had a proposed rule 
geometric mean cost of approximately $687.
    Comment: One commenter objected to the reassignment of CPT code 
62264 from APC 0203 to APC 0207 asserting that the resources used to 
perform the procedures described by CPT codes 62263 and 62264 are the 
same and that CPT code 62263 is rarely used.
    Response: The geometric mean costs for performing the procedures 
described by CPT codes 62263 and 62264 were not the same for CY 2013: 
CPT code 62263 had a CY 2013 final rule geometric mean cost of 
approximately $1,406, and CPT code 62264 had a CY 2013 final rule 
geometric mean cost of approximately $876. The geometric mean costs of 
the procedures described by CPT codes 62263 and 62264 continued to 
differ by a similar magnitude for CY 2014: the CY 2014 proposed rule 
geometric mean cost of the procedure described by CPT code 62263 was 
approximately $1,492, while the CY 2014 proposed rule geometric mean 
cost of CPT code 62264 was approximately $874. However, for CY 2014, we 
determined that continuing to assign CPT code 62264 to APC 0203 would 
create a 2 times rule violation because the geometric mean cost of the 
APC increased from approximately $881 in CY 2013 to approximately 
$1,550 for CY 2014. To correct the 2 times rule violation, we proposed 
to reassign CPT code 62264 from APC 0203 to APC 0207, which has a final 
rule geometric mean cost of approximately $672.
    Based on updated claims data, the resources required to furnish the 
procedure described by CPT code 62264 (which has a final rule geometric 
mean cost of approximately $883) continue to be more similar to the 
resources required for services assigned to APC 0207 (which has a final 
rule geometric mean cost of approximately $672) than for services 
assigned to APC 0203 (which has a final rule geometric mean cost of 
approximately $1,550). Therefore, after consideration of the public 
comment we received, we are finalizing our proposal to reassign CPT 
code 62264 from APC 0203 to APC 0207 for CY 2014.
e. Cerebrospinal Shunt Reprogramming (APC 0692)
    For CY 2014, we proposed to reassign CPT code 62252 (Reprogramming 
of programmable cerebrospinal shunt), which had a proposed rule 
geometric mean cost of approximately $155, from APC 0691 (Level III 
Electronic Analysis of Devices), which had a proposed payment rate of 
approximately $274, to APC 0692 (Level II Electronic Analysis of 
Devices), which had a proposed payment rate of approximately $139. 
(These proposed rates reflect the corrected proposed rates included in 
the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web 
site.)
    Comment: One commenter asked CMS to explain the rationale for the 
proposed reassignment of CPT code 62252 from APC 0691 to APC 0692.
    Response: We proposed to reassign CPT code 62252 from APC 0691 to 
APC 0692 because it would violate the 2 times rule if we continued to 
assign it to APC 0691.
    After consideration of the public comment we received, we are 
finalizing our proposal to reassign CPT code 62252 from APC 0691 to APC 
0692, which has a final rule geometric mean cost of approximately $116. 
In addition, based on our review of the configuration of APCs 0691 and 
0692, we determined that we need to improve the clinical and resource 
homogeneity of these two APCs. In order to avoid several 2 times rule 
violations in these APCs, we are reassigning CPT code 95971 (Simple 
neurostimulator analysis), which has a final rule geometric mean cost 
of approximately $113 and CPT code 95972 (Complex neurostimulator 
analysis), which has a final rule geometric mean cost of approximately 
$145 from the higher Level III APC 0691 (which has a final rule 
geometric mean cost of approximately $277) to the lower Level II APC 
0692 (which has a final rule geometric mean cost of approximately 
$116). In addition, to avoid 2 times rule violations we are reassigning 
CPT code 62367 (Analysis of spinal fusion pump), which has a final rule 
geometric mean cost of approximately $202, CPT code 62368 (Analysis 
with reprogramming), which has a final rule geometric mean cost of 
approximately $216, CPT code 62369 (Analysis with reprogramming and 
fill), which has a final rule geometric mean cost of approximately 
$339, and CPT code 62370 (Analysis with reprogramming and fill 
requiring the skill of a physician or other qualified

[[Page 74986]]

health care professional), which has a final rule geometric mean cost 
of approximately $286, from the lower Level II APC 0692 to the higher 
Level III APC 0691, which has a final rule geometric mean cost of 
approximately $277.
6. Ocular Services
a. Retinal Prosthesis (APC 0672)
    For CY 2014, we proposed to continue to assign the category III CPT 
code 0100T (Placement of a subconjunctival retinal prosthesis receiver 
and pulse generator, and implantation of intra-ocular retinal electrode 
array, with vitrectomy), to APC 0672 (Level III Posterior Segment Eye 
Procedures), based on the similarity of the procedure to the other 
services currently assigned to APC 0672. The device implanted during 
this procedure (HCPCS code C1841 (Retinal prosthesis)) includes all 
internal and external components, and was granted pass-through status 
beginning October 1, 2013.
    Comment: One commenter requested that CMS reassign CPT code 0100T 
to a new APC with a payment rate of approximately $6,500, which the 
commenter estimated by combining the costs of procedures that the 
commenter believed to be components of CPT code 0100T. The commenter 
also asserted that the procedure described by CPT code 0100T is more 
complex than the other procedures assigned to APC 0672.
    Response: There are no claims data available for the procedure 
described by CPT code 0100T at this time. We estimate that more than 95 
percent of the overall cost of the procedure is associated with the 
device, which is paid separately as a pass-through payment device. 
Because the device used in the procedure described by CPT code 0100T is 
in pass-through payment status, we do not believe that it is 
appropriate to create and assign CPT code 0100T to a new APC at this 
time. We also believe that the procedure described by CPT code 0100T is 
similar to the other procedures assigned to APC 0672. While we 
acknowledge that the procedure described by CPT code 0100T is complex, 
the other services assigned to APC 0672, for example the procedure 
described by CPT code 67113 (Repair of complex retinal detachment), are 
also complex and involve many different techniques and require 
extensive resources.
b. Tear Film (APC 0230)
    For CY 2014, we proposed to assign the new Category III CPT code 
0330T (Tear film imaging, unilateral or bilateral, with interpretation 
and report), effective July 1, 2013, to APC 0230 (Level I Eye Tests and 
Treatments) based on the similarity of the service to the other 
services currently assigned to APC 0230.
    Comment: One commenter requested that CMS reassign CPT code 0330T 
to APC 0698 (Level II Eye Tests and Treatments). The commenter believed 
that the clinical and resource similarities of the service described by 
CPT code 0330T to the services currently assigned to APC 0698 warrant 
reassignment.
    Response: We believe that the service described by CPT code 0330T 
is most similar to the other imaging services assigned to APC 0230, 
such as corneal topography or eye photography. We currently have no 
claims data for this service for ratesetting purposes because CPT code 
0330T became effective July l, 2013, and is considered new. Once we 
have claims data for CPT code 0330T, we will reevaluate the APC 
assignment of CPT code 0330T in future years through our standard 
review process.
    After consideration of the public comment we received, we are 
finalizing our CY 2014 proposal to assign CPT code 0330T to APC 0230.
7. Imaging
a. Myocardial Sympathetic Innervation Imaging (APC 0398)
    Effective July 1, 2013, the AMA's CPT Editorial Panel created CPT 
code 0331T (Myocardial sympathetic innervation imaging, planar 
qualitative and quantitative assessment) and CPT code 0332T (Myocardial 
sympathetic innervation imaging, planar qualitative and quantitative 
assessment; with tomographic SPECT). For CY 2014, we proposed to assign 
CPT codes 0331T and 0332T to APC 0398 (Level I Cardiac Imaging), which 
had a proposed payment rate of approximately $397. (The proposed 
payment rate reflects the corrected proposed rate in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: Several commenters disagreed with the proposed assignment 
of CPT codes 0331T and 0332T to APC 0398. The commenters stated that 
the proposed payment rate for APC 0398 would not cover the cost of 
performing the new procedures. Some of these commenters emphasized that 
the proposed payment rate for APC 0398 is substantially lower than the 
cost of the radiopharmaceutical alone used in these procedures. The 
commenters believed that the assignment of CPT codes 0331T and 0332T to 
APC 0398 would impede Medicare beneficiaries' access to these new 
services. Some commenters suggested that CPT codes 0331T and 0332T be 
assigned to a New Technology APC with a payment rate that would better 
reflect the estimated costs for these procedures. Other commenters 
indicated that these new procedures are more comparable to the 
procedures assigned to APC 0377 (Level II Cardiac Imaging) in terms of 
clinical and resource similarities.
    Response: We do not agree with the commenters that CPT codes 0331T 
and 0332T should be assigned to a New Technology APC for CY 2014 
because we believe that these procedures are clinically similar to the 
other services assigned to either APC 0398 (Level I Cardiac Imaging) or 
APC 0377 (Level II Cardiac Imaging). However, because the estimated 
cost of the diagnostic radiopharmaceutical that is used in performing 
the procedures described by CPT codes 0331T and 0332T (HCPCS code 
A9582) is approximately $1,320 based on the drug cost statistics file 
for the proposed rule, we agree with the commenters that it is more 
appropriate in terms of resource similarity to assign CPT codes 0331T 
and 0332T to APC 0377 and, therefore, are modifying the codes' APC 
assignment for CT 2014.
    After consideration of the public comments we received, for CY 
2014, we are assigning CPT codes 0331T and 0332T to APC 0377, which has 
a final geometric mean cost of approximately $1,158.
b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)
    The pass-through payment status of HCPCS code A9584 (Iodine I-123 
ioflupane, diagnostic, per study dose up to 5 millicuries) expires on 
December 31, 2013. For CY 2014, payment for this radiopharmaceutical, 
typically referred to as DaTscan, will be packaged with payment for CPT 
code 78607 (Brain imaging; tomographic (SPECT)), which had a CY 2014 
proposed rule geometric cost of approximately $1,179). The procedure 
described by CPT code 78607 is used to assist in the evaluation of 
adult patients with suspected Parkinson's disease. For CY 2014, we 
proposed to continue to assign CPT code 78607 to APC 0402 (Level II 
Nervous System Imaging), which had a proposed payment rate of 
approximately $1,009. (The proposed payment rate reflects the corrected 
proposed rate in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.) We proposed to maintain the assignment of 
CPT code 78607 to APC 0402 for CY 2014, providing an exception to a 2 
times rule violation involving the cost of CPT code 78645 as

[[Page 74987]]

compared to the cost of CPT code 78607 (78 FR 43592).
    For CY 2014, we proposed to reassign CPT code 78647 (Cerebrospinal 
fluid flow, imaging (not including introduction of material); 
tomographic (SPECT)), which had a proposed rule geometric mean cost of 
approximately $467 from APC 0402 (Level II Nervous System Imaging), 
which had a proposed rule geometric mean cost of approximately $1,009) 
to APC 0403 (Level I Nervous System Imaging), which had a proposed rule 
geometric mean cost of approximately $179.
    For CY 2014, we proposed to reassign CPT code 78605 (Brain imaging, 
4 or more static views), which had a CY 2014 proposed rule geometric 
mean cost of approximately $835 from APC 0403 (Level I Nervous System 
Imaging), which has a CY 2013 payment rate of approximately $264, to 
APC 0402 (Level II Nervous System Imaging) which had a CY 2014 proposed 
payment rate of approximately $1,009.
    For CY 2014, we also proposed to reassign CPT code 78801 
(Radiopharmaceutical localization of tumor or distribution of 
radiopharmaceutical agent(s); multiple areas) from APC 0414 (Level II 
Tumor/Infection Imaging), which has a CY 2013 payment rate of 
approximately $503, to APC 0406 (Level I Tumor/Infection Imaging), 
which had a proposed rule payment rate of approximately $383.
    (The proposed payment rates cited above reflect the corrected 
proposed rates in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.)
    Comment: Several commenters objected to the proposed reduction in 
the CY 2014 payment rate for the DaTscan imaging procedure (including 
the packaged radiopharmaceutical) as a result of packaging of the 
radiopharmaceutical into CPT code 78607 and retention of the procedure 
in APC 0402, following expiration of the pass-through status of the 
procedure. The commenters objected to the reduction from the pass-
through payment amount of approximately $1,975 for HCPCS code A9584 in 
addition to the payment of approximately $458 for CPT code 78607 for CY 
2013. The commenters believed that the payment rate reduction for CPT 
code 78607 (into which the radiopharmaceutical will be packaged for CY 
2014) would hinder beneficiary access to care for this service. Several 
commenters believed that CPT code 78607 would be more appropriately 
assigned to APC 0308 (Positron Emission Tomography (PET) Imaging) 
rather than APC 0402 because CPT code 78607 is a new imaging service 
that uses more resources and is not clinically similar to the 
cisternography and shunt evaluation scans assigned to APC 0402. (We 
note that the CY 2014 final rule geometric mean cost of APC 0308 is 
approximately $1,315.)
    Response: We agree with the commenters that it would be appropriate 
to reassign CPT code 78607 to an APC that contains services more 
similar in terms of costs to CPT code 78607 and to correct the 2 times 
rule violation in APC 0402. However, we do not agree with the 
commenters that the procedure described by CPT code 78607 is clinically 
similar to PET scans. Therefore, we are not assigning CPT code 78607 to 
APC 0308. Based on clinical homogeneity and similar resource use, we 
are reassigning CPT code 78607 from APC 0402 to APC 0408 (Level III 
Tumor/Infection Imaging) for CY 2014, which has a final rule geometric 
mean cost of approximately $1,161.
    Comment: One commenter asked CMS to explain its rationale for 
proposing to reassign CPT code 78647 from APC 0402 to APC 0403. The 
commenter believed that this reassignment would decrease the payment 
rate for the procedure described by CPT code 78647.
    Response: The final rule geometric mean cost of APC 0402 is 
approximately $535, and the final rule geometric mean cost of APC 0403 
is approximately $163. The final rule geometric mean cost of CPT code 
78647 is approximately $434, which is much closer to the final rule 
geometric mean cost of APC 0402 than the final rule geometric mean cost 
of APC 0403. While there is no violation of the 2 times rule in APC 
0403 due to the claims volume of the services in this APC, the 
geometric mean cost of CPT code 78647 is more than two times the 
geometric mean cost of the other services in APC 0403. Because the 
final rule geometric mean cost of CPT code 78647 is more similar to the 
geometric mean costs of the services assigned to APC 0402, we are not 
finalizing our proposal to reassign CPT code 78647 from APC 0402 to APC 
0403. We will continue to maintain the code's current assignment to APC 
0402 for CY 2014.
    Comment: One commenter asked CMS to explain its rationale for 
proposing to reassign CPT code 78605 from APC 0403 to APC 0402 for CY 
2014.
    Response: Based on updated CY 2012 claims data, the final rule 
geometric mean cost of CPT code 78605 (approximately $781) is much 
closer to the final rule geometric mean cost of APC 0402 (approximately 
$535) than to the final rule geometric mean cost of APC 0403 
(approximately $163). Therefore, based on the similarity of the costs 
of the services assigned to APCs 0402 and 0403, we are finalizing our 
proposal to reassign CPT code 78605 from APC 0403 to APC 0402.
    Comment: One commenter asked CMS to explain its rationale for 
proposing to reassign CPT code 78801 from APC 0414 to APC 0406 for CY 
2014.
    Response: We proposed the reassignment of CPT code 78801 from APC 
0414 to APC 0406 for CY 2014 because we had updated claims data for CY 
2014 ratesetting, which indicated that the continued assignment of CPT 
code 78801 to APC 0414 would violate the 2 times rule. The final rule 
geometric mean cost of CPT code 78801 (approximately $362) is much 
closer to the final rule geometric mean cost of APC 0406 (approximately 
$384) than the final rule geometric mean cost of APC 0414 
(approximately $659), and is clinically similar to the other tumor 
imaging services assigned to APC 0406. Therefore, we are finalizing our 
proposal to reassign CPT code 78801 from APC 0414 to APC 0406 for CY 
2014.
8. Radiology Oncology
a. Intraoperative Radiation Therapy (IORT) Related Services (APCs 0028 
and 0065)
    HCPCS code C9726 (Placement and removal (if performed) of 
applicator into breast for radiation therapy) was created, effective 
January 1, 2006, to describe the procedure of placing and removing (if 
performed) an applicator into the breast for radiation therapy. We 
became aware of the procedure via a New Technology APC application, and 
upon approval of the application, we created HCPCS code C9726 because 
there were no HCPCS codes that described this procedure. For CY 2013, 
HCPCS code C9726 is assigned to APC 0028, which has a payment rate of 
$1,862.77. Based on our CY 2014 proposed rule claims data, HCPCS code 
C9726 had a proposed geometric mean cost of approximately $2,165 based 
upon 8 single claims, and APC 0028 had a proposed geometric mean cost 
of approximately $2,047.
    The AMA's CPT Editorial Panel created two new Category I CPT codes 
for intraoperative radiation therapy (IORT) treatment delivery, 
effective January 1, 2012: CPT codes 77424 (Intraoperative radiation 
treatment delivery, x-ray, single treatment session) and 77425 
(Intraoperative radiation treatment delivery, electrons, single

[[Page 74988]]

treatment session). For CY 2013, we finalized a policy to assign these 
CPT codes to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and 
MEG), with a CY 2013 payment rate of $978.25 because we believed these 
IORT service codes were similar to other services assigned to APC 0065 
in terms of clinical characteristics, and the range of estimated costs 
for IORT services (77 FR 68345). For CY 2014, we proposed to maintain 
the APC assignment for CPT codes 77424 and 77425 to APC 0065, which we 
proposed to rename ``APC 0065 (IORT, MRgFUS, and MEG)'', with a 
proposed payment rate of approximately $1,715. (The proposed payment 
rate reflects the corrected proposed rate in the September 6, 2013 OPPS 
Addendum B, which was posted on the CMS Web site.)
    In the CY 2014 OPPS/ASC proposed rule, we noted that both CPT codes 
77424 and 77425 describe the placement and removal (if performed) of an 
applicator into the breast for radiation therapy, as well as the 
delivery of radiation therapy when performed intraoperatively, and that 
it would no longer be required to report the placement and removal of 
the applicator via HCPCS code C9726 on a claim. Therefore, we proposed 
to delete HCPCS code C9726, effective January 1, 2014 (78 FR 43593). 
Under this proposal, hospitals would report the costs of the service to 
place and remove (if performed) an applicator into the breast for 
radiation therapy, as well as the delivery of radiation therapy when 
performed intraoperatively, with CPT codes 77424 and 77425, which we 
proposed to continue to assign to APC 0065.
    Comment: Many commenters disagreed with CMS' assertion that IORT 
services include the placement and removal (if performed) of an 
applicator into the breast for radiation therapy, as well as the 
delivery of radiation therapy when performed intraoperatively, and with 
the proposal to delete HCPCS code C9726 because it would no longer be 
required to report that service on the claim. Several commenters 
indicated that the service described by HCPCS code C9726 is performed 
by the surgeon before and after IORT delivery, and represents the cost 
of the applicator and hospital costs related to the surgeon's placement 
of the applicator, while CPT codes 77424 and 77425 represent radiation 
therapy treatment delivery performed by the radiation oncologist and 
medical physicist and are limited to the technical costs of IORT 
delivery. Many commenters stated that the AMA's CPT Editorial Panel did 
not include placement and removal of the applicator in the descriptions 
of CPT codes 77424 and 77425. Some commenters also indicated that 
placement and removal of applicators for radiation therapy for various 
other parts of the body are separately reported on claims and paid 
under the OPPS. Some commenters expressed concern with the quality of 
the data used for ratesetting, such as the small number of single 
frequency claims available reporting CPT codes 77424 and 77425. One 
commenter suggested that CMS propose a comprehensive APC payment 
methodology for IORT for CY 2015 to include CPT codes 77424 and 77424 
because the services are performed in a single operative session.
    Response: Our proposal to delete HCPCS code C9726 was based on the 
premise that placement of an applicator is a necessary part of the 
delivery of IORT, and that the placement of an applicator was included 
in the procedures described by CPT codes 77424 and 77425. There are 
currently no service codes other than HCPCS code C9726 that separately 
describe placement of a rigid applicator for IORT breast radiation 
delivery, as there are for some other radiation delivery services. The 
commenters argued that the service that has been reported along with 
HCPCS code C9726 by providers on claims is surgical, not a radiation 
oncology service, and that the service is not included in the 
descriptions of CPT codes 77424 and 77425. Therefore, after considering 
all of the public comments on IORT, we are not finalizing our proposal 
to delete HCPCS code C9726 for CY 2014. However, to make the coding 
consistent with other intraoperative procedures involving catheters or 
applicators used for radiation therapy treatment of the breast, for CY 
2014, we are designating HCPCS code C9726 as an add-on code to the 
primary procedure that involved the intraoperative placement of the 
applicator into the breast. We are revising the code descriptor for 
HCPCS code C9726 to read: ``Placement and removal (if performed) of 
applicator into breast for intraoperative radiation therapy, add-on to 
primary breast procedure.'' Payment for HCPCS code C9726 is being 
packaged into the payment for the primary procedure, consistent with 
our policy to package add-on codes for CY 2014.
    We agree with the commenters that there are a small number of 
single frequency claims for CPT codes 77424 and 77425, and we believe 
that is the case for HCPCS code C9726 as well. We appreciate the 
commenters' suggestions for alternative payment methodologies for IORT 
and may consider such alternatives in the future.
    After consideration of the public comments we received, we are not 
finalizing our proposal to delete HCPCS code C9726 for CY 2014. We are 
designating HCPCS code C9726 as an add-on code for which payment is 
being packaged into the payment for CPT codes 77424 and 77425, the 
primary procedures that involve the intraoperative placement of the 
applicator into the breast, consistent with our policy to package add-
on codes for CY 2014. We are revising the code descriptor for HCPCS 
code C9726 to read: ``Placement and removal (if performed) of 
applicator into breast for intraoperative radiation therapy, add-on to 
primary breast procedure.'' We are continuing to assign CPT codes 77424 
and 77425 to APC 0065 for CY 2014, which has a final geometric mean 
cost of $1,253. We are also changing the descriptor of APC 0065 to 
``IORT, MRgFUS, and MEG''.
b. 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) and CPT code 77522 (Proton treatment delivery; simple, 
with compensation). APC 0667 (Level II Proton Beam Radiation Therapy) 
also includes two procedures: CPT code 77523 (Proton treatment 
delivery, intermediate) and CPT code 77525 (Proton treatment delivery, 
complex). The payment rates for proton beam radiation therapy services 
are set annually based on claims data according to the standard OPPS 
ratesetting methodology.
    Based on the claims data used in developing the CY 2014 proposed 
rule, we determined a violation of the 2 times rule in APC 0664. As we 
discuss in section III.B. of this final rule with comment period, a 2 
times rule violation occurs when the cost of the highest cost 
significant item or service within an APC group is more than 2 times 
greater than the cost of the lowest cost significant item or service 
within that same group. In making this determination, we consider only 
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. If neither of these claims thresholds is met, there is not 
a 2 times rule violation even if the highest cost item or service is 
more than 2 times greater than the cost of the lowest cost

[[Page 74989]]

item or service in the APC. In prior years, even though the cost of CPT 
code 77522 was more than 2 times the cost of CPT code 77520, there was 
no 2 times rule violation within APC 0664 because the claims volume for 
CPT code 77520 was not significant (72 FR 66719; 75 FR 71901; and 77 FR 
68341). However, for CY 2014, the volume of claims in the proposed rule 
claims data for CPT code 77520 increased--the number of single claims 
was greater than 99 and contributed at least 2 percent of the single 
claims used to establish the cost of APC 0664--resulting in a 2 times 
rule violation within APC 0664.
    To resolve the 2 times rule violation, in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43593), we proposed to reassign CPT codes 77520 
and 77522 from APC 0664 to APC 0667, and to revise the title of APC 
0667 to ``Proton Beam Radiation Therapy,'' which would now include all 
proton beam radiation therapy services. We also proposed to delete APC 
0664. We invited public comments on this proposal.
    Comment: Several commenters stated that they duplicated CMS' 
ratesetting calculations for proton beam therapy services and 
determined that the threshold for claims volume that would constitute a 
2 times rule violation in APC 0664 was not met. The commenters asserted 
that because there was no 2 times rule violation within APC 0664 
according to their calculations, CMS should not finalize its proposal 
to delete APC 0664 and reassign CPT codes 77520 and 77522 to APC 0667 
in order to avoid a 2 times rule violation. The commenters also 
believed that the simple proton beam treatment delivery services 
assigned to APC 0664 are not clinically similar enough to warrant their 
combination with the intermediate and complex proton beam treatment 
delivery services currently assigned to APC 0667.
    Response: Using the additional final rule claims data in accordance 
with our standard OPPS ratesetting methodology, we determined that the 
number of claims for CPT code 77520 is not significant and, therefore, 
a 2 times rule violation within APC 0664 does not exist for CY 2014.
    After consideration of the public comments we received, because 
there is now no 2 times rule violation within APC 0664, we are not 
finalizing our proposal to delete APC 0664 and reassign CPT codes 77520 
and 77522 to APC 0667. We are continuing the current APC configuration 
for CY 2014. As we do annually for all APCs, we will review the 
appropriateness of the APC assignments for proton beam therapy services 
for the CY 2015 rulemaking cycle.
c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)
    Since 2001, we have distinguished the various methods of delivery 
of stereotactic radiosurgery (SRS) with HCPCS G-codes. SRS includes two 
different radiation source types, specifically, Cobalt-60 and linear 
accelerator (linac). Among the linac-based SRS procedures, the current 
HCPCS G-codes distinguish between procedures that use robotic and non-
robotic linac devices (66 FR 59865). In CY 2007, new CPT codes for SRS 
were established, and at that time, we recognized one of the three SRS 
CPT codes for separate payment under the OPPS. We did not replace all 
of the HCPCS G-codes for SRS with all of the new CPT codes in CY 2007 
because we believed at that time that the distinctions reflected in the 
HCPCS G-codes should be maintained for APC assignment purposes. 
Specifically, in CY 2007 we replaced HCPCS code G0243 (Multi-source 
photon stereotactic radiosurgery, delivery including collimator changes 
and custom plugging, complete course of treatment, all lesions) with 
CPT code 77371 because this CPT code corresponded directly to 
procedures described by HCPCS code G0243. We refer readers to the CY 
2007 OPPS final rule (71 FR 68023 through 68026) for a detailed 
discussion of the history of the SRS codes.
    Since CY 2007, HCPCS codes G0173, G0251, G0339, G0340, and CPT code 
77371 have been the codes used under the OPPS to describe SRS treatment 
delivery procedures. However, SRS techniques and equipment have evolved 
and expanded over time. In light of these developments and our 
understanding of current SRS technology and clinical practice, we have 
reexamined the HCPCS G-codes and CPT codes for SRS with the intent of 
identifying the codes that would best capture the significant 
differences between the various procedures while eliminating 
unnecessary complexity, redundancy, and outdated distinctions that no 
longer represent meaningful distinctions for purposes of OPPS payment. 
Based on our review of the current SRS technology, we understand that 
most current linac-based SRS technology incorporates some type of 
robotic feature. Therefore, we believe that it is no longer necessary 
to continue to distinguish robotic versus non-robotic linac-based SRS 
through the HCPCS G-codes.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43593 through 43594), 
we proposed to replace the existing four HCPCS codes: G0173, G0251, 
G0339, and G0340 with the SRS CPT codes 77372 and 77373. We stated that 
we believe that utilizing all of the CPT codes for SRS (CPT codes 
77371, 77372, and 77373) would more accurately capture the distinctions 
between the various SRS procedures that are currently used; namely, (1) 
Cobalt-60 versus linac and (2) single session cranial treatment versus 
fractionated treatments. Table 16 of the proposed rule showed the 
complete list of HCPCS G-codes and CPT codes for SRS, along with their 
long descriptors. The table also showed the proposed CPT codes and 
their associated status indicators and APC assignments for the current 
HCPCS G-codes for SRS that we proposed to replace. We proposed to 
assign only CPT code 77373 to APC 0066, which we proposed to rename 
``Level I Stereotactic Radiosurgery.'' We proposed to reassign CPT code 
77371 and assign CPT code 77372, the two single session cranial 
treatment codes, to APC 0067, which we proposed to rename ``Level II 
Stereotactic Radiosurgery.'' We believe that the high degree of 
clinical similarity of CPT codes 77371 and 77372 supports the proposed 
grouping of these procedures together in the proposed renamed APC 0067. 
The CY 2014 proposed APC payment rates for the CPT codes for SRS were 
listed in Addendum B to the proposed rule (which is available via the 
Internet on the CMS Web site). Further, we proposed to finalize their 
status indicators and their APC assignments and payment rates in this 
CY 2014 OPPS/ASC final rule with comment period.
    We note that we published a corrected OPPS Addendum B payment file 
that was posted on the CMS Web site on September 6, 2013, after it was 
brought to our attention that the initial proposed payment rates that 
were published on July 19, 2013, for the SRS codes did not include the 
claims data for the SRS HCPCS G-codes. Specifically, our initial 
proposed payment rate of approximately $2,481 for APC 0066 only 
included claims data for CPT code 77373 and did not include claims data 
for HCPCS codes G0251, G0339, and G0340. In addition, our initial 
proposed payment rate of approximately $8,576 for APC 0067 only 
included claims data for CPT codes 77372 and 77371 and did not include 
claims data for HCPCS code G0173. Consequently, we corrected this error 
and posted the corrected payment rates for APCs 0066 and 0067 on

[[Page 74990]]

September 6, 2013. Because of this correction, we extended the public 
comment period for the CY 2014 SRS proposals to September 16, 2013 (78 
FR 54842). Table 27 below shows the list of HCPCS G-codes and CPT codes 
for SRS, along with their long descriptors, and the corrected CY 2014 
proposed APC payment rates.
    In addition, although the SRS HCPCS G-codes will no longer be 
separately payable under the OPPS, the HCPCS codes will remain active 
under the MPFS for CY 2014. Consequently, we proposed to change the 
OPPS status indicator for HCPCS G-codes for SRS from status indicator 
``S'' to ``B'' (Alternative code may be available under the OPPS) for 
CY 2014.
    Comment: Most commenters agreed with CMS' proposal and urged CMS to 
finalize the coding, APC assignment, and payment levels for the SRS CPT 
codes. The commenters agreed that utilizing the CPT codes would 
standardize the reporting of SRS services across all payers, which the 
hospital industry has favored since the SRS treatment delivery CPT 
codes were established in CY 2007. One commenter noted that the use of 
the CPT codes would eliminate confusion among providers regarding how 
to report the SRS treatment delivery services.
    Response: We appreciate the commenters' support for our proposal. 
We believe that adopting the SRS treatment delivery CPT codes and 
restructuring the SRS APCs appropriately distinguishes payment for 
single session cranial SRS treatment from fractionated SRS treatment.
    Comment: Several commenters that utilize both the linear 
accelerator-based SRS technology and Cobalt-60 SRS technology supported 
CMS' proposal and stated that the change would equalize payments for 
both technologies for single session cranial SRS. One commenter stated 
that the proposal is appropriate because there is no clinical data that 
supports the need for differential payment for these technologies. This 
commenter further stated that current medical literature cites no 
difference in clinical effectiveness for one system over another, and 
stated that in terms of outcomes, the linac-based system is clinically 
comparable to a Cobalt-60 system for single session cranial SRS. In 
addition, some commenters stated that the proposal is consistent with 
the provisions of section 634 of the American Taxpayer Relief Act 
(ATRA) of 2012.
    Response: We appreciate the commenters' support for our proposal. 
As specified in the April 2013 OPPS Update CR (Transmittal 2664, CR 
8228) dated March 1, 2013, section 634 of the ATRA requires that, 
effective April 1, 2013, if the payment amount for Cobalt-60 based SRS, 
as described by CPT code 77371, exceeds the payment amount for linear 
accelerator-based SRS, as described by HCPCS code G0173 (or a successor 
code), the payment for CPT code 77371 must be reduced to the payment 
amount for HCPCS code G0173. The requirement does not apply to rural 
hospitals, sole community hospitals, or rural referral centers. In this 
final rule with comment period, for CY 2014, we are reassigning CPT 
code 77371 and assigning CPT code 77372 (the successor codes for HCPCS 
code G0173) to APC 0067. Therefore, CPT codes 77371 and 77372 will have 
the same payment amount. We agree with the commenters that this APC 
assignment satisfies the requirements of section 634 of the ATRA.
    Comment: Some commenters expressed concern regarding the proposal 
for SRS and suggested that CMS delay implementation of the proposal. 
The commenters suggested that, to pay appropriately for SRS services, 
CMS consider for CY 2015 the development of a comprehensive APC for the 
procedures assigned to APC 0067 (which includes CPT codes 77371 and 
77372), similar to the comprehensive APC proposal for high-cost, 
device-dependent services. The commenters stated that single session 
cranial SRS procedures performed with either Cobalt 60-based SRS or 
linac-based SRS are device-dependent procedures and cannot be performed 
without use of the costly technology. The commenter further stated that 
having one comprehensive APC for single session cranial SRS is 
appropriate and consistent with the requirements of section 634 of the 
ATRA. The commenters encouraged CMS to consider the comprehensive APC 
payment methodology to appropriately pay for services, regardless of 
the specific equipment used to deliver SRS treatment.
    Response: We do not agree with the commenters' suggestion to delay 
implementation of the proposal because we believe that adopting the CPT 
codes and restructuring the SRS APCs improve the clinical and resource 
homogeneity for SRS while satisfying the requirements of section 634 of 
the ATRA.
    We appreciate the commenters' suggestion to create a comprehensive 
APC payment methodology for SRS services. However, because such a 
change would require public notice and opportunity to comment, we will 
consider and evaluate the appropriateness of such a payment methodology 
in the future.
    Comment: Some commenters who were not supportive of the proposals 
relating to SRS stated that the corrected proposed APC payment rates 
for the SRS codes were too low, and requested that CMS utilize the 
initial proposed APC payment rates for APCs 0066 and 0067.
    Response: As explained above, we revised the initial proposed 
payment rates for APCs 0066 and 0067 after it was brought to our 
attention that our ratesetting for these APCs did not include claims 
data for the appropriate HCPCS codes, including the various HCPCS G-
codes that were proposed for deletion. We should have included the CY 
2012 SRS HCPCS G-code claims data in our proposed CY 2014 ratesetting; 
otherwise, some of the services would be significantly underrepresented 
in the APC payment calculations. We believe that the corrected proposed 
APC payment rates that include claims data for the SRS HCPCS G-codes 
accurately reflect all of the SRS services that are used to configure 
APCs 0066 and 0067.
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    Comment: Some commenters expressed concern with the proposed 
packaging of payments for certain CPT codes describing the Cobalt-60 
SRS procedure. In particular, the commenters indicated that the 
proposal to package ancillary services, including certain SRS radiation 
planning codes, penalizes hospitals for providing the more efficient 
form of SRS, namely, the Cobalt-60 technology, which is provided as a 
single-day service. Some of the commenters stated that under CMS' 
packaging proposal, hospitals would experience a decrease in payment 
for performing the Cobalt-60 procedure because the procedures that they 
perform on the same day would no longer be paid separately. In 
particular, the commenters were concerned that the proposed policy for 
packaging of payment for CPT codes 77290, 77295, 77300, 77334, and 
77370, if finalized, would result in higher payments for patients 
treated with linac-based SRS technologies because the payment for 
planning services would not be packaged--that is, planning services 
occur on a different day than the day of delivery of linac-based SRS 
services.
    Response: As discussed in section II.A.3. of this final rule with 
comment period, we are not finalizing our proposal to package payment 
of ancillary tests. The SRS planning services, specifically those 
described by CPT codes 77290, 77295, 77300, 77334, and 77370, for which 
payments were initially proposed to be packaged under our packaging 
proposal for ancillary services, will continue to be paid separately 
for CY 2014. The final CY 2014 long descriptors, status indicators, and 
APC assignments for these CPT codes are listed in Table 28 below.

[[Page 74993]]

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    Comment: Some commenters questioned the use of claims data for 
certain HCPCS G-codes for determining the corrected payment rates for 
APCs 0066 and 0067. The commenters stated that the initial proposed 
payment rates were correct. In addition, some commenters did not 
believe that claims data for HCPCS code G0173 should have been used to 
determine the payment rate for APC 0067 because this code was more than 
likely reported for ``other than brain'' tumors. In addition, the 
commenters stated that the corrected payment rates result in a 2 times 
rule violation in both APC 0066 and APC 0067, and, therefore, CMS 
should not finalize its proposal.
    Response: HCPCS code G0173 describes a single session linac-based 
SRS procedure. We believe that this code is appropriately crosswalked 
to CPT code 77372, and adequately represents single session cranial SRS 
cases. Although a 2 times rule violation did occur in APC 0067, as we 
describe in section II.A.B.3. of this final rule with comment period, 
we may make exceptions to the 2 times rule in certain cases. In the 
case of the SRS treatment delivery services, we believe that adopting 
the CPT codes and restructuring the SRS APCs improves clinical and 
resource homogeneity for both types of cranial single session SRS 
procedures. Furthermore, assigning CPT codes 77371 and 77372 to the 
same APC also satisfies the requirements of section 634 of the ATRA. If 
CPT codes 77371 and 77372 were assigned to different APCs, the payment 
rate for CPT code 77371 would have to be reduced to equal the payment 
rate for CPT code 77372. As a majority of the commenters preferred, we 
believe that the assignment of CPT codes 77371 and 77372 to the same 
APC, with the blended payment rate as opposed to current CY 2013 
payment reduction for CPT code 77371, is most appropriate.
    Comment: One commenter recommended that CMS exclude the claims data 
associated with HCPCS code G0251 when determining the payment rate for 
APC 0066. The commenter indicated that HCPCS code G0251 is used most 
often for fractionated cranial SRS, not for stereotactic body radiation 
therapy (SBRT), as described by CPT code 77373. The commenter

[[Page 74994]]

recommended that CMS reassign HCPCS code G0251 to its own APC, which is 
similar to the CY 2013 APC assignment.
    Response: Both HCPCS code G0251 and CPT code 77373 describe 
fractionated cranial SRS services that involve between 1 to 5 fractions 
of treatment. Based on the code descriptor, we believe that the service 
described by HCPCS code G0251 is appropriately crosswalked to CPT code 
77373.
    Comment: Some commenters stated that CMS only used approximately 20 
percent of the claims data for CPT code 77371 to set the payment rate 
for APC 0067, and suggested that CMS use more of the claims data for 
Cobalt-60 SRS in the ratesetting process.
    Response: For the CY 2014 update, we proposed to set the payment 
rate for APC 0067 based on claims data for HCPCS code G0173 and CPT 
codes 77371 and 77372. To determine the corrected proposed APC payment 
rates, we used approximately 41 percent (953 single claims out of 4,672 
total claims) of the claims for CPT code 77371 to set the proposed 
payment rate for APC 0067. For this final rule with comment period, we 
used approximately 27 percent (425 single claims out of 4,672 total 
claims) of the claims for CPT code 77371 and approximately 72 percent 
of the claims for HCPCS code G0173 (1,136 single claims out of 1,771 
total claims to set the payment rate for APC 0067. Based on these 
codes, our analysis of the latest hospital outpatient claims data shows 
a final CY 2014 geometric mean cost of approximately $3,604 for APC 
0067.
    Comment: Several commenters disagreed with the proposal to replace 
the HCPCS G-codes and use the CPT codes to describe the SRS treatment 
delivery services. The commenters stated that the SRS HCPCS G-codes are 
preferable to the CPT codes because they accurately describe the 
current standard SRS techniques. The commenters further stated that the 
CPT code descriptors reflect old technologies. In addition, some 
commenters requested that CMS retain the existing APC structure and use 
of HCPCS G-codes for SRS treatment delivery services because they 
believed the HCPCS G-codes more accurately reflect the costs and 
practice of full body, cranial, multi- and single-session robotic SRS. 
One commenter also suggested that CMS delete CPT codes 77371 and 77372 
and replace them with one code that describes a single session 
intracranial SRS treatment procedure with no mention of the radiation 
source in the code descriptor.
    Response: As stated above, we believe that it is no longer 
necessary to continue to distinguish robotic versus non-robotic linac-
based SRS through HCPCS G-codes. We believe that the CPT codes for SRS 
treatment delivery, although more general than the HCPCS G-codes, 
accurately describe the most significant distinctions between the 
various SRS procedures: (1) Cobalt-60 versus linac radiation sources; 
and (2) single session cranial versus fractionated treatments. If the 
three-code SRS delivery CPT coding scheme that was created by the CPT 
Editorial Panel for CY 2007 is considered to be inadequate by SRS 
stakeholders, we believe that coding reform in this area would be best 
addressed through a dedicated CPT workgroup that would include all of 
the various physician specialties, such as neurosurgery and radiation 
oncology, and the other stakeholders involved in the delivery of this 
critical treatment modality. We also believe that it is best that we 
generally refrain from creating supplemental HCPCS G-codes or C-codes 
that describe the attributes of a particular device under the 
assumption of more precise coding but without the benefit of a broad 
perspective of stakeholder and physician specialist input. Otherwise, 
we risk unintentionally creating a competitive advantage for a 
particular technology through the establishment and use of codes that 
may not be based on the most complete understanding of the clinical 
science of SRS treatment delivery.
    Comment: Several commenters requested that CMS clarify the report 
instructions for CPT codes 77372 and 77373 because there is confusion 
regarding how these services should be reported. The commenters stated 
that the lack of clarify promotes inefficiency and ensures misuse of 
CPT codes.
    Response: We agree with the commenters that the transition from the 
HCPCS G-codes to the CPT codes could be confusing in certain cases. 
Therefore, we are providing the following coding guidance for CPT codes 
77371, 77372, and 77373. CPT code 77371 is to be used only for single 
session cranial SRS cases performed with a Cobalt-60 device, and CPT 
code 77372 is to be used only for single session cranial SRS cases 
performed with a linac-based device. The term ``cranial'' means that 
the pathological lesion(s) that are the target of the radiation is 
located in the patient's cranium or head. The term ``single session'' 
means that the entire intracranial lesion or lesions that comprise the 
patient's diagnosis are treated in their entirety during a single 
treatment session on a single day. CPT code 77372 is never to be used 
for the first fraction or any other fraction of a fractionated 
treatment. CPT code 77372 is to be used only for single session cranial 
linac-based SRS treatment. Fractionated SRS treatment is any SRS 
delivery service requiring more than a single session of SRS treatment 
for a cranial lesion, up to a total of no more than five fractions, and 
one to five sessions (but no more than five) for non-cranial lesions. 
CPT code 77373 is to be used for any fraction (including the first 
fraction) in any series of fractionated treatments, regardless of the 
anatomical location of the lesion or lesions being radiated. 
Fractionated cranial SRS treatment is any cranial SRS delivery service 
that exceeds one treatment session and fractionated non-cranial SRS 
treatment is any non-cranial SRS delivery service, regardless of the 
number of fractions but never more than five. Therefore, CPT code 77373 
is the exclusive code (and the use of no other SRS treatment delivery 
code is permitted) for any and all fractionated SRS treatment services 
delivered anywhere in the body, including, but not limited to, the 
cranium or head. CPT code 77372 is not to be used for the first 
fraction of a fractionated cranial SRS treatment series and must only 
be used in cranial SRS delivery service when there is a single 
treatment session to treat the patient's entire condition.
    Although we believe that this coding guidance is clear to ensure 
reporting compliance, we will activate coding edits to prevent the use 
of more than one type of SRS treatment delivery CPT code per diagnosis 
per patient along with no more than five fractions for CPT code 77373.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal without modification. Specifically, we 
are finalizing our proposal to reassign CPT code 77371 to APC 0067; 
replace HCPCS code G0173 with CPT code 77372 and assign the code to APC 
0067; and replace HCPCS codes G0251, G0339, and G0340 with CPT code 
77373 and assign this code to APC 0066. In addition, although the SRS 
HCPCS G-codes will no longer be separately payable under the OPPS, the 
codes will remain active under the MPFS for CY 2014. Consequently, we 
are finalizing our proposal to change the status indicator for the 
HCPCS G-codes for SRS services to OPPS status indicator ``B'' 
(Alternative code may be available under the OPPS) for CY 2014. Table 
29 below shows the final CPT codes for the SRS treatment delivery 
services, their status indicators, APC assignments, and payment rates 
for CY 2014.
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9. Respiratory Services
a. Bronchial Thermoplasty (APC 0415)
    Effective January 1, 2013, the CPT Editorial Panel created two new 
Category I CPT codes: CPT code 31660 (Bronchoscopy, rigid or flexible, 
including fluoroscopic guidance, when performed; with bronchial 
thermoplasty, 1 lobe) and CPT code 31661 (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with 
bronchial thermoplasty, 2 or more lobes). These new CPT codes replaced 
two Category III CPT 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), which were deleted as of 
January 1, 2013. In the CY OPPS/ASC 2013 final rule with comment period 
(77 FR 68352), we finalized a policy that, beginning January 1, 2014, 
device category C1886 (Catheter, extravascular tissue ablation, any 
modality (insertable)) will no longer be eligible for pass-through 
payments, and its device costs will be packaged with the costs of the 
procedures with which the HCPCS code C1886 device is reported in the 
claims data. We reiterated that final policy in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43595). The HCPCS code C1886 device is used in the 
procedures described by CPT codes 31660 and 31661. Therefore, the HCPCS 
code C1886 device costs will be packaged with the costs of the 
procedures described by CPT codes 31660 and 31661. Bronchial 
thermoplasty CPT codes 0276T and 0277T are assigned to APC 0415 (Level 
II Endoscopy Lower Airway) for CY 2013, and we proposed to assign 
bronchial thermoplasty CPT codes 31660 and 31661 to APC 0415 for CY 
2014 with a proposed payment rate of approximately $2,177.
    Comment: One commenter stated that bronchial thermoplasty CPT codes 
31660 and 31661 (as well as the CPT codes 0276T and 0277T) are 
inappropriately assigned to APC 0415. The commenter expressed concern 
that under the CMS proposal to expire device HCPCS code C1886 from 
pass-through payment status, the payment rate for APC 0415 will not 
reflect the costs associated with CPT codes 31660 and 31661, the 
procedure with which the HCPCS code C1886 device is used. The commenter 
stated that the two bronchial thermoplasty CPT codes available in CY 
2012, CPT code 0276T and CPT code 0277T, were subject to noncoverage 
policies for all Category III CPT codes by most Medicare Administrative 
Contractors (MACs), which resulted in few Medicare claims for CY 2012, 
the claims data year used for CY 2014 ratesetting. The commenter 
further stated that claims data show that some providers submitted 
claims reporting bronchial thermoplasty services with the HCPCS code 
C1886 device, while others did not, and that, as a result, the HCPCS 
code C1886 device charge data understate the cost of the C1886 device, 
which is reportedly $2,500.
    The commenter also expressed its concerns regarding the composition 
of APC 0415. The commenter believed that the payment rate for APC 0415 
is driven by claims reporting one high-volume code, 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)) because the proposed payment rate 
of APC 0415 of approximately $2,177 is close to the CPT code 31629 
proposed rule geometric mean cost of approximately $2,122. The 
commenter recommended two options to increase the payment rate for 
bronchial thermoplasty services as a means to adequately pay for the 
cost of the service. One option was to split APC 0415 into two levels, 
with many of the higher volume, lower cost procedure codes assigned to 
the Level II Endoscopy Lower Airway APC and the lower volume, higher 
cost procedure codes assigned to a new proposed Level III Endoscopy 
Lower Airway APC. The second option recommended by the commenter was to 
assign CPT codes 31660 and 31661 to APC 0423 (Level II Percutaneous 
Abdominal and Biliary Procedures), which the commenter believed has a 
number of clinical similarities, including one pulmonary procedure 
described by CPT code 32998 (Ablation therapy for reduction or 
eradication of 1 or more pulmonary tumor(s) including pleura or chest 
wall when involved by tumor extension, percutaneous, radiofrequency, 
unilateral).
    Response: Regarding the commenter's concerns about the claims data 
for bronchial thermoplasty services, we believe that the cost of the 
HCPCS code C1886 device is reflected in the proposed payment rate for 
APC 0415, the APC to which we proposed to assign CPT codes 31660 and 
31661. In a data analysis of the claims reporting CPT codes 0276T and 
0277T, we found that, of the 37 single frequency claims available for 
the data analysis for CPT code 0276T, 16 single claims reported the 
HCPCS code C1886 device with a geometric mean cost of approximately 
$3,726, while 21 single claims did not report the HCPCS code C1886 
device, yet the geometric mean cost was approximately $3,825. 
Therefore, it appears that hospitals did not separately report the 
HCPCS code C1886 device for pass-through payment on claims reporting 
CPT code 0276T but instead reported the cost of the HCPCS code C1886 
device as part of the cost of the procedure described by CPT code 
0276T. Of the 18 claims reporting the procedure described by CPT code 
0277T in our CY 2012 claims data, 10 claims were submitted with the 
HCPCS code C1886 device reported separately, with a geometric mean cost 
of approximately $4,175, while 8 claims were submitted without the 
HCPCS code C1886 device reported separately, with a somewhat lower 
geometric mean cost of $2,780. However, our final geometric mean costs 
(based on the final rule claims data) for CPT codes 0276T and 0277T, 
$4,019 and $3,700, respectively, are similar to the geometric mean cost 
of bronchial thermoplasty services with the HCPCS code C1886 device 
reported separately that we found in our analysis of CPT codes 0276T 
and 0277T described above. Therefore, we believe that the payment rate 
for APC 0415 appropriately reflects the costs of the HCPCS code C1886 
device.
    We do not agree that APC 0423 would be a more appropriate APC 
assignment for CPT codes 31660 and 31661. Although there is one 
pulmonary procedure in APC 0423, CPT code 32998, it is a procedure with 
a percutaneous approach, which is very different than a bronchoscopy 
approach. In addition, we do not agree with the commenter's suggestion 
that APC 0415 be split into two lower airway endoscopy APCs. The 
creation of a Level III lower airway endoscopy APC suggested by the 
commenter would result in relatively few single frequency claims 
available for ratesetting--495 claims for the suggested Level III APC 
compared to 5,174 single claims for the suggested Level II APC, based 
on CY 2014 final rule claims data. This lower frequency would promote 
volatility of costs for such a Level III lower airway endoscopy APC. 
Based on the reasons set forth above, we are finalizing our proposal to 
assign bronchial thermoplasty services CPT codes 31660 and 31661 to APC 
0415 for CY 2014, which has a geometric mean cost of approximately 
$2,007.

[[Page 74997]]

b. Direct Laryngoscopy (APC 0074)
    For CY 2013, we assigned CPT code 31571 (Laryngoscopy, direct, with 
injection into vocal cord(s), therapeutic; with operating microscope or 
telescope) to APC 0075 (Level V Endoscopy Upper Airway), with a payment 
rate of $2,026.82. For CY 2014, we proposed to assign CPT code 31571 to 
APC 0074 (Level IV Endoscopy Upper Airway), with a proposed payment 
rate of approximately $1,532. (The proposed payment rate reflects the 
corrected proposed rate in the September 6, 2013 OPPS Addendum B, which 
was posted on the CMS Web site.)
    Comment: One commenter stated that the proposed rule cost of CPT 
code 31571 does not support the reassignment of this procedure code 
from APC 0075 to APC 0074. The commenter believed that the proposed 
payment rate for APC 0074 does not adequately cover the cost of the 
procedure described by CPT code 31571, in light of the fact that the 
geometric mean cost of CPT code 31571 increased from approximately 
$1,849 for CY 2013 to $1,956 in the CY 2014 proposed rule.
    Response: The structure of APCs 0074 and 0075 required the proposed 
realignment of the procedures within those APCs to avoid 2 times rule 
violations. If CPT code 31571 remained assigned to APC 0075, a 2 times 
rule violation would have resulted because the cost of the procedure is 
more than two times less than the significant procedure with the 
highest geometric mean cost, CPT code 31276 (Nasal/sinus endoscopy, 
surgical with frontal sinus exploration, with or without removal of 
tissue from frontal sinus), which had a proposed rule geometric mean 
cost of approximately $4,623. This situation appears to remain the case 
based on final rule claims data. The final rule geometric mean cost of 
CPT code 31571 is approximately $1,951 and the final rule geometric 
mean cost of CPT code 31276 is approximately $4,504, which would result 
in a 2 times rule violation if the two procedures were assigned to the 
same APC. We note that the geometric mean cost of APC 0074 has 
increased from $1,390.85 for CY 2013, to approximately $1,547 for the 
CY 2014 proposed rule, and approximately $1,887 for this CY 2014 final 
rule with comment period. Furthermore, we believe that the procedure 
described by CPT code 31571 is similar in terms of clinical composition 
and resource costs to the other procedures assigned to APC 0074. The 
final rule geometric mean cost of CPT code 31571 is approximately 
$1,951, while the final rule geometric mean cost for APC 0074 is 
approximately $1,887, and the final rule geometric mean cost for APC 
0075 is approximately $3,062. Therefore, we are finalizing our proposal 
to reassign CPT code 31571 from APC 0075 to APC 0074 for CY 2014.
c. Pulmonary Rehabilitation Services (APC 0077)
    For CY 2014, we proposed to reassign HCPCS code G0424 (Pulmonary 
rehabilitation, including exercise (includes monitoring), one hour, per 
session, up to two sessions per day) from APC 0102 (Level II Pulmonary 
Treatment) to APC 0077 (Level I Pulmonary Treatment), with a proposed 
payment rate of approximately $39. (The proposed payment rate reflects 
the corrected proposed rate in the September 6, 2013 OPPS Addendum B, 
which was posted on the CMS Web site.) We note that, for CY 2013, HCPCS 
code G0424 was assigned to APC 0102 with a similar payment rate of 
approximately $39.
    CMS established HCPCS code G0424 effective January 1, 2010, to 
describe a one-hour session of pulmonary rehabilitation. This HCPCS 
code was established consistent with the requirements set forth in 
section 144(a)(1) of Public Law 110-275 (MIPPA), which added section 
1861(fff) to the Act, to provide Medicare Part B coverage and payment 
for a comprehensive program of pulmonary rehabilitation services 
furnished to beneficiaries with chronic obstructive pulmonary disease, 
effective January 1, 2010.
    Comment: Several commenters expressed concern about the 
reassignment of HCPCS code G0424 to APC 0077, which is the same APC to 
which HCPCS codes G0237 (Therapeutic procedures to increase strength or 
endurance of respiratory muscles, face to face, one on one, each 15 
minutes (includes monitoring)), G0238 (Therapeutic procedures to 
improve respiratory function, other than described by G0237, one on 
one, face to face, per 15 minutes (includes monitoring)), and G0239 
(Therapeutic procedures to improve respiratory function or increase 
strength or endurance of respiratory muscles, two or more individuals 
(includes monitoring)), are assigned. Several commenters stated that 
the length of time in performing the service described by HCPCS code 
G0424 is not consistent with the length of time to perform the other 
services assigned to APC 0077. In particular, the commenters stated 
that HCPCS code G0424 represents a 60-minute to 90-minute procedure, 
which is not similar to the time requirement of the two procedures 
assigned to APC 0077, HCPCS codes G0237 and G0238, which represent 15-
minute procedures. Because of the time required to perform the service, 
the commenters believed that HCPCS code G0424 should not be assigned to 
the same APC as HCPCS codes G0237 and G0238. In addition, several 
commenters stated that the assignment of HCPCS code G0424 to APC 0077 
would create a 2 times rule violation. Some commenters further believed 
that hospitals are underreporting the costs of the procedure described 
by HCPCS code G0424, and stated that hospitals may be confused about 
the differences in costs for the procedures described by HCPCS codes 
G0237 and G0238 (15-minute procedures) and G0424 (60-90 minute 
procedures). Some commenters recommended that CMS establish a payment 
for HCPCS code G0424 using claims data from HCPCS codes G0237, G0238, 
and G0239, similar to the simulated methodology that CMS used in CY 
2010 before actual claims data for HCPCS code G0424 became available.
    Response: Prior to CY 2012, we did not have available actual claims 
data for HCPCS code G0424, and consequently, for CY 2010 and CY 2011, 
we utilized a simulated methodology to arrive at an appropriate payment 
for the procedure described by HCPCS code G0424. We discussed this 
simulated methodology extensively in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74263 through 74267). Because HCPCS code 
G0424 became effective January 1, 2010, the first year of actual claims 
data for this service was used in the CY 2012 OPPS update. 
Specifically, in CY 2012, we had data available for HCPCS code G0424 
for payments for OPPS services based on claims submitted from January 
1, 2010 through December 31, 2010. Payment for HCPCS code G0424 for CY 
2012 was approximately $37.42. For the CY 2014 OPPS update, payment for 
the procedure described by HCPCS code G0424 is based on claims 
submitted from January 1, 2012 through December 31, 2012. Similar to 
our findings for the CY 2012 and CY 2013 OPPS updates, we have a very 
robust set of claims for the procedure described by HCPCS code G0424 
for the CY 2014 update. Based on our latest hospital outpatient claims 
data, the resource cost associated with HCPCS code G0424 is comparable 
to the other services assigned to APC 0077. Specifically, our latest 
hospital outpatient claims data show that the geometric mean cost for 
HCPCS code G0424 is approximately $43, based on 457,226 single claims 
(out of 459,199

[[Page 74998]]

total claims), which is similar to the proposed payment rate of 
approximately $39 for APC 0077. We note that APC 0077 included various 
pulmonary treatments whose geometric mean costs range between $23 and 
$43. Based on the latest hospital outpatient claims data, we believe 
that HCPCS code G0424 can be appropriately reassigned to APC 0077.
    Regarding the commenters' statement about hospitals underreporting 
the costs of the procedure described by HCPCS code G0424, we have no 
evidence of such underreporting. Furthermore, as we have previously 
stated, ``[b]eyond our standard OPPS trimming methodology . . . that we 
apply to those claims that have passed various types of claims 
processing edits, it is not our general policy to judge the accuracy of 
hospital coding and charging for purposes of ratesetting'' (75 FR 
71838). We expect hospitals to report their services appropriately.
    We disagree with the commenters' assertion that assigning HCPCS 
code G0424 to APC 0077 would create a 2 times rule violation. We 
reviewed the costs of the procedures that would be assigned to APC 
0077, including the cost of the procedure described by HCPCS code G0424 
and did not find a violation of the 2 times rule in the APC. 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, 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 HCPCS code G0424, we evaluated 
its APC assignment for the CY 2014 update, and determined that APC 0077 
is the appropriate assignment for this service based on its clinical 
homogeneity and resource similarity to the other services assigned to 
APC 0077.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to reassign 
HCPCS code G0424 from APC 0102 to APC 0077. APC 0077 has a final CY 
2014 geometric mean cost of approximately $39. The final CY 2014 
payment rate for HCPCS code G0424 can be found in Addendum B to this CY 
2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site).
10. Other Services
a. Balloon Sinus Dilation (APCs 0074 and 0075)
    For CY 2013, we assigned 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), with a payment rate of $2,026.82. For CY 2014, 
we proposed to continue to assign CPT codes 31295, 31296, and 31297 to 
APC 0075.
    Comment: One commenter stated that the proposed geometric mean cost 
of APC 0075 of approximately $2,378 is driven by the cost and frequency 
of a single code, CPT code 31541 (Laryngoscopy, direct, operative, with 
excision of tumor and/or stripping of vocal cords or epiglottis; with 
operating microscope or telescope), which had a proposed geometric mean 
cost of approximately $2,085, and comprised 61 percent of the APC's 
single frequency claims for ratesetting. The commenter requested that 
CMS analyze the appropriateness of continuing to assign CPT codes 
31295, 31296, and 31297 to APC 0075 and/or the appropriateness of 
continuing to assign CPT code 31541 to APC 0075.
    Response: Based on updated claims data, we reviewed the procedures 
in APC 0074 (Level IV Endoscopy Upper Airway) and APC 0075. During our 
review, we found 2 times rule violations in both APCs. To resolve one 
of the 2 times rule violations, we reassigned CPT code 31541 from APC 
0075 to APC 0074 for CY 2014. As a result, the final rule geometric 
mean cost of APC 0075 increased to approximately $3,062.
    The final rule geometric mean costs of CPT codes 31295, 31296, and 
31297 are $2,456, $2,894, and $1,905, respectively. Therefore, while we 
are continuing to assign CPT codes 31295 and 31296 to APC 0075 for CY 
2014, to avoid another 2 times rule violation, we are reassigning CPT 
code 31297, which has an appreciably lower geometric mean cost than the 
geometric mean cost of CPT codes 31295 and 31296, to APC 0074 for CY 
2014. APC 0074 has a CY 2014 final geometric mean cost of approximately 
$1,887.
    After consideration of the public comments we received, we are 
continuing to assign CPT codes 31295 and 31296 to APC 0075 for CY 2014, 
as we proposed. However, we are reassigning CPT code 31297 to APC 0074 
for CY 2014. In addition, we are reassigning CPT code 31541 from APC 
0075 to APC 0074 for CY 2014.
b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)
    We created HCPCS code C9736 (Laparoscopy, surgical, radiofrequency 
ablation of uterine fibroid(s), including intraoperative guidance and 
monitoring, when performed) effective July 1, 2013. The procedure 
became known to us by means of an application to assign the procedure 
to a New Technology APC. We assigned HCPCS code C9736 to APC 0131 
(Level II Laparoscopy) because we believed that it has the greatest 
degree of clinical similarity to the laparoscopic procedures assigned 
to that APC. APC 0131 has a CY 2013 payment rate of $3,487.15. We 
proposed to continue to assign HCPCS code C9736 to APC 0131 for CY 
2014, with a proposed payment rate of approximately $3,765. (The 
proposed payment rate reflects the corrected proposed rate in the 
September 6, 2013 OPPS Addendum B, which was posted on the CMS Web 
site.)
    The AMA's CPT Editorial Panel recently created new Category III CPT 
code 0336T (Laparoscopy, surgical, ablation of uterine fibroid(s), 
including intraoperative ultrasound guidance and monitoring, 
radiofrequency), to be effective January 1, 2014, which describes the 
procedure described by HCPCS code C9736. Because HCPCS code C9736 
became effective July 1, 2013, there are no claims data available for 
this code for ratesetting purposes.
    At its August 26, 2013 meeting, the HOP Panel recommended that CMS 
move HCPCS code C9736 from APC 0131 to APC 0174 (Level IV Laparoscopy).
    Comment: A few commenters recommended that CMS reassign HCPCS code 
C9736 (or its successor code, CPT code 0336T) to APC 0174 for CY 2014 
because the resources involved in performing the procedure are more 
similar to the resources used in performing procedures assigned to APC 
0174. The commenters stated that two CPT codes assigned to APC 0174, 
CPT code 47370 (Laparoscopy, surgical, ablation of 1 or more liver 
tumor(s); radiofrequency) and CPT code 50542 (Laparoscopy, surgical; 
ablation of renal mass lesion(s), including intraoperative ultrasound 
guidance and monitoring, when performed), have clinical and resource 
characteristics similar to the characteristics of the procedures 
described by HCPCS code C9736. The commenters stated that both 
procedures are performed in an operating room

[[Page 74999]]

(OR) under general anesthesia and involve diagnostic laparoscopy, and 
both procedures use approximately 160 to 180 minutes of OR time. One 
commenter estimated that OR time for other procedures assigned to APC 
0131 averages 122 minutes. Other commenters stated that the single-use 
RF probe used in the procedure described by HCPCS code C9736 costs 
$2,584, which is part of more than $3,400 in total device and supply 
costs. They added that other procedures assigned to APC 0131 are not as 
device intensive, whereas procedures assigned to APC 0174 are device 
intensive. The commenters also requested that CMS delete HCPCS code 
C9736 and use the new CPT code 0336T, upon its effective date, January 
1, 2014.
    Response: We do not have claims data on HCPCS code C9736 for 
ratesetting purposes because the code is new, effective July 1, 2013. 
We routinely assign procedure or service codes to clinical APCs before 
we have claims data that are indicative of the resource costs of a 
procedure or service. 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 agree with the HOP Panel and the commenters that 
resources used to perform the procedure described by HCPCS code C9736 
appear to be more similar to the resources used to perform some of the 
services already assigned to APC 0174. Because new CPT code 0336T 
describes the procedure described by HCPCS code C9736 and is considered 
its successor code, we are deleting HCPCS code C9736, effective January 
1, 2014, and assigning CPT code 0336T to APC 0174 for CY 2014. As with 
all new services under the OPPS, the APC assignment of CPT code 0336T 
is subject to review once our claims data begin to reflect the cost of 
this procedure.
    After consideration of the public comments we received, we are 
deleting HCPCS code C9736, effective January 1, 2014, and assigning CPT 
code 0336T to APC 0174 for CY 2014, which has a final geometric mean 
cost of approximately $8,623.
c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)
    The AMA's CPT Editorial Panel created two Category III CPT codes 
that describe Magnetic Resonance Image Guided Focused Ultrasound 
(MRgFUS) used in ablation of uterine fibroids, effective January 1, 
2005: CPT codes 0071T (Focused ultrasound ablation of uterine 
leiomyomata, including MR guidance; total leiomyomata volume less than 
200 cc of tissue) and 0072T (Focused ultrasound ablation of uterine 
leiomyomata, including MR guidance; total leiomyomata volume greater or 
equal to 200 cc of tissue). The CMS HCPCS Workgroup created a third 
code related to MRgFUS, HCPCS code C9734 (Focused ultrasound ablation/
therapeutic intervention, other than uterine leiomyomata, with magnetic 
resonance (MR) guidance), effective April 1, 2013. HCPCS code C9734 
originally described the service ``with or without MR guidance''. 
However, effective July l, 2013, we changed the descriptor to only 
specify ``with magnetic resonance guidance''. For CY 2013, all three of 
the MRgFUS codes are assigned to APC 0067 (Level II Stereotactic 
Radiosurgery), with HCPCS code C9734 added to APC 0067 effective April 
1, 2013. The CY 2013 payment rate for APC 0067 is $3,300.64. For CY 
2014, as part of a proposed restructuring of the Stereotactic 
Radiosurgery (SRS) APCs and procedures, we proposed to reassign SRS 
procedures to other APCs and to maintain intraoperative radiation 
therapy (IORT) and magnetoencephalography (MEG) procedures in APC 0065. 
We proposed to reassign the service codes for MRgFUS procedures to APC 
0065 based on clinical coherence to the other procedures assigned to 
APC 0065. In addition, we proposed to rename APC 0065 ``IORT, MRgFUS, 
and MEG,'' which has a CY 2014 proposed payment rate of approximately 
$1,714 (78 FR 43593 through 43594). (The CY 2014 proposed payment rate 
reflects the corrected proposed rate in the September 6, 2013 OPPS 
Addendum B, which was posted on the CMS Web site.) The proposal to 
restructure the APCs that pay for SRS, IORT, MRgFUS, and MEG procedures 
would reduce the number of APCs under which payment is made for SRS, 
IORT, MRgFUS, and MEG procedures from four to three APCs. We note that 
there are no claims data for CPT codes 0071T and 0072T, or HCPCS code 
C9734, available for CY 2014 ratesetting purposes.
    Comment: Commenters expressed concern about the CY 2014 proposed 
reassignment of MRgFUS services to APC 0065, and stated that MRgFUS 
services are not appropriate for assignment to APC 0065 based on 
clinical and resource characteristics of other services assigned to APC 
0065. One commenter opined that MRgFUS services are more similar 
clinically to the SRS services assigned to APC 0067, in terms of 
treatment set-up, delivery of radiation, and post-procedure recovery, 
except that MRgFUS services use nonionizing radiation. This commenter 
also believed that MRgFUS services are similar in resources to the SRS 
services assigned to APC 0067, estimating hospital costs for services 
described by CPT codes 0071T and 0072T at $5,439 each, and the cost of 
the service described by HCPCS code C9734 at $6,073, which are similar 
to the proposed payment rate of APC 0067 of approximately $5,615.
    A few commenters urged CMS not to reduce the payment rates for 
MRgFUS services, as part of restructuring the SRS APCs, or to package 
payment for other services related to MRgFUS. The commenters noted that 
the CY 2014 proposal would reduce the payment rate for MRgFUS services 
by nearly half of the amount of the payment rate for APC 0067 for CY 
2013, in addition to reductions in payment as a result of the packaging 
of related radiation oncology services.
    One commenter identified a number of services performed with MRgFUS 
for which CMS has proposed to package payment and estimated the 
foregone separate payments for these services, if CMS packages them, to 
total approximately $2,800. The commenter recommended that, if CMS 
finalizes packaging of these services, CMS compensate providers for 
performance of the MRgFUS services by assigning MRgFUS procedure codes 
to either APC 0229 (Level II Endovascular Revascularization of the 
Lower Extremity), which has a proposed payment rate of approximately 
$10,314, or a New Technology APC reflecting a similar level of 
resources use. The commenter acknowledged that there are few Medicare 
claims data reporting the MRgFUS procedure codes, and stated that the 
procedures described by CPT codes 0071T and 0072T are generally 
performed on younger women and that, although HCPCS code C9734 is a new 
code effective in CY 2013, the commenter expects there will be a 
significant number of patients over age 65 with metastatic bone cancer 
who will receive treatment with the procedure described by HCPCS code 
C9734.
    Response: We do not agree with the commenter that MRgFUS procedures 
are similar to SRS procedures assigned to APC 0067 because of the 
clinical differences between MRgFUS and SRS, which is a specialized 
type of radiation therapy. We believe that MRgFUS procedures are more 
similar to the services in restructured APC 0065, which are distinct 
from SRS clinical characteristics. We note there are no claims data 
available for CPT codes 0071T and 0072T or HCPCS code C9734

[[Page 75000]]

for CY 2014 ratesetting. Regarding the cost estimates for MRgFUS 
procedures presented by the commenter, it is our longstanding policy to 
reassign procedures to APCs based on Medicare claims data that support 
reassignment, rather than relying on external cost estimates.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign CPT codes 0071T, 0072T, and HCPCS 
code C9734 to APC 0065 for CY 2014. The final rule geometric mean cost 
of APC 0065 is approximately $1,253.
    Our proposed and final packaging policies for CY 2014 are discussed 
in section II.A.3. of this final rule with comment period.
d. Flow Cytometry (APC 0433)
    For CY 2014, we proposed to reassign CPT code 88184 (Flow 
cytometry, cell surface, cytoplasmic, or nuclear marker, technical 
component only; first marker) from APC 0433 (Level II Pathology) to APC 
0344 (Level IV Pathology), with a proposed payment rate of 
approximately $273. (The proposed payment rate reflects the corrected 
proposed rate in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.) In addition, for CY 2014, we proposed to 
package payment for CPT code 88185 (Flow cytometry, cell surface, 
cytoplasmic, or nuclear marker, technical component only; each 
additional marker (list separately in addition to code for first 
marker)), which is currently assigned to APC 0342 (Level I Pathology) 
as an add-on code. We refer readers to section II.A.3. of this final 
rule with comment period for further discussion of our proposed and 
final payment methodology for add-on codes for CY 2014.
    Comment: One commenter expressed disappointment with CMS' decision 
to decrease the payment rate for flow cytometry CPT codes 88184 and 
88185.
    Response: We note that the CY 2013 payment rate for CPT code 88184 
was approximately $23 and the CY 2013 payment rate for CPT code 88185 
was approximately $13. For CY 2014, we proposed to reassign CPT code 
88184 from APC 0433 to APC 0344 with a payment rate of approximately 
$273 based on our claims data for the proposed rule.
    We also proposed to package payment for CPT code 88185 because it 
is an add-on code. We refer readers to section II.A.3. of this final 
rule with comment period for further discussion of our final payment 
methodology for add-on codes for CY 2014.
    Based on our latest hospital outpatient claims data, we decided not 
to revise the APC assignment for CPT code 88184 and instead decided to 
retain the code's assignment to APC 0433 (Level II Pathology), which is 
the same APC to which CPT code 88184 was assigned for CY 2013. Analysis 
of the claims data shows a final rule geometric mean cost of 
approximately $35 for CPT code 88184, which is similar to the final 
rule geometric mean cost of approximately $37 for APC 0433.
    After consideration of the public comment that we received and 
review of our latest hospital outpatient claims data for this final 
rule with comment period, we are revising our proposal and will 
continue to assign CPT code 88184 to APC 0433 for CY 2014. CPT code 
88184 has a final payment rate of approximately $37 for CY 2014, which 
is slightly higher than the payment rate of approximately $23 for CY 
2013. This final payment rate also can be found in Addendum B to this 
CY 2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site). The final policy for packaging CPT 
code 88185 as an add-on code for CY 2014 is discussed in section 
II.A.3. of this final rule with comment period.
e. Hormone Pellet Implant (APC 0420)
    For CY 2014, we proposed to reassign CPT code 11980 (Subcutaneous 
hormone pellet implantation (implantation of estradiol and/or 
testosterone pellets beneath the skin)) from APC 0340 (Level I Minor 
Procedures) to APC 0420 (Level II Minor Procedures), with a proposed 
payment rate of approximately $103. (The proposed payment rate reflects 
the corrected proposed rate in the September 6, 2013 OPPS Addendum B, 
which was posted on the CMS Web site.)
    In the proposed rule, we note that we proposed to make some changes 
related to APC 0340 for CY 2014. We proposed to revise the title of APC 
0340 from ``Minor Ancillary Procedures'' to ``Level I Minor 
Procedures'' and to establish a second level APC to describe minor 
ancillary procedures, specifically, APC 0420, with the title of ``Level 
II Minor Procedures,'' as listed in Addendum A to the CY 2014 OPPS/ASC 
proposed rule, which was posted on the CMS Web site. Based on our 
review of the latest CY 2012 hospital outpatient claims data, we 
believed that these changes were necessary to pay appropriately for the 
services assigned to APC 0340.
    Comment: One commenter expressed concern about the APC assignment 
of CPT code 11980 and suggested two options to address the code's APC 
assignment. Under the first option, the commenter suggested that CMS 
consider establishing a new APC that describes minor ancillary 
procedures, specifically a Level III Minor Procedures APC, and assign 
CPT code 11980 to this newly created APC. Because there are several 
procedures with varying costs assigned to APC 0340 and APC 0420, the 
commenter suggested restructuring the minor procedures APCs by 
establishing payment ranges for each level of service. In particular, 
the commenter suggested that the Level I Minor Procedures APC would 
have a geometric means cost in the range of $0 to $120, the Level II 
Minor Procedures APC would have a geometric mean cost in the range of 
$121 to $300, and the Level III Minor Procedures would have a geometric 
mean cost of greater than $300. As an alternative option, the commenter 
recommended that CMS reassign CPT code 11980 to APC 0189 (Level III 
Female Reproductive Procedure).
    Response: As the commenter stated, the procedure described by CPT 
code 11980 involves both testosterone pellets for men and estradiol 
pellets for women. Because all the procedures in APC 0189 relate to 
female procedures, we do not believe that APC 0189 would be an 
appropriate APC assignment for CPT code 11980. In addition, based on 
our review of the updated hospital outpatient claims data, we believe 
the two-level APC appropriately pays for the minor procedures that are 
currently assigned to APCs 0340 and 0420.
    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. We will reevaluate the 
APC assignment of CPT code 11980 for the CY 2015 OPPS rulemaking cycle.
    After consideration of the public comment that we received, we are 
finalizing our proposal to reassign CPT code 11980 to APC 0420, which 
has a final geometric mean cost of approximately $99 for CY 2014. The 
final CY 2014 payment rate for CPT code 11980 can be found in Addendum 
B to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
f. Peyronie Disease Injection Procedure (APC 0164)
    For CY 2014, we proposed to reassign CPT code 54200 (Injection 
procedure for peyronie disease) from APC 0164 (Level

[[Page 75001]]

II Urinary and Anal Procedures) to APC 0126 (Level I Urinary and Anal 
Procedures), with a proposed payment rate of approximately $137, based 
on its clinical and resource similarity to other procedures assigned to 
APC 0126. (The proposed payment rate reflects the corrected proposed 
rate in the September 6, 2013 OPPS Addendum B, which was posted on the 
CMS Web site.)
    Comment: One commenter expressed concern with the proposal to 
reassign CPT code 54200 to APC 0126 and requested that CMS continue to 
assign this code to APC 0164, which is the APC assignment for CY 2013. 
The commenter stated the CPT code 54200 is clinically similar to the 
procedures described by CPT codes 54220 (Irrigation of corpora 
cavernosa for priapism) and 54235 (Injection of corpora cavernosa with 
pharmacologic agent(s) (eg, papaverine, phentolamine)), which are 
assigned to APC 0164. The commenter indicated that all three procedures 
(CPT codes 54200, 54220, and 54235) involve needle placements and 
should be assigned to the same APC. In addition, the commenter 
requested that CMS establish a low geometric mean cost of $163 for APC 
0164.
    Response: We examined the latest CY 2012 hospital outpatient claims 
data, which are based on claims submitted from January 1, 2012 through 
December 31, 2012, and we agree with the commenter's suggestion to 
continue to assign CPT code 54200 to APC 0164. Our analysis reveals 
that the resource cost associated with the procedure described by CPT 
code 54200 is similar to the resource cost of the procedure described 
by CPT code 54220, which is assigned to APC 0164. Specifically, the 
geometric mean cost for CPT code 54200 is approximately $167 based on 
330 single claims (out of 351 total claims), which is similar to the 
geometric mean cost of approximately $166 for CPT code 54220 based on 
25 single claims (out of 427 total claims). Based on the claims data, 
we believe that CPT code 54200 should continue to be assigned to APC 
0164.
    With regard to the commenter's suggestion to set the geometric mean 
cost at $163 for APC 0164, we do not cap the geometric mean cost based 
on suggested amounts. The geometric mean cost is determined based on 
consideration of the costs of all of the procedures and the number of 
claims within a given APC. We refer readers to section II.A. of this 
final rule with comment period for a discussion of our methodology in 
determining the APC geometric mean costs.
    After consideration of the public comment we received, we are not 
finalizing our proposal to reassign CPT code 54200 from APC 0164 to APC 
0126 for CY 2014. Rather, we are maintaining the APC assignment for CPT 
code 54200 to APC 0164, which has a final CY 2014 geometric mean cost 
of approximately $212. The final CY 2014 payment rate for CPT code 
54200 can be found in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
g. Negative Pressure Wound Therapy (NPWT) (APC 0016)
    We established HCPCS code G0456 (Negative pressure wound therapy, 
(e.g. vacuum assisted drainage collection) using a mechanically-powered 
device, not durable medical equipment, including provision of cartridge 
and dressing(s), topical application(s), wound assessment, and 
instructions for ongoing care, per session; total wound(s) surface area 
less than or equal to 50 square centimeters) and HCPCS code G0457 
(Negative pressure wound therapy, (e.g. vacuum assisted drainage 
collection) using a mechanically-powered device, not durable medical 
equipment, including provision of cartridge and dressing(s), topical 
application(s), wound assessment, and instructions for ongoing care, 
per session; total wound(s) surface area greater than 50 square 
centimeters), effective January 1, 2013, to provide a payment mechanism 
for negative pressure wound therapy services furnished through a 
disposable device. We assigned these services to APC 0016 (Level IV 
Debridement & Destruction), which has a CY 2013 payment rate of 
approximately $210. For CY 2014, we proposed to continue to assign 
HCPCS codes G0456 and G0457 to APC 0016, with a proposed payment rate 
of approximately $272. (The proposed payment rate reflects the 
corrected proposed rate in the September 6, 2013 OPPS Addendum B, which 
was posted on the CMS Web site.)
    Comment: Some commenters requested that CMS reassign HCPCS codes 
G0456 and G0457 from APC 0016 to proposed APC 0186 (Level III Skin 
Repair). The commenters believed that, based on clinical homogeneity 
and resource costs of the other procedures assigned to proposed APC 
0186, proposed APC 0186 is the most appropriate assignment for HCPCS 
codes G0456 and G0457. Another commenter stated that the cost of 
providing NPWT is in the range of $450 to $500, which more closely 
aligns with the CY 2013 payment rate of approximately $393 for proposed 
APC 0135 (Level IV Skin Repair). One commenter believed that HCPCS 
codes G0456 and G0457 are clinically similar to the wound care 
procedures described by CPT codes 12020, 13100, 13101, 15002, and 
15003, which were assigned to APC 0135 for CY 2013.
    Response: We disagree with the commenters' assertion that HCPCS 
codes G0456 and G0457 are similar, in terms of clinical homogeneity or 
resource costs, to CPT codes 12020, 13100, 13101, and 15002. Our 
analysis of the latest hospital outpatient claims data indicates that 
the resource costs for the services described by CPT codes 12020, 
13100, 13101, and 15002 are in the range of $474 to $570. Specifically, 
the geometric mean cost for CPT code 12020 is approximately $522 based 
on 1,082 single claims (out of 2,254 total claims), for CPT code 13100, 
approximately $474 based on 81 single claims (out of 341 total claims), 
for CPT code 13101, approximately $570 based on 1,198 single claims 
(out of 3,725 total claims), and for CPT code 15002, approximately $547 
based on 657 single claims (out of 4,119 total claims). (We have not 
included the geometric mean cost for CPT code 15003 in this discussion 
because it is an add-on code that will be packaged in the CY 2014 OPPS 
update.) We believe that the resource costs for the services described 
by the negative pressure wound therapy HCPCS codes G0456 and G0457 may 
be slightly higher than the resource costs for the services described 
by the negative pressure wound therapy CPT codes 97605 and 97606, but 
not as significant as those services described by CPT codes 12020, 
13100, 13101, and 15002. Our claims data show that the geometric mean 
cost for HCPCS code 97605 is approximately $100 based on 66,355 single 
claims (out of 85,285 total claims), and approximately $140 for CPT 
code 97606 based on 7,681 single claims (out of 10,771 total claims). 
Based on the nature of the procedure, the advice from our medical 
advisors, and our claims data for CPT codes 12020, 13100, 13101, 15002, 
97605, and 97606, we believe that APC 0016, which has a geometric mean 
cost of approximately $276, is the more appropriate APC assignment for 
HCPCS codes G0456 and G0457 because these procedures describe 
debridement-type services rather than skin repair procedures.
    Because HCPCS codes G0456 and G0457 are new for CY 2013, we expect 
to have claims data next year, at which time, we will reevaluate the 
APC assignments for both codes in preparation for the CY 2015 
rulemaking cycle. We remind hospitals that we

[[Page 75002]]

review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS.
    Comment: One commenter who responded to the CY 2013 OPPS/ASC final 
rule with comment period believed that the CY 2013 payment rate of 
approximately $210 for both HCPCS codes G0456 and G0457 is 
inappropriate considering that the current national average selling 
price for the device used with the procedure is approximately $270. In 
addition, the commenter requested that CMS revise the status indicator 
of HCPCS codes G0456 and G0457 from ``T'' (Significant Procedure, 
Multiple Reduction Applies) to ``S'' (Significant Procedure, Not 
Discounted When Multiple) in order to not undercompensate hospitals for 
performing the procedure when it is performed with other services on 
the same day.
    Response: For the CY 2014 update, the payment rate for HCPCS codes 
G0456 and G0457 will increase from $210 for CY 2013 to approximately 
$275 for CY 2014. As stated above, because HCPCS codes G0456 and G0457 
are new for CY 2013, we expect to have claims data next year, at which 
time we will reevaluate the APC assignments for both codes in 
preparation for the CY 2015 rulemaking cycle.
    With regards to the status indicator assignment of HCPCS codes 
G0456 and G0457, we note that all codes assigned to APC 0016 are 
crosswalked to status indicator ``T'' and have no corresponding ``S'' 
status indicator. In addition, we do not believe that every service or 
procedure should be paid at 100 percent. The multiple procedure 
reduction for status indicator ``T'' services recognizes that 
efficiencies are gained when multiple procedures are performed in a 
single session. We believe that this policy is appropriately applied to 
the wound treatment procedures in question.
    After consideration of the public comments that we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign HCPCS codes G0456 and G0457 to APC 0016, which has a final CY 
2014 geometric mean cost of approximately $276. The final CY 2014 
payment rate for HCPCS codes G0456 and G0457 can be found in Addendum B 
to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
h. Platelet Rich Plasma (PRP) (APC 0327)
    For CY 2014, we proposed to continue to assign HCPCS code G0460 
(Autologous platelet rich plasma for chronic wounds/ulcers, including 
phlebotomy, centrifugation, and all other preparatory procedures, 
administration and dressings, per treatment) to APC 0013 (Level II 
Debridement & Destruction) with a proposed payment rate of 
approximately $83. (The proposed payment rate reflects the corrected 
proposed rate in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.)
    Comment: Many of the commenters disagreed with the proposed APC 
assignment for HCPCS code G0460. Several commenters stated that the 
proposed payment rate of approximately $83 for APC 0013 does not 
adequately pay for the cost of providing the service described by HCPCS 
code G0460. Some of the commenters reported that the actual cost to 
provide PRP services is between $400 and $450. Other commenters 
reported a specific cost of $458 to perform the procedure. Most of the 
commenters stated that HCPCS code G0460 is inappropriately assigned to 
APC 0013 and urged CMS to reassign the code to APC 0135 (Level IV Skin 
Repair), which had a proposed payment rate of approximately $862. One 
commenter stated that PRP services are more analogous to the tissue-
based wound procedures that are assigned to APC 0135 (Level III Skin 
Repair) for CY 2013, which has a payment rate of $393.38 for the first 
100cm2.
    Response: We reviewed all the codes assigned to the Debridement & 
Destruction APCs as well as the Skin Repair APCs. After further 
consultation with our medical advisors, we agree with the commenters 
that HCPCS code G0460 would be more appropriately assigned to one of 
the Skin Repair APCs. For CY 2014, there are four Skin Repair APCs. We 
have renumbered these APCS with sequential numbers as follows: (1) APC 
0326 (Level I Skin Repair); (2) APC 0327 (Level II Skin Repair); (3) 
APC 0328 (Level III Skin Repair); and (4) APC 0329 (Level IV Skin 
Repair). After consideration of the public comments we received, and 
based on the clinical comparability of the procedure and the 
approximate resource costs associated with the procedure as compared to 
other procedures assigned to the Skin Repair APCs, we believe that APC 
0327 is the most appropriate APC assignment for HCPCS code G0460. APC 
0327 has a final geometric mean cost of approximately $411 for CY 2014. 
The final CY 2014 payment rate for HCPCS code G0460 can be found in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site).
    It has been our practice since the implementation of the OPPS in 
2000 to review, on an annual basis, the APC assignments for the 
procedures and services paid under the OPPS. We will review the APC 
assignment for HCPCS code G0460 and determine whether an APC 
reassignment is necessary for the CY 2015 ratesetting.
i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium 
(HEU) Sources (APC 1442)
    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. Therefore, for CY 2013, we finalized a 
policy to provide an additional payment of $10 for the marginal cost 
for radioisotopes produced from non-HEU sources over the costs for 
radioisotopes produced by HEU sources (77 FR 68316). Under this policy, 
hospitals report HCPCS code Q9969 (Tc-99m from non-highly enriched 
uranium source, full cost recovery add-on, per study dose) once per 
dose along with any diagnostic scan or scans furnished using Tc-99m as 
long as the Tc-99m doses used can be certified by the hospital to be at 
least 95 percent derived from non-HEU sources.
    Comment: Several commenters requested changes in the additional 
payment for Technetium-99m produced from non-highly enriched uranium 
(non-HEU) sources, as described by HCPCS code Q9969. One commenter was 
concerned that CMS did not utilize stakeholder feedback to craft a more 
effective payment methodology, such as ensuring that the payment leads 
to Full Cost Recovery higher in the supply chain, or paying 
radiopharmacies for the additional costs of maintaining segregated 
channels for HEU and LEU.

[[Page 75003]]

One commenter was concerned about the beneficiary's responsibility for 
a 20-percent copayment. That commenter also believed that the $10 
payment was too low. Specific changes requested by commenters included 
elimination of the copayment, increase in the payment rate, expanding 
it to other radioisotopes, and modifying the payment in response to 
industry suggestions during stakeholder meetings and/or paying 
separately for diagnostic radiopharmaceuticals.
    Response: We implemented this payment for a specific purpose based 
on industry and government concerns and considering stakeholder 
requests and stakeholder feedback. We determined 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 a probability that those costs will not be passed on uniformly as 
the industry converts. Therefore, we used our authority under section 
1833(t)(2)(E) of the Act to ensure payment equity among hospitals to 
propose and finalize a policy through rulemaking that created this 
additional payment to address the incremental cost of obtaining Tc-99m 
from the new sources of supply. We stated in our CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68316) that our expectation was that 
the transition to non-HEU sourced Mo-99 would be completed within 4 to 
5 years and that there might be a need to make differential payments 
for a period of 4 to 5 years. We further stated that we would reassess, 
and propose if necessary, on an annual basis, whether such an 
adjustment continued to be necessary and whether any changes to the 
adjustment were warranted. We have reassessed this payment for CY 2014 
and have not identified any new information that would cause us to 
modify the payment at this time. We do not agree with the commenters' 
suggestion to eliminate the beneficiary's copayment because section 
1833(t)(8) of the Act and Sec. Sec.  419.41 through 419.45 of the 
regulations require a beneficiary copayment.

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 three device categories eligible for pass-
through payment. These device categories are described by HCPCS codes 
C1830 (Powered bone marrow biopsy needle) and C1840 (Lens, intraocular 
(telescopic)), which we made effective for pass-through payment as of 
October 1, 2011; and HCPCS code C1886 (Catheter, extravascular tissue 
ablation, any modality (insertable)), which we made effective for pass-
through payment as of January 1, 2012. Recognizing that these three 
device categories were eligible for at least 2, but not more than 3, 
years of pass-through status, in the CY 2013 OPPS/ASC final rule with 
comment period, we finalized the expiration of pass-through payment for 
all three of these HCPCS codes, which will expire after December 31, 
2013 (77 FR 68352). Therefore, in accordance with our established 
policy, after December 31, 2013, we will package the respective costs 
of the HCPCS codes C1830, C1840, and C1886 devices into the costs of 
the procedures with which the devices are reported in the hospital 
claims data used in OPPS ratesetting.
b. CY 2014 Policy
    As previously stated, we 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). In the CY 2013 OPPS/ASC proposed rule (78 FR 43595), in the 
case of device category C1840, we proposed that the device costs be 
packaged only when billed with CPT code 0308T (Insertion of ocular 
telescope prosthesis including removal of crystalline lens), which 
became effective on July 1, 2012. We announced the policy that device 
category C1840 must be billed with CPT code 0308T, effective July 1, 
2012, in Transmittal 2483, dated June 8, 2012. CPT code 0308T is 
currently assigned to APC 0234 (Level IV Anterior Segment Eye 
Procedures), which had a proposed geometric mean cost of approximately 
$1,794. When the HCPCS code C1840 device costs are packaged into the 
cost of CPT code 0308T (and the equivalent procedure described by HCPCS 
code C9732 for the first half of 2012), the proposed geometric mean 
cost of the procedure is approximately $15,249. Based on this geometric 
mean cost for CPT code 0308T, we proposed to create new APC 0351 (Level 
VII Anterior Segment Eye Procedures), and to assign CPT code 0308T to 
this APC, which had a proposed geometric mean cost of approximately 
$15,249. We stated in the proposed rule that the geometric mean cost 
for CY 2014 that will be reported in the final rule for this new APC 
will depend on the geometric mean cost of CPT code 0308T (including the 
cost of HCPCS code C1840) as calculated using claims data available for 
the final rule.
    Comment: One commenter requested that CMS extend the pass-through 
payment period of HCPCS code C1830 because one local Medicare 
contractor had denied ASC payment at least twice because the Medicare 
claim form was reportedly incorrectly completed. The commenter stated 
that there is a lack of consistent guidance on how ASC claims for pass-
through items are to be submitted.
    Response: We are not extending the period of pass-through payment 
of HCPCS code C1830. Under the ASC payment system, Sec.  416.164(b)(2) 
of the regulations requires that we pay separately for certain 
implantable items and services that have pass-through status under the 
OPPS.
    HCPCS code C1830 was made effective for pass-through payment as of 
October 1, 2011, and we finalized a December 31, 2013 expiration date 
from pass-through payment for HCPCS code C1830 under the OPPS in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68353). We cannot 
extend the pass-through payment status of HCPCS code C1830 through CY 
2014, because such an extension would make

[[Page 75004]]

the pass-through payment status effective longer than the maximum 3-
year period permitted under section 1833(t)(6)(B)(iii) of the Act. As 
we stated in the proposed rule, after December 31, 2013, the costs for 
devices described by HCPCS code C1830 will be packaged into the costs 
of the procedure with which the device is reported in the hospital 
claims data used in the development of the OPPS relative payment 
weights that will be used to establish the ASC payment rates for CY 
2014 (78 FR 43638). Therefore, we are not altering the decision to 
expire category C1830 from pass-through payment as of January 1, 2014, 
or our ASC policy. We are not aware of systematic problems with billing 
of HCPCS code C1830 either in the OPPS payment system or the ASC 
payment system. The commenter cited that there were several instances 
in which one local contractor rejected HCPCS code C1830 claims from an 
ASC. Our OPPS claims data reflect that nearly 1,900 claims from for 
HCPCS code C1830 were processed with a geometric mean cost of 
approximately $126. Therefore, it appears that most HCPCS code C1830 
pass-through payment claims were adjudicated successfully in the OPPS, 
and we believe this is true in the ASC setting as well. Because pass-
through devices are contractor priced in the ASC, there may be more 
interactions between ASCs and MACs on pass-through claims than is 
typical for hospitals. We are not aware of widespread problems with ASC 
processing of claims for HCPCS code C1830.
    Comment: One commenter concurred with the proposed assignment of 
CPT code 0308T to new APC 0351, as well as the designation of this 
procedure as device-intensive in the ASC setting. The commenter also 
urged CMS to only use claims from hospitals that are customers of the 
manufacturer of the HCPCS code C1840 device as claims used with CPT 
code 0308T because that company is reportedly the sole manufacturer of 
the device. The commenter noted that four claims were from a hospital 
that was not a customer, and which apparently reported costs with CPT 
code 0308T that were much too low to represent the HCPCS code C1840 
device cost.
    Response: We appreciate the commenter's support for the APC 
assignment of CPT code 0308T. Regarding the recommendation to use 
claims only from customers of the device manufacturer, we do not 
generally screen claims in the manner suggested by the commenter.
    After consideration of the public comments we received, we are 
maintaining our previous decision to expire device categories C1830, 
C1840, and C1886 from pass-through payment status, which we finalized 
in the CY 2013 OPPS/ASC final rule with comment period, and we are 
finalizing our proposal to package the costs of these devices with the 
procedures with which they are billed. We also are finalizing for CY 
2014 the proposed assignment of CPT code 0308T to APC 0351. The final 
CY 2014 geometric mean cost of APC 0351 is approximately $15,606.
    As we indicated in the CY 2014 OPPS/ASC proposed rule, with the 
expiration of device categories C1830, C1840, and C1886 from pass-
through payment status at the end of CY 2013, there are no currently 
active categories for which we would expire pass-through status in CY 
2014. If we create new device categories for pass-through payment 
status during the remainder of CY 2013 or during CY 2014, we will 
propose future expiration dates in accordance with the statutory 
requirement that they be eligible for pass-through payments for at 
least 2, but not more than 3, years from the date on which pass-through 
payment for any medical device described by the category may first be 
made. (There is one new device category eligible for pass-through 
payment that we created effective October 1, 2013, C1841 (Retinal 
prosthesis, includes all internal and external components). However, 
this category will not expire in CY 2014.)
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 (the cost of the 
device) exceeds the portion of the otherwise applicable Medicare 
outpatient department fee schedule amount (the APC payment amount) 
associated with the device. We have an established policy to estimate 
the portion of each APC payment rate that could reasonably be 
attributed to the cost of the associated devices that are eligible for 
pass-through payments (66 FR 59904) for purposes of estimating the 
portion of the otherwise applicable APC payment amount associated with 
pass-through devices. For eligible device categories, we deduct an 
amount that reflects the portion of the APC payment amount that we 
determine is associated with the cost of the device, defined as the 
device APC offset amount, from the charges adjusted to cost for the 
device, as provided by section 1833(t)(6)(D)(ii) of the Act, to 
determine the eligible device's pass-through payment amount. We have 
consistently used an established methodology to estimate the portion of 
each APC payment rate that could reasonably be attributed to the cost 
of an associated device eligible for pass-through payment, using claims 
data from the period used for the most recent recalibration of the APC 
rates (72 FR 66751 through 66752). We establish and update the 
applicable device APC offset amounts for eligible pass-through device 
categories through the transmittals that implement the quarterly OPPS 
updates.
    Currently, we have published a list of all procedural APCs with the 
CY 2013 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 2014 Policy
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), we proposed to 
continue, for CY 2014, our established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
(that is, reflect) the cost of an associated device eligible for pass-
through payment, using claims data from the period used for the most 
recent recalibration of the APC payment rates. We proposed to continue 
our policy, for CY 2014, that the pass-through evaluation process and 
pass-

[[Page 75005]]

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)).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), for CY 2014, 
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 any new device pass-through 
category that includes a newly eligible implantable biological 
beginning in CY 2014 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 (78 FR 43596).
    In addition, in the CY 2014 OPPS/ASC proposed rule (78 FR 43596), 
we proposed to update the list of all procedural APCs with the final CY 
2014 portions of the APC payment amounts that we determine are 
associated with the cost of devices on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html so that this information is available 
for use by the public in developing potential CY 2014 device pass-
through payment applications and by CMS in reviewing those 
applications.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing them for CY 2014 without modification. 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 2014 
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 2014 device pass-through 
payment applications and by CMS in reviewing those applications.
3. Changes to Device Pass-Through Criteria: Integral and Subordinate 
Criterion
    We established a number of specific criteria that new medical 
devices must meet to be considered eligible for pass-through payments 
under section 1833(t)(6) of the Act (42 CFR 419.66; 65 FR 18480 and 65 
FR 47672 through 47674). In the CY 2014 OPPS/ASC proposed rule (78 FR 
43596), we proposed to change one of these criteria for device pass-
through payment, described at Sec.  419.66(b)(3), which requires that a 
device ``is an integral and subordinate part of the service furnished, 
is used for one patient only, comes in contact with human tissue, and 
is surgically implanted or inserted whether or not it remains with the 
patient when the patient is released from the hospital'' (65 FR 47674).
    Regarding the existing regulation at Sec.  419.66(b)(3), applicants 
for device pass-through status have continued to ask what is meant by 
the phrase ``integral and subordinate part of the service furnished,'' 
and more specifically, what the terms ``integral'' and ``subordinate'' 
mean. These terms have not been specifically defined or described in 
prior regulatory language, preamble, or guidance. In an effort to 
reduce further confusion and ensure all applicants understand the 
intent of the existing regulation, we proposed to provide guidance on 
the meaning of the term ``integral'' and delete the term 
``subordinate'' from the existing regulation in the proposed rule. In 
the proposed rule, we stated that we have interpreted the term 
``integral'' to mean that the device is necessary to furnish or deliver 
the primary procedure with which it is used. For example, a pacemaker 
is integral to the procedure of implantation of a pacemaker. We have 
interpreted the accompanying term ``subordinate'' in conjunction with 
the term ``integral,'' in that a ``subordinate'' device is dependent 
upon the overall procedure of implanting the device, and we have not 
interpreted the term separately, or applied the term ``subordinate'' as 
a separate criterion. Because of confusion among pass-through status 
applicants regarding the use of both terms ``integral'' and 
``subordinate,'' and because we do not believe it is necessary that the 
regulation specifically state that a device must be subordinate to the 
procedure, in addition to the requirement that a device be integral to 
the procedure, and have not treated ``subordinate'' as a separate 
criterion, as previously explained, we proposed to delete the term 
``subordinate'' from this criterion's regulatory text under existing 
Sec.  419.66(b)(3). The proposed revised Sec.  419.66(b)(3) regulatory 
language read as follows: ``The device is an integral part of the 
service furnished, is used for one patient only, comes in contact with 
human tissue, and is surgically implanted or inserted, whether or not 
it remains with the patient when the patient is released from the 
hospital.''
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing, without modification, our proposal to delete the 
term ``subordinate'' from this criterion's regulatory text under 
existing Sec.  419.66(b)(3). The final revised Sec.  419.66(b)(3) 
regulatory language reads as follows: ``The device is an integral part 
of the service furnished, is used for one patient only, comes in 
contact with human tissue, and is surgically implanted or inserted, 
whether or not it remains with the patient when the patient is released 
from the hospital.''

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

[[Page 75006]]

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. Policy for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597), 
beginning in CY 2014, we proposed to modify our existing policy of 
reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. For CY 
2013 and prior years, our policy has been to reduce OPPS payment by 100 
percent of the device offset amount when a hospital furnishes a 
specified device without cost or with a full credit and by 50 percent 
of the device offset amount when the hospital receives partial credit 
in the amount of 50 percent or more of the cost for the specified 
device. For CY 2014, we proposed to reduce OPPS payment, for the 
applicable APCs listed in Table 17 of the proposed rule, by the full or 
partial credit a hospital receives for a replaced device. Specifically, 
under this proposed policy for CY 2014, hospitals would be required to 
report the amount of the credit in the amount portion for value code 
``FD'' (Credit Received from the Manufacturer for a Replaced Medical 
Device) when the hospital receives a credit for a replaced device 
listed in Table 18 of the proposed rule that is 50 percent or greater 
than the cost of the device. Under this proposal, hospitals would no 
longer be required to append the ``FB'' or ``FC'' modifier when 
receiving a device at no cost or with a full or partial credit.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597), 
for CY 2014, we proposed to continue using the three criteria 
established in the CY 2007 OPPS/ASC final rule with comment period for 
determining the APCs to which our modified CY 2014 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 that we continue to believe these criteria 
are appropriate because no cost devices and device credits are likely 
to be associated with particular cases only when the device must be 
reported on the claim and is of a type that is implanted and remains in 
the body when the beneficiary leaves the hospital. We believe that the 
reduction in payment is appropriate only when the cost of the device is 
a significant part of the total cost of the APC into which the device 
cost is packaged, and that the 40-percent threshold is a reasonable 
definition of a significant cost.
    Comment: A majority of commenters supported CMS' proposed 
adjustment to the OPPS payment for no cost/full credit and partial 
credit devices, while some commenters requested that CMS rescind its 
proposal because they believed it would cause additional administrative 
burden. One commenter argued that using the ``FD'' value code 
methodology in the OPPS would lead to inaccuracy of claims. One 
commenter stated that, in some cases, if a full credit were received, 
the entire APC payment would be consumed by the credit and the hospital 
would receive no payment for the procedural portion of the service. 
That commenter suggested that CMS develop a floor for the offset and 
urged CMS to work with hospital stakeholders to better understand the 
overall impact to hospitals and to ensure that hospitals would be 
appropriately paid for the procedural aspect of the device/lead 
replacement. Another commenter requested that CMS remove APCs 0082, 
0083 0104, 0229, 0319, and 0656 from the final listing of APCs covered 
by the no cost/full credit policy.
    Response: We appreciate the support of our proposal by the majority 
of commenters. We disagree with commenters' assertion that the proposed 
change from the ``FB''/``FC'' modifiers to the ``FD'' value code for 
the adjustment to OPPS payment for no cost/full credit and partial 
credit devices would cause added administrative burden. We believe that 
the use of the ``FD'' value code will not cause added administrative 
burden for hospitals. We also disagree with the assertion that using 
the ``FD'' value code methodology in the OPPS would lead to an 
inaccuracy in claims. We believe that the use of the ``FD'' value code 
methodology could lead to greater accuracy in our claims data. However, 
we are sensitive to the commenter's concerns that, in some cases, if a 
full credit were received, the entire APC payment would be consumed by 
the credit and the hospital would receive no payment for the nondevice 
portion of the costs related to the service. Therefore, we are limiting 
the OPPS payment deduction for the applicable APCs listed below in 
Table 30 of this final rule with comment period to the total amount of 
the device offset when the ``FD'' value code appears on a claim. 
Hospitals would still be required to report the amount of the credit in 
the amount portion for value code ``FD'' when the hospital receives a 
credit for a replaced device listed in Table 18 of the proposed rule 
that is 50 percent or greater than the cost of the device. We continue 
to believe that APCs 0082, 0083, 0104, 0229, 0319, and 0656 are 
appropriately identified as APCs to which the no cost/full credit and 
partial credit device adjustment policy will apply for CY 2014.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal to modify our existing policy of 
reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. 
Specifically, we are finalizing our proposal to require hospitals to 
report the amount of the credit in the amount portion for value code 
``FD'' (Credit Received from the Manufacturer for a Replaced Medical 
Device) when the hospital receives a credit for a replaced device 
listed in Table 31 of this final rule with comment period that is 50 
percent or greater than the cost of the device. We also are finalizing 
our proposal to limit the OPPS payment deduction for the applicable 
APCs listed below in Table 30 of this final rule with comment period to 
the total amount of

[[Page 75007]]

the device offset when the ``FD'' value code appears on a claim.
    We proposed to update the lists of APCs and devices to which the 
proposed modified no cost/full credit and partial credit device 
adjustment policy would apply for CY 2014, consistent with the three 
criteria discussed earlier in this section, based on the final CY 2012 
claims data available for the CY 2014 OPPS/ASC final rule with comment 
period.
    We examined the offset amounts calculated from the CY 2014 final 
rule data and the clinical characteristics of the final CY 2014 APCs to 
determine which APCs meet the criteria for CY 2014. Based on the CY 
2012 claims data available for this final rule with comment period, we 
are not making any changes to the proposed lists of APCs and devices to 
which this modified policy applies.
    Table 30 below lists the APCs to which the finalized modified 
payment adjustment policy for no cost/full credit and partial credit 
devices applies in CY 2014.
    Table 31 below lists the devices to which the finalized modified 
payment adjustment policy for no cost/full credit and partial credit 
devices applies in CY 2014.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

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 of 1999 
(BBRA) (Pub. L. 106-113), this provision requires the Secretary to make 
additional payments to hospitals for: current orphan drugs, as 
designated under section 526 of the Federal Food, Drug, and Cosmetic 
Act (Pub. L. 107-186); current drugs and biologicals and brachytherapy 
sources used in cancer therapy; and current radiopharmaceutical drugs 
and biologicals. ``Current'' refers to drugs or biologicals that are 
outpatient hospital services under Part B for which payment was made on 
the first date the hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and biologicals that were not being paid for as an HOPD 
service as of December 31, 1996 and whose cost is ``not insignificant'' 
in relation to the OPPS payments for the procedures or services 
associated with the new drug or biological. For pass-through payment 
purposes, radiopharmaceuticals are included as ``drugs.'' As required 
by statute, transitional pass-through payments for a drug or biological 
described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a 
period of at least 2 years, but not more than 3 years, after the 
payment was first made for the product as a hospital outpatient service 
under Medicare Part B. Proposed CY 2014 pass-through drugs and 
biologicals and their designated APCs were assigned status indicator 
``G'' in Addenda A and B to the proposed rule, which are available via 
the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. If the drug or biological is covered under 
a competitive acquisition contract under section 1847B of the Act, the 
pass-through payment amount is determined by the Secretary to be equal 
to the average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary. However, we note that the 
Part B drug competitive acquisition program (CAP) has been postponed 
since CY 2009, and such a program has not been reinstated for CY 2014.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64. These regulations specify 
that the pass-through payment equals the amount determined under 
section 1842(o) of the Act minus the portion of the APC payment that 
CMS determines is associated with the drug or biological. Section 1847A 
of the Act establishes the average sales price (ASP) methodology, which 
is used for payment for drugs and biologicals described in section 
1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including the ASP, the wholesale acquisition cost 
(WAC), and the average wholesale price (AWP). In this final rule with 
comment period, the term ``ASP methodology'' and ``ASP-based'' are 
inclusive of all data sources and methodologies described therein. 
Additional information on the ASP methodology can be found on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2013
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43598), we proposed 
that the pass-through status of 15 drugs and biologicals would expire 
on December 31, 2013, as listed in Table 19 of the proposed rule (78 FR 
43599). 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, 2013. These drugs and biologicals were approved for pass-
through status on or before January 1, 2012. With the exception of 
those groups of drugs and biologicals that are always packaged when 
they do not have pass-through status, specifically diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, and our new 
groups of policy packaged products described in section II.A.3. of the 
proposed rule, namely drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure and 
drugs and biologicals that function as supplies when used in a surgical 
procedure, 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 $90 for CY 2014), as discussed further in section V.B.2. of this 
final rule with comment period. If the estimated per day cost for the 
drug or biological is less than or equal to the applicable OPPS drug 
packaging threshold, we 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 2014, as discussed further in 
section V.B.3. of this final rule with comment period).
    Comment: One commenter recommended that CMS provide pass-through 
status for new drugs, specifically diagnostic radiopharmaceuticals, for 
a full 3-year period. The commenter asserted that providing pass-
through status for 3 years would help provide a more current and 
accurate data set on which to base payment for the associated nuclear 
medicine procedure into which the radiopharmaceutical is subsequently 
packaged. To provide for a full 3-year pass-through period, the 
commenter recommended that the pass-through status for drugs and 
biologicals expire on a quarterly basis rather than on an annual basis.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74287), the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68363), and as described in section V.A. of this 
final rule with comment period, section 1833(t)(6)(C)(i)(II) of the Act 
permits CMS to make pass-through payments for a period of at least 2 
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 appropriately facilitates 
dissemination of these new products into clinical practice and 
facilitates the collection of sufficient hospital claims data 
reflective

[[Page 75011]]

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, we begin pass-through payment on a quarterly 
basis, depending on when applications are submitted to us for 
consideration. We are confident that the period of time for which 
drugs, biologicals, contrast agents, and radiopharmaceuticals receive 
pass-through status, which is at least 2 but no more than 3 years, is 
appropriate for CMS to collect the sufficient amount of data to make a 
packaging determination. 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.
    Comment: One commenter stated that the pass-through status for 
HCPCS code Q4131 (Epifix, per square centimeter) should not expire on 
December 31, 2013, because this product has not received pass-through 
payments for a period of at least 2 years after the payment was first 
made for this product as a hospital outpatient service under Medicare 
Part B, as required by statute. The commenter indicated that pass-
through payment for HCPCS code Q4131 was first made in February 2012.
    Response: Upon review of our CY 2012 claims data, we agree with the 
commenter that HCPCS code Q4131 has not received pass-through payments 
for the minimum period of ``at least 2 years'' as required by statute. 
Therefore, we are not finalizing our proposal to expire the pass-
through status for HCPCS code Q4131 on December 31, 2013.
    After consideration of the public comments we received, we are 
modifying our proposal to expire the pass-through status of the 15 
drugs and biologicals that were listed in Table 19 of the CY 2014 OPPS/
ASC proposed rule (78 FR 43599). The pass-through status for HCPCS code 
Q4131 will not expire on December 31, 2013, but will continue for CY 
2014. Table 32 lists the drugs and biologicals for which pass-through 
status will expire on December 31, 2013, as well as the final status 
indicators and the final APC assignments for these drugs and 
biologicals for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.331


[[Page 75012]]


3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43599), we proposed to 
continue pass-through status in CY 2014 for 18 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, 2013. These drugs and biologicals, which were approved for 
pass-through status between April 1, 2012 and July 1, 2013, were listed 
in Table 20 of the proposed rule (78 FR 43600). The APCs and HCPCS 
codes for these drugs and biologicals approved for pass-through status 
through April 1, 2013 were assigned status indicator ``G'' in Addenda A 
and B of the proposed rule. Addenda A and B for the proposed rule are 
available via the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. Payment for drugs and biologicals with pass-through 
status under the OPPS is currently made at the physician's office 
payment rate of ASP+6 percent. We stated in the proposed rule that we 
believe it is consistent with the statute to propose to continue to 
provide payment for drugs and biologicals with pass-through status at a 
rate of ASP+6 percent in CY 2014, which is the amount that drugs and 
biologicals receive under section 1842(o) of the Act.
    Therefore, for CY 2014, 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 
2014. We proposed that a $0.00 pass-through payment amount would be 
paid for most pass-through drugs and biologicals under the CY 2014 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 policy-packaged drugs (which include contrast 
agents, diagnostic radiopharmaceuticals, anesthesia drugs, and our new 
groups of policy packaged products described in section II.A.3. of this 
final rule with comment period, namely drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies when used in a surgical procedure), we proposed that their 
pass-through payment amount would be equal to ASP+6 percent for CY 2014 
because, if not on pass-through status, payment for these products 
would be packaged into the associated procedure.
    In addition, we proposed to continue to update pass-through payment 
rates on a quarterly basis on the CMS Web site during CY 2014 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).
    In CY 2014, as is consistent with our CY 2013 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 2014, 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 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: One commenter requested that CMS provide a higher payment 
amount for radiopharmaceuticals that are granted pass-through status.
    Response: We note that, for CY 2014, consistent with our CY 2013 
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 2014, we 
proposed to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS to account for the acquisition as 
well as pharmacy overhead and handling costs. We continue to believe 
that a single payment is appropriate for diagnostic 
radiopharmaceuticals with pass-through status in CY 2014, 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 handling and overhead costs.
    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 2014, we will follow the standard ASP methodology to 
determine the pass-through payment rate that drugs receive under 
section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not 
available for a radiopharmaceutical, we will provide pass-through 
payment at WAC+6 percent, the equivalent payment provided to pass-
through drugs and biologicals without ASP information. If WAC 
information 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. of this final rule 
with comment period, over the last 6 years, we implemented a policy 
whereby payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and anesthesia drugs is packaged 
into payment for the associated procedure. In the CY 2014 OPPS/ASC 
proposed rule, we proposed to continue the packaging of these items, 
and we also proposed new groups of policy-packaged products described 
in section II.A.3. of the proposed rule, namely drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test

[[Page 75013]]

or procedure and drugs and biologicals that function as supplies when 
used in a surgical procedure, regardless of their per day cost, in CY 
2014. As stated earlier, pass-through payment is the difference between 
the amount authorized under section 1842(o) of the Act and the portion 
of the otherwise applicable OPD fee schedule that the Secretary 
determines is associated with the drug or biological. Because payment 
for a drug that is policy-packaged would otherwise be packaged if the 
product did not have pass-through 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 2013, we proposed to continue 
to set the associated copayment amount to zero for CY 2014 for pass-
through diagnostic radiopharmaceuticals, contrast agents, and 
anesthesia drugs that would otherwise be packaged if the item did not 
have pass-through status. We also proposed to set the associated 
copayment amount to zero for the additional categories of policy-
packaged products proposed for CY 2014 described in section II.A.3. of 
the proposed rule.
    The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical, contrast agent, anesthesia drug, and 
the additional categories of policy-packaged products proposed for CY 
2014 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 are available via the 
Internet on the CMS Web site).
    Comment: Commenters supported the CY 2014 proposal to continue to 
set the associated copayment amounts to zero for pass-through 
diagnostic radiopharmaceuticals, contrast agents, and other drugs and 
biologicals that would otherwise be packaged if the product did not 
have pass-through status. The commenters noted that this policy is 
consistent with statutory requirements and provides cost-saving 
benefits to beneficiaries. One commenter requested that CMS expand the 
$0 copayment policy to pass-through therapeutic radiopharmaceuticals as 
well.
    Response: We appreciate the commenters' support of our proposal. 
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 would otherwise be packaged if the item 
did not have pass-through status. However, therapeutic 
radiopharmaceuticals without pass-through status are not packaged but 
are paid at ASP+6 percent. Therefore, the copayment for a therapeutic 
radiopharmaceutical with pass-through status cannot be zero but must be 
based on the payment amount for the therapeutic radiopharmaceutical 
when it does 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, contrast agents, and anesthesia drugs that would 
otherwise be packaged if the item did not have pass-through status to 
zero for CY 2014. We also are finalizing our proposal to extend this 
policy to the additional categories of policy-packaged drugs and 
biologicals that have pass-through status, and to set a copayment 
amount of zero for these drugs and biologicals for CY 2014.
    The 26 drugs and biologicals that will continue to have pass-
through status for CY 2014 or have been granted pass-through status as 
of January 2014 are shown in Table 33 below. 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. Table 33 includes 
those coding changes.

BILLING CODE 4120-01-P

[[Page 75014]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.332


[[Page 75015]]


BILLING CODE 4120-01-C
4. Provisions for Reducing Transitional Pass-Through Payments for 
Diagnostic Radiopharmaceuticals; Contrast Agents; Drugs, Biologicals, 
and Radiopharmaceuticals That Function as Supplies When Used in a 
Diagnostic Test or Procedure; and Drugs and Biologicals That Function 
as Supplies When Used in a Surgical Procedure 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 2014, in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43601), we proposed to continue to package payment 
for all nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and anesthesia drugs and to begin packaging all nonpass-through 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
when used in a diagnostic test or procedure and drugs and biologicals 
that function as supplies when used in a surgical procedure, as 
discussed in section II.A.3. of this final rule with comment period.
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 are 
currently two diagnostic radiopharmaceuticals with pass-through status 
under the OPPS. HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, 
per study dose, up to 5 millicuries) was granted pass-through status 
using HCPCS code C9406 beginning July 1, 2011, and we proposed that its 
pass-through status would expire on December 31, 2013. HCPCS code C1204 
(Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was 
granted pass-through status beginning October 1, 2013. We currently 
apply the established radiopharmaceutical payment offset policy to 
pass-through payment for these products. 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 new pass-through diagnostic radiopharmaceuticals 
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, for 
purposes of the OPPS, 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. For CY 2014, as we did in CY 2013, we proposed to continue to 
apply the diagnostic radiopharmaceutical offset policy to payment for 
pass-through diagnostic radiopharmaceuticals.
    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 and to report a token charge of less than 
$1.01 in cases in which the diagnostic radiopharmaceutical is received 
without cost or with full credit. Beginning in CY 2014, we proposed to 
no longer require hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures or to report a token charge of less than 
$1.01 in cases in which the diagnostic radiopharmaceutical is received 
at no cost/full credit (78 FR 43601). Under this proposed policy, the 
OPPS payment amount for nuclear medicine procedures are not reduced 
when a diagnostic radiopharmaceutical is received at no cost or full 
credit. Based on claims data, it appears that hospitals rarely receive 
diagnostic radiopharmaceuticals at no cost or full credit. Therefore, 
we do not believe that the burden on hospitals of adhering to the 
nuclear medicine ``FB'' modifier policy continues to be warranted.
    Comment: 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 2014 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

[[Page 75016]]

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.
    Comment: One commenter believed that CMS should not discontinue the 
requirement for hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures in cases in which the diagnostic 
radiopharmaceutical is received at no cost or full credit. The 
commenter suggested that this is a relatively new policy and, 
therefore, should be maintained for at least another year.
    Response: Based on claims data, it appears that hospitals rarely 
receive diagnostic radiopharmaceuticals at no cost or full credit. 
Therefore, we do not believe that the ``FB'' modifier policy, as it 
relates to diagnostic radiopharmaceuticals, is warranted.
    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 2014 
OPPS/ASC proposed rule (78 FR 43601). We will continue to reduce the 
payment amount for procedures in the APCs listed in Table 34 in this 
final rule with comment period by the full policy-packaged offset 
amount appropriate for diagnostic radiopharmaceuticals. We also are 
finalizing our proposal to no longer require hospitals to append 
modifier ``FB'' to specified nuclear medicine procedures or to report a 
token charge of less than $1.01 in cases in which the diagnostic 
radiopharmaceutical is received at no cost or full credit. Under this 
finalized policy, the OPPS payment amount for nuclear medicine 
procedures is not reduced when a diagnostic radiopharmaceutical is 
received at no cost or full credit.
    Table 34 below displays the APCs to which nuclear medicine 
procedures will be assigned in CY 2014 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.
[GRAPHIC] [TIFF OMITTED] TR10DE13.333


[[Page 75017]]


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. Currently, there 
are no contrast agents with pass-through status under the OPPS. As 
described in section V.A.4.c. of the proposed rule (78 FR 43602), we 
proposed that new pass-through contrast agents would be paid at ASP+6 
percent, while those new pass-through contrast agents without ASP 
information would be paid at WAC+6 percent or, if WAC is not available, 
at 95 percent of the product's most recently published AWP.
    Although there are currently 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 2014 
in order to provide an appropriate transitional pass-through payment 
for new contrast agents 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 2014 OPPS/ASC proposed rule (78 FR 
43602), we proposed, for new contrast agents that are approved for 
pass-through status as a drug or biological during CY 2014, to deduct 
from the payment an amount that reflects the portion of the APC payment 
associated with predecessor contrast agents. This was proposed in order 
to ensure that 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 2014, as we 
did in CY 2013, we proposed to continue to apply this same policy to 
contrast agents. Specifically, we proposed to utilize the policy-
packaged drug offset fraction for procedural APCs, calculated as 1 
minus the following: the cost from single procedure claims in the APC 
after removing the cost for policy packaged drugs divided by the cost 
from single procedure claims in the APC. To determine the actual APC 
offset amount for pass-through contrast agents that takes into 
consideration the otherwise applicable OPPS payment amount, 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 2014 to recognize that when a contrast agent 
with pass-through status is billed with any procedural APC listed in 
Table 22 of the proposed rule (78 FR 43602 through 43603), a specific 
offset based on the procedural APC would be applied to the payment for 
the contrast agent to ensure that duplicate payment is not made for the 
contrast agent.
    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 
34 above, and these APCs are displayed in Table 35 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 2014, we proposed to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 22 of the proposed rule (78 FR 43602 through 43603), 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.
    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.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2014 without modification. We will 
continue to recognize that when a contrast agent with pass-through 
status is billed with any procedural APC listed in Table 35 below, a 
specific offset based on the procedural APC will be applied to the 
payment for the contrast agent to ensure that duplicate payment is not 
made for the contrast agent.

[[Page 75018]]

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d. Payment Offset Policy for Products Packaged According to the Policy 
To Package Drugs, Biologicals, and Radiopharmaceuticals That Function 
as Supplies When Used in a Diagnostic Test or Procedure and Drugs and 
Biologicals That Function as Supplies When Used in a Surgical Procedure
    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. As discussed in 
section II.A.3. of the CY 2014 OPPS/ASC proposed rule, as a part of our 
proposed policy to package drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure 
and drugs and biologicals that function as supplies when used in a 
surgical procedure, we specifically proposed that skin substitutes and 
stress agents used in myocardial perfusion imaging (MPI) be policy 
packaged in CY 2014, in addition to diagnostic radiopharmaceuticals, 
contrast agents, and anesthesia drugs (78 FR 43570 through 43572). We 
believe that a payment offset, similar to the offset

[[Page 75019]]

currently in place for pass-through devices, diagnostic 
radiopharmaceuticals, and contrast agents, is necessary in order to 
provide an appropriate transitional pass-through payment for drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure and drugs and biologicals that 
function as supplies when used in a surgical procedure because all of 
these are packaged, or proposed to be packaged, when they do not have 
pass-through status. In accordance with our standard offset 
methodology, we proposed for CY 2014 to deduct an amount that reflects 
the portion of the APC payment associated with predecessor products in 
order to ensure no duplicate payment is made from the payment for pass-
through drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure and drugs and 
biologicals that function as supplies when used in a surgical procedure 
(78 FR 43603).
    In CY 2009, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor diagnostic radiopharmaceuticals when considering a new 
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 
through 68641). For CY 2014, we proposed to apply this same policy to 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
when used in a diagnostic test or procedure and drugs and biologicals 
that function as supplies when used in a surgical procedure (78 FR 
43603). Specifically, in the case of pass-through skin substitutes, we 
proposed to utilize the policy-packaged drug offset fraction for skin 
substitute procedural APCs, calculated as 1 minus the following: The 
cost from single procedure claims in the APC after removing the cost 
for policy-packaged drugs divided by the cost from single procedure 
claims in the APC. Because policy packaged radiopharmaceuticals also 
would be included in the drug offset fraction for the APC to which MPI 
procedures are assigned, in the case of pass-through stress agents, we 
proposed to utilize the policy-packaged drug offset fraction for the 
procedural APC, calculated as 1 minus the following: The cost from 
single procedure claims in the APC after removing the cost for policy-
packaged drugs excluding policy-packaged diagnostic 
radiopharmaceuticals divided by the cost from single procedure claims 
in the APC. To determine the actual APC offset amount for pass-through 
skin substitutes and pass-through stress agents that takes into 
consideration the otherwise applicable OPPS payment amount, we proposed 
to multiply the policy-packaged drug offset fraction by the APC payment 
amount for the procedure with which the pass-through skin substitute or 
pass-through stress agent is used and, accordingly, reduce the separate 
OPPS payment for the pass-through skin substitute or pass-through 
stress agent by this amount (78 FR 43603).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal, without modification, to recognize that 
when a skin substitute with pass-through status is billed with any 
procedural APC listed in Table 36 below, a specific offset based on the 
procedural APC will be applied to the payment for the skin substitute 
to ensure that duplicate payment is not made for the skin substitute. 
In addition, when a stress agent with pass-through status is billed 
with any procedural APC listed in Table 37 below, a specific offset 
based on the procedural APC will be applied to the payment for the 
stress agent to ensure that duplicate payment is not made for the 
stress agent.
    Table 36 below displays the APCs to which skin substitute 
procedures will be assigned in CY 2014 and for which we expect that an 
APC offset could be applicable in the case of skin substitutes with 
pass-through status.
    Table 37 below displays the APCs to which MPI procedures will be 
assigned in CY 2014 and for which we expect that an APC offset could be 
applicable in the case of a stress agent with pass-through status.
    As we proposed, we will continue to post annually on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset 
amounts that will be used for that year for purposes of both evaluating 
cost significance for candidate pass-through device categories and 
drugs and biologicals and establishing any appropriate APC offset 
amounts. Specifically, the file will continue to provide the amounts 
and percentages of APC payment associated with packaged implantable 
devices, policy-packaged drugs, and threshold packaged drugs and 
biologicals for every OPPS clinical APC.

[[Page 75020]]

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

1. Background
    Under the CY 2013 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 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; for CY 
2012, we set the packaging threshold at $75; and for CY 2013, we set 
the packaging threshold at $80.
    Following the CY 2007 methodology, for the CY 2014 OPPS/ASC 
proposed rule (78 FR 43604), 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 2014 and 
rounded the resulting dollar amount ($87.70) to the nearest $5 
increment, which yielded a figure of $90. In performing this 
calculation, we used the most recent forecast of the quarterly index 
levels for the PPI for Pharmaceuticals for Human Use (Prescription) 
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' 
Office of the Actuary (OACT). We refer below to this series generally 
as the PPI for Prescription Drugs.
    We chose the PPI for Prescription Drugs 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

[[Page 75021]]

comment period) and have been incorporated into our calculation. Based 
on the calculations described above, we proposed a packaging threshold 
for CY 2014 of $90. (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, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43604), to determine 
the proposed CY 2014 packaging status for all nonpass-through drugs and 
biologicals that are not policy packaged, we calculated, on a HCPCS 
code-specific basis, the per day cost of all drugs, biologicals, and 
therapeutic radiopharmaceuticals (collectively called ``threshold-
packaged'' drugs) that had a HCPCS code in CY 2012 and were paid (via 
packaged or separate payment) under the OPPS. We used data from CY 2012 
claims processed before January 1, 2013 for this calculation. However, 
we did not perform this calculation for those drugs and biologicals 
with multiple HCPCS codes that include different dosages, as described 
in section V.B.2.c. of the proposed rule, or for diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, and 
implantable biologicals that we proposed to continue to package in CY 
2014, or for the new categories of policy-packaged products proposed 
for CY 2014, as discussed in section II.A.3. of the proposed rule.
    In order to calculate the per day costs for drugs, biologicals, and 
therapeutic radiopharmaceuticals to determine their proposed packaging 
status in CY 2014, 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 biological HCPCS code, we 
used an estimated payment rate of ASP+6 percent (which is the payment 
rate we proposed for separately payable drugs and biologicals for CY 
2014, as discussed in more detail in section V.B.3.b. of the proposed 
rule) to calculate the CY 2014 proposed rule per day costs. We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2012 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2013) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2014, we proposed to use 
payment rates based on the ASP data from the fourth quarter of CY 2012 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
are available via the Internet on the CMS Web site) because these were 
the most recent data available for use at the time of development of 
the proposed rule. These data also were the basis for drug payments in 
the physician's office setting, effective April 1, 2013. 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 
2012 hospital claims data to determine their per day cost.
    We proposed to package items with a per day cost less than or equal 
to $90, and identify items with a per day cost greater than $90 as 
separately payable. Consistent with our past practice, we crosswalked 
historical OPPS claims data from the CY 2012 HCPCS codes that were 
reported to the CY 2013 HCPCS codes that we displayed in Addendum B of 
the proposed rule (which is available via the Internet on the CMS Web 
site) for payment in CY 2014.
    Comment: The majority of commenters objected to the proposed 
increase in the OPPS packaging threshold to $90 for CY 2014. The 
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 $80 for CY 2014. A 
few commenters suggested that CMS limit increases in the packaging 
threshold amount to the hospital market basket update factor for the 
year that is reflective of all statutory adjustments.
    Response: 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 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 2014 or to eliminate or to 
freeze the packaging threshold at $80.
    We disagree with the commenters who suggested that CMS 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 of 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. 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.
    Since publication of the CY 2014 OPPS/ASC proposed rule, consistent 
with our policy of updating the packaging threshold with more recently 
available data for this final rule with comment period, we have again 
followed the CY 2007 methodology for CY 2014 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 2014. We then rounded the 
resulting updated dollar amount ($91.27) to the nearest $5 increment, 
which yielded a figure of $90. Therefore, after consideration for the 
public comments we received, and consistent with our methodology for

[[Page 75022]]

establishing the packaging threshold using the most recent PPI forecast 
data, we are adopting a CY 2014 packaging threshold of $90.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals for the OPPS/ASC final rule with comment period. 
We note that it is also our policy to make an annual packaging 
determination for a HCPCS code only when we develop the OPPS/ASC final 
rule with comment period for the update year. Only HCPCS codes that are 
identified as separately payable in the final rule with comment period 
are subject to quarterly updates. For our calculation of per day costs 
of HCPCS codes for drugs and biologicals in this final rule with 
comment period, we used ASP data from the first quarter of CY 2013, 
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, 2013, along with updated hospital claims 
data from CY 2012. We note that we also used these data for budget 
neutrality estimates and impact analyses for this final rule with 
comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B to this final rule with comment 
period are based on ASP data from the second quarter of CY 2013. 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, 2013. These payment rates will then 
be updated in the January 2014 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2014. For items that do not currently have an ASP-based 
payment rate, we recalculated their mean unit cost from all of the CY 
2012 claims data and updated cost report information available for this 
CY 2014 final rule with comment period to determine their final per day 
cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in this CY 2014 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 2014 OPPS drug packaging 
threshold and the drug's payment status (packaged or separately 
payable) in CY 2013. Specifically, for CY 2014, consistent with our 
historical practice, we proposed to apply the following policies to 
these HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals whose relationship to the drug packaging threshold 
changes based on the updated drug packaging threshold and on the final 
updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2013 and that were proposed for separate payment in CY 
2014, and that then have per day costs equal to or less than the CY 
2014 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2014 final rule, would continue to 
receive separate payment in CY 2014.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2013 and that are proposed for separate payment in CY 2014, and 
that then have per day costs equal to or less than the CY 2014 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2014 final rule, would remain packaged in 
CY 2014.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2014 but then have per day costs 
greater than the CY 2014 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2014 final 
rule, would receive separate payment in CY 2014.
    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 2014 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2013. 
Therefore, we are finalizing our proposal, without modification, for CY 
2014.
    We note that we proposed to package HCPCS codes 90734 
(Meningococcal conjugate vaccine, serogroups a, c, y and w-135 
(tetravalent), for intramuscular use), J0630 (Injection, calcitonin 
salmon, up to 400 units), and J1570 (Injection, ganciclovir sodium, 500 
mg) for CY 2014. Using updated ASPs and the CY 2012 hospital claims 
data available for this final rule with comment period, HCPCS codes 
90734, J0630, and J1570 now have per day costs greater than $90. In 
accordance with our established policy for such cases, for CY 2014 we 
will pay for HCPCS codes 90734, J0630, and J1570 separately.
    In addition, because we did not have claims data for HCPCS code 
J7191 (Factor viii (antihemophilic factor (porcine)), per IU) in the CY 
2014 OPPS/ASC proposed rule, we had proposed a status indicator of 
``E'' for this product in CY 2014. However, since publication of the 
proposed rule, we have received claims data and the per day cost for 
this product is more than the $90 CY 2014 packaged threshold. HCPCS 
code J7191 will be paid separately and will be assigned a status 
indicator of ``K'' for CY 2014.
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

[[Page 75023]]

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 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 2014, 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 2014 OPPS/ASC proposed rule (78 FR 43606), 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 
2014.
    For CY 2014, 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 2012 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 2014 OPPS/ASC final rule with comment period 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 2012 
claims data to make the packaging determinations for these drugs: HCPCS 
codes J3471 (Injection, hyaluronidase, ovine, preservative free, per 1 
usp unit (up to 999 usp units)); 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 doses, 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 $90 (so that all HCPCS codes for the same drug or 
biological would be packaged) or greater than $90 (so that 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 2014 proposal, without modification, to 
continue to make packaging determinations on a drug-specific basis, 
rather than a HCPCS code-specific basis, for those HCPCS codes that 
describe the same drug or biological but different dosages. The 
packaging status of each drug and biological HCPCS code to which this 
methodology will apply is displayed in Table 38 below.
BILLING CODE 4120-01-P

[[Page 75024]]

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[[Page 75025]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.337


[[Page 75026]]


[GRAPHIC] [TIFF OMITTED] TR10DE13.338

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'' (known as a SCOD) is defined as a 
covered outpatient drug, as defined in section 1927(k)(2) of the Act, 
for which a separate APC has been established and that either is a 
radiopharmaceutical agent or is a drug or biological for which payment 
was made on a pass-through basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of SCODs. These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary. Most physician Part B drugs are paid at ASP+6 percent 
pursuant to section 1842(o) and section 1847A of the Act.
    Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in 
OPPS payment rates for SCODs to take into account overhead and related 
expenses, such as pharmacy services and handling costs. Section 
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead 
and related expenses and to make recommendations to the Secretary 
regarding whether, and if so how, a payment adjustment should be made 
to compensate hospitals for overhead and related expenses. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.
    It has been our longstanding policy to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, 
as required by statute, but we also apply it to separately payable 
drugs and biologicals that are not SCODs, which is a policy 
determination rather than a statutory requirement. In the CY 2014 OPPS/
ASC proposed rule (78 FR 43608), we proposed to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    Since CY 2006, we have attempted to establish a drug payment 
methodology that reflects hospitals' acquisition costs for drugs and 
biologicals while taking into account relevant pharmacy overhead and 
related handling expenses. We have attempted to collect more data on 
hospital overhead charges for drugs and biologicals by making several 
proposals that would require hospitals to change the way they report 
the cost and charges for drugs. None of these proposals were adopted 
due to significant stakeholder concern, including that hospitals stated 
that it would be administratively burdensome to report hospital 
overhead charges. We established a payment policy for separately 
payable drugs and biologicals, authorized by section 
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). We 
referred 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

[[Page 75027]]

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 to keep the redistribution 
ratio constant between the proposed rule and the final rule. For a 
detailed discussion of our OPPS drug payment policies from CY 2006 to 
CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68383 through 68385).
    We noted in the CY 2013 OPPS/ASC final rule with comment period (77 
FR 68386) that 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 stated 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 
indicated our concern that the continued use of the standard drug 
payment methodology (including the overhead adjustment) still may not 
appropriately account for average acquisition and pharmacy overhead 
cost and, therefore, may result in payment rates that are not as 
predictable, accurate, or appropriate as they could be.
    In that final rule with comment period, we discussed that 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. In the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of 
the Act authorizes the Secretary to calculate and adjust, as necessary, 
the average price for a drug in the year established under section 
1842(o), 1847A, or 1847B of the Act, as the case may be, in determining 
payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, 
Part B drugs are paid at ASP+6 percent when furnished in physicians' 
offices. We indicated that we believe that establishing the payment 
rates based on the statutory default of ASP+6 percent is appropriate as 
it yields increased predictability in payment for separately payable 
drugs and biologicals under the OPPS. We also noted that ASP+6 percent 
is an appropriate payment amount because it is consistent with the 
range of payment amounts yielded by our drug payment methodologies over 
the past 7 years. Therefore, 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 final rule with comment period (77 FR 68389), we finalized our 
proposal for CY 2013 to pay for separately payable drugs and 
biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) 
of the Act, referred to as the statutory default. We also finalized our 
proposal that the ASP+6 percent payment amount for separately payable 
drugs and biologicals requires no further adjustment and represents the 
combined acquisition and pharmacy overhead payment for drugs and 
biologicals, that payments for separately payable drugs and biologicals 
are included in the budget neutrality adjustments under the 
requirements in section 1833(t)(9)(B) of the Act, and that the budget 
neutral weight scaler is not applied in determining payments for these 
separately paid drugs and biological for CY 2013 (77 FR 68389).
b. CY 2014 Payment Policy
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43608), we proposed to 
continue our CY 2013 policy and pay for separately payable drugs and 
biologicals at ASP+6 percent pursuant to section 
1833(t)(14)(A)(iii)(II) of the Act, referred to as the ``statutory 
default.'' We proposed that the ASP+6 percent payment amount for 
separately payable drugs and biologicals requires no further adjustment 
and represents the combined acquisition and pharmacy overhead payment 
for drugs and biologicals. We also proposed that payments for 
separately payable drugs and biologicals are included in the budget 
neutrality adjustments, under the requirements in section 1833(t)(9)(B) 
of the Act, and that the budget neutral weight scaler is not applied in 
determining payments for these separately paid drugs and biologicals.
    Comment: Commenters supported CMS' proposal to pay for separately 
payable drugs and biologicals based on the statutory default rate of 
ASP+6 percent. 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. 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. One commenter recommended that CMS design a 
payment strategy that would maintain the current ASP+6 percent for 
branded drug products but provide for a much higher payment rate for 
multi-source generic drugs.
    Response: We appreciate the commenters' support of our proposal. We 
continue to believe that ASP+6 percent based on the statutory default 
is appropriate for hospitals for CY 2014 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 2014. With regard to the development of a 
multi-tiered payment strategy that would encourage the use of generic 
drugs over their branded counterparts, we made no such proposal and, 
therefore, consider this comment outside the scope of the proposed 
rule.
    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.
    Response: We do not accept the commenter's recommendation that CMS 
require drugs and biologicals to be reported under revenue code 0636. 
We believe that drugs and biologicals also may 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. In addition, 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.

[[Page 75028]]

    Comment: One commenter asked that, for CY 2014, CMS consider paying 
for influenza and PPV vaccines at 106 percent of ASP instead of paying 
for the items at reasonable cost.
    Response: We consider this comment outside the scope of the 
proposed rule.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6 
percent payment amount for separately payable drugs and biologicals 
requires no further adjustment and represents the combined acquisition 
and pharmacy overhead payment for drugs and biologicals for CY 2014. 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 2014 payment of ASP+6 percent for separately 
payable nonpass-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, 2013, or WAC, AWP, 
or mean unit cost from CY 2012 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 2014 payment rates. This is because payment rates for drugs and 
biologicals with ASP information for January 2014 will be determined 
through the standard quarterly process where ASP data submitted by 
manufacturers for the third quarter of 2013 (July 1, 2013 through 
September 30, 2013) are used to set the payment rates that are released 
for the quarter beginning in January 2014 near the end of December 
2013. 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 2013 are based on mean unit cost in 
the available CY 2012 claims data. If ASP information becomes available 
for payment for the quarter beginning in January 2014, 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 2013 ASP data) that do not have ASP information 
available for the quarter beginning in January 2014. These drugs and 
biologicals will then be paid based on mean unit cost data derived from 
CY 2012 hospital claims. Therefore, the payment rates listed in Addenda 
A and B to this final rule with comment period are not for January 2014 
payment purposes and are only illustrative of the CY 2014 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 2013, we established a 
policy to pay for separately paid therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. If ASP information is unavailable for a therapeutic 
radiopharmaceutical, we base therapeutic radiopharmaceutical payment on 
mean unit cost data derived from hospital claims. We believe that the 
rationale outlined in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60524 through 60525) for applying the principles of 
separately payable drug pricing to therapeutic radiopharmaceuticals 
continues to be appropriate for nonpass-through separately payable 
therapeutic radiopharmaceuticals in CY 2014. Therefore, in the CY 2014 
OPPS/ASC proposed rule (78 FR 43609), we proposed for CY 2014 to pay 
all nonpass-through, separately payable therapeutic 
radiopharmaceuticals at ASP+6 percent, based on the statutory default 
described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full 
discussion of ASP-based payment for therapeutic radiopharmaceuticals, 
we refer readers to the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60520 through 60521). We also proposed to rely on CY 2012 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 are submitted to CMS.
    Response: We appreciate the commenters' support. We continue to 
believe that providing payment for therapeutic radiopharmaceuticals 
based on ASP or mean unit cost if ASP information is not available 
would provide appropriate payment for these products. When ASP data are 
not available, we believe that paying for therapeutic 
radiopharmaceuticals using mean unit cost will appropriately pay for 
the average hospital acquisition and associated handling costs of 
nonpass-through separately payable therapeutic radiopharmaceuticals. As 
we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60523), although using mean unit cost for payment for therapeutic 
radiopharmaceuticals when ASP data are not available is not the usual 
OPPS process (the usual process relies on alternative data sources such 
as WAC or AWP when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data), we 
continue to believe that WAC or AWP is not an appropriate proxy to 
provide OPPS payment for average therapeutic radiopharmaceutical 
acquisition cost and associated handling costs when manufacturers are 
not required to submit ASP data. Payment based on WAC or AWP under the 
established OPPS ASP methodology for payment of separately payable 
drugs and biologicals is usually temporary for a calendar quarter until 
a manufacturer is able to submit the required ASP data in accordance 
with the quarterly ASP submission timeframes for reporting under 
section 1847A of the Act. Because ASP reporting for OPPS payment of 
separately payable therapeutic radiopharmaceutical is not required, a 
manufacturer's choice to not submit ASP could result in payment for a 
separately payable therapeutic radiopharmaceutical based on WAC or AWP 
for a full year, a result which we believe would be inappropriate.

[[Page 75029]]

    Comment: One commenter indicated that the proposed payment rate for 
the therapeutic radiopharmaceutical identified by HCPCS code A9517 
(Iodine i-131 sodium iodide capsule(s), therapeutic, per millicurie) 
decreased by 54 percent compared to the CY 2013 payment rate and 
questioned the reason for this proposed reduction.
    Response: The CY 2013 payment rate for HCPCS code A9517 is $17.74 
per millicurie. The proposed CY 2014 payment rate for HCPCS code A9517 
was $18.70, which is a 5.4 percent increase compared to the CY 2013 
payment rate. The final CY 2014 payment rate for HCPCS code A9517 is 
$18.52, which is a 4.4 percent increase compared to the CY 2013 payment 
rate.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to pay all 
nonpass-through, separately payable therapeutic radiopharmaceuticals at 
ASP+6 percent. We are also finalizing our proposal to continue to rely 
on CY 2012 mean unit cost data derived from hospital claims data for 
payment rates for therapeutic radiopharmaceuticals for which ASP data 
are unavailable. The CY 2014 final rule payment rates for nonpass-
through separately payable therapeutic radiopharmaceuticals are 
included in Addenda A and B to this final rule with comment period 
(which are available via the Internet on the CMS Web site).
5. Payment for Blood Clotting Factors
    For CY 2013, 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 2013, we provided payment for blood 
clotting factors under the OPPS at ASP+6 percent, plus an additional 
payment for the furnishing fee. We note that when blood clotting 
factors are provided in physicians' offices under Medicare Part B and 
in other Medicare settings, a furnishing fee is also applied to the 
payment. The CY 2013 updated furnishing fee was $0.188 per unit.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43609), for CY 2014, 
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 pay for blood 
clotting factors at ASP+6 percent and to continue to apply the 
furnishing fee for blood clotting factors provided in the OPD.
    Response: We appreciate the commenters' support of our policy.
    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 subsequent years for drugs, biologicals, and radiopharmaceuticals 
that have assigned HCPCS codes, but that do not have a reference AWP or 
approval for payment as pass-through drugs or biologicals. Because 
there was no statutory provision that dictated payment for such drugs, 
biologicals, and radiopharmaceuticals in CY 2005, and because we had no 
hospital claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. 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 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 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 CYs 2011, 2012, and 
2013, paying for new drugs, biologicals, and

[[Page 75030]]

radiopharmaceuticals that do not have pass-through status, and are 
without OPPS hospital claims data at ASP+5 percent, ASP+4 percent, and 
ASP+6 percent, respectively, consistent with the final OPPS payment 
methodology for other separately payable drugs and biological during 
those payment years.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43610), we proposed to 
provide payment for new drugs, biologicals, and therapeutic 
radiopharmaceuticals that do not have pass-through status at ASP+6 
percent, consistent with the proposed CY 2014 payment methodology for 
other separately payable nonpass-through drugs, 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, biologicals, and therapeutic 
radiopharmaceuticals would be treated like other drugs, biologicals, 
and therapeutic radiopharmaceuticals under the OPPS.
    For CY 2014, we also proposed to package payment for all new 
nonpass-through policy-packaged products (diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure, and drugs and biologicals that 
function as supplies when used in a surgical procedure) with HCPCS 
codes but without claims data (those new CY 2014 HCPCS codes that do 
not crosswalk to predecessor HCPCS codes). This is consistent with the 
proposed policy packaging of all existing nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure, and drugs and biologicals that 
function as supplies when used in a surgical procedure, as discussed in 
more detail in section II.A.3. of the proposed rule and this final rule 
with comment period.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2014, we proposed to continue our policy of using the WAC 
for the product to establish the initial payment rate for new nonpass-
through drugs and biologicals with HCPCS codes, but which are without 
OPPS claims data. However, we noted that if the WAC is also 
unavailable, we would make payment at 95 percent of the product's most 
recent AWP. We also proposed to assign status indicator ``K'' 
(Separately paid nonpass-through drugs and biologicals, including 
therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and 
biologicals without OPPS claims data and for which we have not granted 
pass-through status. With respect to new nonpass-through drugs and 
biologicals for which we do not have ASP data, we proposed that once 
their ASP data become available in later quarterly submissions, their 
payment rates under the OPPS would be adjusted so that the rates would 
be based on the ASP methodology and set to the finalized ASP-based 
amount (proposed for CY 2014 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 and biologicals would be treated 
like other drugs and biologicals under the OPPS, unless they are 
granted pass-through status.
    Similarly, we proposed to continue to base the initial payment for 
new therapeutic radiopharmaceuticals with HCPCS codes, but which do not 
have pass-through status and are without claims data, on the WACs for 
these products if ASP data for these therapeutic radiopharmaceuticals 
are not available. If the WACs 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, we proposed to announce 
any changes to the payment amounts for new drugs and biologicals in 
this CY 2014 OPPS/ASC final rule with comment period and also on a 
quarterly basis on the CMS Web site during CY 2014 if later quarter ASP 
submissions (or more recent WACs or AWPs) indicate that changes to the 
payment rates for these drugs and biologicals are necessary. The 
payment rates for new therapeutic radiopharmaceuticals also would be 
changed accordingly based on later quarter ASP submissions. We note 
that the new CY 2014 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 2014 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 2014 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2012 and/or CY 2013 for which we did not have CY 2012 
hospital claims data available for the proposed rule and for which 
there are no other HCPCS codes that describe different doses of the 
same drug, but which have pricing information available for the ASP 
methodology. In order to determine the packaging status of these 
products for CY 2014, we proposed to continue our policy to calculate 
an estimate of the per day cost of each of these items by multiplying 
the payment rate of each product based on ASP+6 percent, similar to 
other nonpass-through drugs and biologicals paid separately under the 
OPPS, by an estimated average number of units of each product that 
would typically be furnished to a patient during one day in the 
hospital outpatient setting (78 FR 43610). This rationale was first 
adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR 
68666 and 68667). We proposed to package items for which we estimated 
the per day administration cost to be less than or equal to $90 and to 
pay separately for items for which we estimated the per day 
administration cost to be greater than $90 (with the exception of 
diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
when used in a diagnostic test or procedure, and drugs and biologicals 
that function as supplies when used in a surgical procedure, which we 
proposed to package regardless of cost) in CY 2014. We also proposed 
that the CY 2014 payment for separately payable items without CY 2012 
claims data would be ASP+6 percent, similar to payment for other 
separately payable nonpass-through drugs and biologicals under the 
OPPS. In accordance with the ASP methodology paid in the physician's 
office setting, in the absence of ASP data, we proposed to use the WAC 
for the product to establish the initial payment rate and, if the WAC 
is also unavailable, we would make payment at 95 percent of the most 
recent AWP available. The proposed estimated units

[[Page 75031]]

per day and status indicators for these items were displayed in Table 
26 of the proposed rule (78 FR 43611).
    Finally, there were 11 drugs and biologicals, shown in Table 27 of 
the proposed rule (78 FR 43612), that were payable in CY 2012 but for 
which we lacked CY 2012 claims data and any other pricing information 
for the ASP methodology for the CY 2014 OPPS/ASC proposed rule. For CY 
2010, we finalized a policy to assign status indicator ``E'' (Not paid 
by Medicare when submitted on outpatient claims (any outpatient bill 
type)) whenever we lacked claims data and pricing information and were 
unable to determine the per day cost of a drug or biological. In 
addition, we noted that we would provide separate payment for these 
drugs and biologicals if pricing information reflecting recent sales 
became available mid-year for the ASP methodology. We continued this 
policy for CY 2011, CY 2012, and CY 2013 (75 FR 71973, 76 FR 74334, and 
77 FR 68396, respectively). For CY 2014, we proposed to continue to 
assign status indicator ``E'' to drugs and biologicals that lack CY 
2012 claims data and pricing information for the ASP methodology. All 
drugs and biologicals without CY 2012 hospital claims data and data 
based on the ASP methodology that were assigned status indicator ``E'' 
on this basis at the time of the proposed rule for CY 2014 were 
displayed in Table 27 of the proposed rule (78 FR 43612). We also 
proposed to continue our policy to assign the products status indicator 
``K'' and pay for them separately for the remainder of CY 2014 if 
pricing information were to become available.
    We did not receive any public comments on our CY 2014 proposals to 
provide payment for new drugs, biologicals, and therapeutic 
radiopharmaceuticals using the ASP methodology and to use an estimated 
per day cost in order to determine the packaging status of drugs and 
biologicals for which we have pricing information available but do not 
have hospital claims data available. Therefore, we are finalizing these 
proposals without modification. The final estimated units per day and 
status indicators for drugs and biologicals for which we have pricing 
information available but do not have hospital claims data available 
for CY 2014 are displayed in Table 39 below.
    We also did not receive any public comments on our proposal to 
continue to assign status indicator ``E'' to drugs and biologicals that 
lack CY 2012 claims data and pricing information for the ASP 
methodology and, therefore, we are finalizing this proposal without 
modification. All drugs and biologicals without CY 2012 hospital claims 
data and data based on the ASP methodology that are assigned status 
indicator ``E'' on this basis at the time of this final rule with 
comment period for CY 2014 are displayed in Table 40 below.
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C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits

    Beginning January 1, 2008, CMS implemented OPPS edits that require 
hospitals to include a HCPCS code for a radiolabeled product when a 
separately payable nuclear medicine procedure is present on a claim. In 
the CY 2014 OPPS/ASC proposed rule (78 FR 43612), we proposed to no 
longer require the nuclear medicine procedure-to-radiolabeled product 
edits. Under this proposal, hospitals would still be expected to adhere 
to the guidelines of correct coding and append the correct radiolabeled 
product code to the claim when applicable. However, claims would no 
longer be returned to providers when HCPCS codes for radiolabeled 
products do not appear on claims with nuclear medicine procedures.
    Comment: Several commenters indicated that CMS should continue to 
apply the nuclear medicine procedure-to-radiolabeled product edits to 
ensure that all packaged costs are included on nuclear medicine claims 
in order to establish appropriate payment rates in the future.
    Response: We do not agree with commenters that we should continue 
the nuclear medicine procedure-to-radiolabeled product edits. We 
believe that hospitals have now had several years of experience 
reporting procedures involving radiolabeled products and have grown 
accustomed to ensuring that they code and report charges so that their 
claims fully and appropriately reflect the costs of those radiolabeled 
products. As with all other items and services recognized under the 
OPPS, we expect hospitals to code and report their costs appropriately, 
regardless of whether there are claims processing edits in place.
    After consideration of the public comments we received, we are 
finalizing our proposal to no longer require the nuclear medicine 
procedure-to-radiolabeled product edits. Hospitals

[[Page 75034]]

will still be expected to adhere to the guidelines of correct coding 
and append the correct radiolabeled product code to the claim when 
applicable.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate prorata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2014 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that will continue to be eligible 
for pass-through payment in CY 2014. The CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66778) describes the methodology we have 
used in previous years to develop the pass-through spending estimate 
for known device categories continuing into the applicable update year. 
The second group of items consists of items that we know are newly 
eligible, or project may be newly eligible, for device pass-through 
payment in the remaining quarters of CY 2013 or beginning in CY 2014. 
The sum of the CY 2014 pass-through estimates for these two groups of 
device categories equals the total CY 2014 pass-through spending 
estimate for device categories with pass-through status. We base the 
device pass-through estimated payments for each device category on the 
amount of payment as established in section 1833(t)(6)(D)(ii) of the 
Act, and as outlined in previous rules, including the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68397). We note that, beginning 
in CY 2010, the pass-through evaluation process and pass-through 
payment for implantable biologicals newly approved for pass-through 
payment beginning on or after January 1, 2010, that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) is the device pass-through process and payment methodology (74 
FR 60476). As has been our past practice (76 FR 74335), we include an 
estimate of any implantable biologicals eligible for pass-through 
payment in our estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. We note that the Part B drug CAP program has been postponed 
since CY 2009, and such a program has not been proposed to be 
reinstated for CY 2014. Because we will pay for most nonpass-through 
separately payable drugs and biologicals under the CY 2014 OPPS at 
ASP+6 percent, as we discussed in section V.B.3. of this final rule 
with comment period, which represents the otherwise applicable fee 
schedule amount associated with most pass-through drugs and 
biologicals, and because we will pay for CY 2014 pass-through drugs and 
biologicals at ASP+6 percent, as we discussed in section V.A. of this 
final rule with comment period, our estimate of drug and biological 
pass-through payment for CY 2014 for this group of items was $0, as 
discussed below.
    Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, without pass-through status 
will always be packaged into payment for the associated procedures and 
these products will not be separately paid. In addition, as we 
proposed, we are policy-packaging all nonpass-through drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure and drugs and biologicals that 
function as supplies when used in a surgical procedure for CY 2014, as 
discussed in section II.A.3. of this final rule with comment period. 
All of these policy-packaged drugs and biologicals with pass-through 
status will be paid at ASP+6 percent like other pass-through drugs and 
biologicals for CY 2014. Therefore, our estimate of pass-through 
payment for policy-packaged drugs and biologicals with pass-through 
status approved prior to CY 2014 is not $0. In section V.A.4. of this 
final rule with comment period, we discuss our proposed and finalized 
policy to determine if the costs of certain policy-packaged drugs or 
biologicals are already packaged into the existing APC structure. If we 
determine that a policy-packaged drug or biological approved for pass-
through payment resembles predecessor drugs or biologicals already 
included in the costs of the APCs that are associated with the drug 
receiving pass-through payment, we offset the amount of pass-through 
payment for the policy-packaged drug or biological. For these drugs or 
biologicals, the APC offset amount is the portion of the APC payment 
for the specific procedure performed with the pass-through drug or 
biological which we refer to as the policy-packaged drug APC offset 
amount. If we determine that an offset is appropriate for a specific 
policy-packaged drug or biological receiving pass-through payment, we 
reduce our estimate of pass-through payments for these drugs or 
biologicals by this amount.
    Similar to pass-through estimates for devices, the first group of 
drugs and biologicals requiring a pass-through payment estimate 
consists of those products that were recently made eligible for pass-
through payment and that will continue to be eligible for pass-through 
payment in CY 2014. The second group contains drugs and biologicals 
that we know are newly eligible, or project will be newly eligible, in 
the remaining quarters of CY 2013 or beginning in CY 2014. The sum of 
the CY 2014 pass-through estimates for these two groups of drugs and 
biologicals equals the total CY 2014 pass-through spending estimate for 
drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

    As we proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43613), 
we are setting the applicable pass-through payment percentage limit at 
2.0

[[Page 75035]]

percent of the total projected OPPS payments for CY 2014, consistent 
with section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from 
CY 2004 through CY 2013 (77 FR 68398).
    For the first group of devices for pass-through payment estimation 
purposes, there is one device category, C1841 (Retinal prosthesis, 
includes all internal and external components), receiving pass-through 
payment for CY 2013, made effective subsequent to the proposed rule on 
October 1, 2013, that will continue to be eligible for pass-through 
payment for CY 2014. As discussed in section IV.A. of this final rule 
with comment period, we finalized in the CY 2013 OPPS/ASC final rule 
with comment period the expiration of pass-through payment for three 
device categories after the end of CY 2013. Therefore, we estimate that 
CY 2014 pass-through expenditures for the first group of pass-through 
device categories to be $0.5 million. In estimating our CY 2014 pass-
through spending for device categories in the second group, we include: 
device categories that we knew at the time of the development of the 
final rule will be newly eligible for pass-through payment in CY 2014 
(of which there are none); additional device categories that we 
estimate could be approved for pass-through status subsequent to the 
development of the final rule and before January 1, 2014; and 
contingent projections for new device categories established in the 
second through fourth quarters of CY 2014. We are using the general 
methodology described in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66778), while also taking into account recent OPPS 
experience in approving new pass-through device categories.
    We did not receive any public comments regarding our proposed 
estimate for device pass-through spending. For this final rule with 
comment period, the estimate of CY 2014 pass-through spending for this 
second group of device categories is $9.5 million, which is a slight 
decrease from the $10 million estimate in the proposed rule (78 FR 
43613). Using our established methodology, we are establishing that the 
total estimated pass-through spending for device categories for CY 2014 
(spending for the first group of device categories ($0.5 million) plus 
spending for the second group of device categories ($9.5 million)) will 
be $10 million.
    To estimate CY 2014 pass-through spending for drugs and biologicals 
in the first group, specifically those drugs and biologicals recently 
made eligible for pass-through payment and continuing on pass-through 
status for CY 2014, we utilized the most recent Medicare physician's 
office data regarding their utilization, information provided in the 
respective pass-through applications, historical hospital claims data, 
pharmaceutical industry information, and clinical information regarding 
those drugs or biologicals to project the CY 2014 OPPS utilization of 
the products.
    For the known drugs and biologicals (excluding policy-packaged 
diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, 
and radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, and drugs and biologicals that function 
as supplies when used in a surgical procedure) that will be continuing 
on pass-through status in CY 2014, we estimate the pass-through payment 
amount as the difference between ASP+6 percent and the payment rate for 
nonpass-through drugs and biologicals that will be separately paid at 
ASP+6 percent, which is zero for this group of drugs. Because payment 
for policy-packaged drugs and biologicals is packaged if the product 
was not paid separately due to its pass-through status, we include in 
the CY 2014 pass-through estimate the difference between payment for 
the policy-packaged drug or biological at ASP+6 percent (or WAC+6 
percent, or 95 percent of AWP, if ASP or WAC information is not 
available) and the policy-packaged drug APC offset amount, if we 
determined that the policy-packaged drug or biological approved for 
pass-through payment resembles predecessor drugs or biologicals already 
included in the costs of the APCs that are associated with the drug 
receiving pass-through payment. For the proposed rule, using the 
methodology described above, we calculated a CY 2014 proposed spending 
estimate for this first group of drugs and biologicals of approximately 
$0.962 million.
    We did not receive any public comments on our proposed methodology 
for calculating the spending estimate for the first group of drugs and 
nonimplantable biologicals. Therefore, for this final rule with comment 
period, we are finalizing our proposed methodology. Using our 
established methodology and updated data and information, we calculated 
a final CY 2014 spending estimate for the first group of drugs and 
nonimplantable biologicals of approximately $1.4 million.
    To estimate CY 2014 pass-through spending for drugs and biologicals 
in the second group (that is, drugs and biologicals that we knew at the 
time of development of the final rule are newly eligible for pass-
through payment in CY 2014, additional drugs and biologicals that we 
estimate could be approved for pass-through status subsequent to the 
development of the final rule and before January 1, 2014, and 
projections for new drugs and biologicals that could be initially 
eligible for pass-through payment in the second through fourth quarters 
of CY 2014), we use utilization estimates from pass-through applicants, 
pharmaceutical industry data, clinical information, recent trends in 
the per unit ASPs of hospital outpatient drugs, and projected annual 
changes in service volume and intensity as our basis for making the CY 
2014 pass-through payment estimate. We also consider the most recent 
OPPS experience in approving new pass-through drugs and biologicals. 
Using our proposed methodology for estimating CY 2014 pass-through 
payments for this second group of drugs, we calculated a spending 
estimate for this second group of drugs and biologicals of 
approximately $0.165 million.
    We did not receive any public comments on our proposed methodology 
for estimating CY 2014 pass-through payments for this second group of 
drugs and nonimplantable biologicals. Therefore, for this final rule 
with comment period, we are finalizing our proposed methodology. Using 
that methodology and updated data and information, we calculated a 
final CY 2014 spending estimate for this second group of drugs and 
implantable biologicals of approximately $0.9 million.
    As discussed in section V.A. of this final rule with comment 
period, radiopharmaceuticals are considered drugs for pass-through 
purposes. Therefore, we include radiopharmaceuticals in our CY 2014 
pass-through spending estimate for drugs and biologicals. Our CY 2014 
estimate for total pass-through spending for drugs and biologicals 
(spending for the first group of drugs and biologicals ($1.4 million) 
plus spending for the second group of drugs and biologicals ($0.9 
million)) equals $2.3 million.
    In summary, in accordance with the methodology described above in 
this section, for this final rule with comment period, we estimate that 
total pass-through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2014 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2014 will be 
approximately $12.3 million

[[Page 75036]]

(approximately $10 million for device categories and approximately $2.3 
million for drugs and biologicals), which represents 0.02 percent of 
total projected OPPS payments for CY 2014. We estimate that pass-
through spending in CY 2014 will not amount to 2.0 percent of total 
projected OPPS CY 2014 program spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report HCPCS visit codes to describe three 
types of OPPS services: clinic visits, emergency department (ED) 
visits, and critical care services, including trauma team activation. 
Historically, we have recognized the CPT and HCPCS codes describing 
clinic visits, Type A and Type B (ED) visits, and critical care 
services, which are listed below in Table 41. We refer readers to the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 through 
74346) for a full discussion of our policy on OPPS payment for hospital 
outpatient visits for CY 2013 and prior years.

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B. Payment for Hospital Outpatient Clinic and Emergency Department 
Visits

    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and ED hospital outpatient visits using 
the CPT E/M codes and to develop internal hospital guidelines for 
reporting the appropriate visit level (65 FR 18451). Because a national 
set of hospital-specific codes and guidelines do not currently exist, 
we have advised hospitals that each hospital's internal guidelines that 
determine the levels of clinic and ED visits to be reported should 
follow the intent of the CPT code descriptors, in that the guidelines 
should be designed to reasonably relate the intensity of hospital 
resources to the different levels of effort represented by the codes.
    While many hospitals have advocated for hospital-specific national 
guidelines for visit billing since the OPPS started in 2000, and we 
have signaled through rulemaking our intent to develop guidelines, this 
complex undertaking has proven challenging. Our work with interested 
stakeholders, such as hospital associations, along with a contractor, 
has confirmed that no single approach could consistently and accurately 
capture hospitals' relative costs. Public comments received on this 
issue, as well as our own knowledge of how clinics operate, have led us 
to conclude that it is not feasible to adopt a set of national 
guidelines for reporting hospital clinic visits that can accommodate 
the enormous variety of patient populations and service-mix provided by 
hospitals of all types and sizes throughout the country. Moreover, no 
single approach appears to be broadly endorsed by the stakeholder 
community.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43614 through 43616), 
for CY 2014, we proposed to modify our longstanding policies related to 
hospital outpatient clinic and ED visits. Rather than recognizing five 
levels of clinic and ED visits respectively, we proposed to create 
three new alphanumeric Level II HCPCS codes to describe all levels of 
each type of clinic and ED visit, as discussed in greater detail below. 
We stated that we believe a policy that recognizes a single visit level 
for clinic visits, Type A ED visits, and Type B ED visits for payment 
under the OPPS is appropriate for several reasons. First, we indicated 
that the proposal is in line with our strategic goal of using larger 
payment bundles to maximize hospitals' incentives to provide care in 
the most efficient manner as stated in section II.A.3. of the proposed 
rule. We stated that we believed this proposal will remove any 
incentives hospitals may have to provide medically unnecessary services 
or expend additional, unnecessary resources to achieve a higher level 
of visit payment under the OPPS. Second, we stated that we believe that 
it is important to consider ways in which we can reduce the 
administrative burden that Medicare payment policies place on 
hospitals, while maintaining our ability to calculate accurate payment 
rates under the OPPS. We believed that replacing the 20 HCPCS codes 
currently recognized for clinic visits and ED visits with three new 
alphanumeric Level II HCPCS codes would reduce administrative burden 
and would be easily adopted by hospitals, because the three new codes 
would require hospitals to distinguish only among clinic visits, Type A 
ED visits, and Type B ED visits. We stated that discontinuing the use 
of the five levels of HCPCS visit codes for clinic and Type A and Type 
B ED visits would reduce hospitals' administrative burden by 
eliminating the need for them to develop and apply their own internal 
guidelines to differentiate among five levels of resource use for every 
clinic visit and ED visit they provide, and by eliminating the need to 
distinguish between new and established patients. Third, we stated that 
our proposal would allow a large universe of claims to be utilized for 
ratesetting for each of the three newly proposed alphanumeric Level II 
HCPCS visit codes. We stated that we believe this large volume of 
claims available for ratesetting for each of the newly proposed 
alphanumeric Level II HCPCS visit codes will allow us to capture a very 
broad spectrum of cases ranging from extremely low complexity cases to 
extremely high complexity cases. We believed this large and diverse 
spectrum of clinical complexity and resource variation within the 
claims as well as the very high volume of claims that we proposed to 
use for ratesetting for the newly proposed alphanumeric Level II HCPCS 
visit new codes will allow us to have very accurate data upon which to 
develop accurate and appropriate payments. Lastly, we also stated that 
we believe that removing the differentiation among five levels of 
intensity for each visit will eliminate any incentive for hospitals to 
``upcode'' patients whose visits do not fall clearly into one category 
or another.
    For these reasons, for CY 2014, we proposed to discontinue our 
longstanding policy of recognizing five distinct visit levels for 
clinic visits and ED visits based on the existing HCPCS E/M codes, and 
instead recognize three new alphanumeric HCPCS codes for each visit 
type. Specifically, we proposed to create a new alphanumeric HCPCS G-
code for hospital use only representing any clinic visit under the OPPS 
and to assign the newly created alphanumeric clinic visit HCPCS G-code 
to its own newly created APC 0634. Using CY 2012 claims data, we 
proposed to develop CY 2014 OPPS payment rates for the new HCPCS G-code 
based on the total geometric mean cost of the levels 1 through 5 CPT E/
M codes for clinic visits currently recognized under the OPPS (CPT 
codes 99201 through 99205 and 99211 through 99215). We stated that 
while we would use data for CPT codes 99201 through 99205 and 99211 
through 99215 from

[[Page 75039]]

claims billed in CY 2012 to calculate the geometric mean cost for new 
APC 0634, we would no longer recognize those CPT codes when they appear 
on hospital claims effective January 1, 2014. We also proposed to no 
longer recognize a distinction between new and established patient 
clinic visits. Under this proposal, all clinic visits would be reported 
using the new HCPCS G-code, regardless of whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the 3 years prior to a visit.
    In addition, in the CY 2014 OPPS/ASC proposed rule (78 FR 43614 
through 43617), we proposed to discontinue our longstanding policy of 
recognizing five distinct visit levels for Type A ED visits and instead 
proposed to create a new alphanumeric HCPCS G-code for hospital use 
only representing any Type A ED visit under the OPPS. We proposed to 
assign the newly created alphanumeric Type A ED visit HCPCS G-code to 
its own newly created APC 0635. Using CY 2012 claims data, we proposed 
to develop CY 2014 OPPS payment rates for new HCPCS G-code based on the 
total geometric mean cost of the levels 1 through 5 CPT E/M codes for 
Type A ED visits currently recognized under the OPPS (CPT codes 99281 
through 99285). We stated that while we would use data for CPT codes 
99281 through 99285 from claims billed in CY 2012 to calculate the 
geometric mean cost for new APC 0635, we would no longer recognize 
those CPT codes when they appear on hospital claims effective January 
1, 2014. Similarly, we also proposed to discontinue our longstanding 
policy of recognizing five distinct visit levels for Type B ED visits 
and instead proposed to create a new alphanumeric HCPCS G-code 
representing all Type B ED visits under the OPPS. We proposed to assign 
the newly created alphanumeric Type B ED visit HCPCS G-code to its own 
newly created APC 0636. Using CY 2012 claims data, we proposed to 
develop CY 2014 OPPS payment rates for new HCPCS G-code based on the 
total geometric mean cost of the levels 1 through 5 HCPCS codes for 
Type B ED visits currently recognized under the OPPS (HCPCS codes G0380 
through G0384). We stated that while we would use data for HCPCS codes 
G0380 through G0384 from claims billed in CY 2012 to calculate the 
geometric mean cost for new APC 0636, we would no longer recognize 
those HCPCS codes for Type B ED visits when they appear on hospital 
claims effective January 1, 2014.
    We noted that we would use the hospital claims data for the three 
new HCPCS G-codes when available for future ratesetting. We summarized 
the proposed changes to the visit coding and payment structure in Table 
29 of the proposed rule (78 FR 43616). We welcomed public comments on 
our CY 2014 proposal to recognize a single visit level for clinic, Type 
A ED, and Type B ED visits for payment under the OPPS. We stated that 
we believe this proposal will allow us to make accurate payments for 
visits broad-scale because we will be using data from the universe of 
hospital outpatient visits, for which we have an extremely high volume 
of claims representing the entire spectrum of costs incurred by 
hospitals. Nonetheless, we indicated that we were interested in hearing 
from stakeholders regarding whether a different approach may be 
preferable to capture the resource utilization for extremely low 
complexity cases as well as extremely high complexity cases or to 
otherwise recognize a difference among visit levels. We stated that 
while we do not believe, based on our current assessment, that it is 
necessary to provide additional payment levels or carve out these cases 
to make accurate and appropriate payments for visits, we were 
interested in hearing from hospitals whether there are certain cases 
that would not be best accommodated by a single level of payment. If 
such cases exist, we welcomed stakeholder input into whether and how 
this proposal could be changed in the final rule to either make 
exceptions for or accommodate these special cases. We stated that if 
commenters provided compelling comments describing such special cases 
or the need for additional payment levels, should they exist, and if 
there are alternative policies that would more accurately and 
appropriately pay for visits, we would consider implementing a 
different policy in the final rule. We noted that, to the extent that 
commenters recommended that additional levels of payment or special 
high complexity or low complexity cases be recognized, we also would be 
interested in how we should define and differentiate those levels or 
cases.
    Comment: Commenters specifically opposed CMS' proposal to collapse 
the current five levels of ED visits into a single visit level for both 
Type A and Type B ED visits. Commenters stated that the proposed single 
payment for Type A ED and Type B ED visits captures too broad a range 
of ED visits, which could result in payment rates that are inadequate 
for treatment of beneficiaries who require higher levels of care. 
Commenters also stated that a single ED visit level would result in 
higher copayment amounts for beneficiaries receiving services 
consistent with a lower level ED visit. Commenters expressed concern 
that hospitals would pressure physicians and hospital staff to reduce 
the time in the ED to lessen the potential loss of revenues associated 
with a single level ED visit payment, potentially leading to a 
deterioration of patient care. Commenters argued that the proposed ED 
visit policy is inequitable to hospitals that consistently have a more 
complex case-mix and a greater than average utilization of the higher 
level ED visit codes, such as trauma centers, teaching hospitals, and 
hospitals that have taken steps to shift lower-acuity ED patients into 
Type B EDs or onsite or nearby urgent care clinics. Commenters urged 
CMS to exclude trauma care from any consolidation of ED payment levels 
to ensure that designated trauma centers are fairly paid for the care 
they provide. Commenters expressed reservations about a single payment 
for ED visits in light of a potential increase in ED usage and ED 
patient acuity due to newly insured individuals having access to care 
under the Affordable Care Act.
    Commenters also argued that there is a bias toward lower level 
visit code costs in calculating the geometric mean cost for the new 
collapsed visit codes as higher level visit codes are more often billed 
with separately paid procedures on the same day of service. Commenters 
expressed additional reservations with the proposed policy in light of 
their inability to conduct impact analysis on the proposed policy due 
to initial errors in the CY 2014 OPPS/ASC proposed rule data. 
Commenters also stated the proposed policy removes CMS' ability to 
track and document differences in patient acuity and is inconsistent 
with CMS' previously stated purpose in creating Medicare Severity 
Diagnosis-Related Groups (MS-DRGs) under the IPPS to account for 
differences in costs due to differences in patient severity.
    Moreover, commenters stated that the proposed policy should not be 
implemented in CY 2014 due to its interaction with CMS' proposal to 
expand packaging of services and hospitals' administrative training 
sessions currently underway to implement International Classification 
of Diseases, 10th Edition (ICD-10). Commenters asserted that the 
proposed policy would create added administrative burden as other 
payers will continue to require the reporting of the five E/M code 
levels. Commenters suggested that CMS work with the AMA to develop 
facility-specific CPT codes

[[Page 75040]]

for Type A ED and Type B ED visits and seek input from industry 
stakeholders, specifically hospital representatives, to develop 
descriptions for these new codes that allow for their consistent 
application by hospital outpatient departments. Commenters also 
recommended that CMS develop hospital-specific national guidelines for 
hospitals to report ED visits.
    Commenters stated that they did not understand why this proposal is 
necessary in light of CMS' previous statements that hospitals are 
generally billing appropriately and in a consistent manner that 
distinguishes among the different levels of visits based on the 
required hospital resources and CMS' current utilization of 
Comprehensive Error Rate Testing (CERT), Recovery Audit Contractors 
(RACs), Zone Program Integrity Contractors (ZPICs), and other methods 
of review to identify medically unnecessary services. Commenters stated 
that CMS should conduct selected focused audits in lieu of the proposed 
policy if CMS believes that hospitals are upcoding.
    Response: We appreciate all of the public comments we received on 
our proposal to collapse the current five levels of ED visits into a 
single visit level for both Type A and Type B ED visits. We 
specifically sought comment on whether there are certain high or low 
complexity cases that would not be best accommodated by a single level 
of payment. We stated in the proposed rule that, if such cases exist, 
we would welcome stakeholder input into whether and how this proposal 
could be changed in the final rule to either make exceptions for or 
accommodate these special cases. We also stated in the proposed rule 
that if commenters provided compelling comments describing such special 
cases or the need for additional payment levels, should they exist, and 
if there are alternative policies that would more accurately and 
appropriately pay for visits, we would consider implementing a 
different policy in the final rule. As discussed above, we received 
several comments that a single payment for an ED visit might 
underrepresent resources required to treat the most complex patients, 
such as trauma patients. We find this to be a compelling issue, for 
which an alternative payment structure, possibly including more than 
one payment level, may be warranted. However, at this time, additional 
study is needed to fully assess the most suitable payment structure for 
ED visits, including the particular number of visit levels that would 
not underrepresent resources required to treat the most complex 
patients, such as trauma patients. For CY 2014, we believe it is best 
to delay any change in ED visit coding while we reevaluate the most 
appropriate payment structure for Type A and Type B ED visits. We will 
maintain the current coding structure consisting of five visit levels 
for CY 2014 while we consider alternative payment structures.
    Comment: Commenters suggested the following alternatives to our 
proposed policy: One commenter requested that CMS alter its proposal 
and create one APC for Type A ED and Type B ED visits as proposed, but 
continue to allow the reporting of the current CPT E/M codes instead of 
creating new HCPCS codes. Multiple commenters suggested that CMS employ 
a three acuity level model to pay for Type A ED and Type B ED visits 
under the OPPS. Another commenter suggested CMS continue to use the 
current CPT codes for clinic E/M services but assign the CPT codes to 
one of three ED Visit APCs. One commenter suggested CMS create three 
composite ED services based on the ancillary services packaged with ED 
claim. A few commenters recommended, on a short-term basis, that CMS 
develop a set of three trauma[hyphen]specific HCPCS codes for all 
trauma patients, for whom a trauma team is activated.
    Response: We appreciate the thoughtful and detailed alternatives 
presented by commenters. We need additional time to study and fully 
consider these alternatives and other comments received with respect to 
how our proposed ED visits policy would affect payments for the most 
complex patients. We believe it is best to delay any change in ED visit 
coding while we consider further the most appropriate payment structure 
for Type A and Type B ED visits.
    Comment: Commenters generally opposed our proposal to create a 
single new alphanumeric HCPCS G-code for hospital use only representing 
all clinic visits under the OPPS and to assign the newly created 
alphanumeric clinic visit HCPCS G-code to its own newly created APC 
0634. Some commenters raised similar concerns about a single payment 
for clinic visits as they did for ED visits, although there were fewer 
objections to a single payment for clinic visits and those objections 
lacked the forcefulness and specificity of the objections to a single 
level of payment for Type A and Type B ED visits. A few commenters 
stated that, while they did not favor a single payment for clinic 
visits, given the nature of the services provided at clinic visits, a 
single payment level would be acceptable. A majority of commenters 
supported CMS' proposal to eliminate the distinction between ``new'' 
and ``established'' patient visits. As with ED visits, commenters 
stated that the proposed single clinic visit code and associated single 
payment are overly broad, which could result in payment rates that are 
inadequate for treatment of beneficiaries who require higher levels of 
care and higher copayment amounts for beneficiaries receiving lower 
level visits. Commenters expressed concern that hospitals would 
pressure physicians and hospital staff to reduce the time in clinic 
visits to lessen the potential loss of revenues associated with a 
single level clinic visit payment, potentially leading to a 
deterioration of patient care. Commenters asserted that the proposed 
policy would create added administrative burden as other payers will 
continue to require the reporting of the five E/M CPT codes to describe 
clinic visits. Commenters argued that the proposed policy is 
inequitable to many tertiary care and teaching hospitals, including 
those hospitals that consistently have a more complex case-mix and a 
greater than average utilization of the higher level E/M codes. 
Commenters also argued there is a likely bias toward lower level visit 
code costs in calculating the geometric mean cost for the new collapsed 
visit codes as higher level visit codes are more often billed with 
separately paid procedures on the same day of service. Commenters 
expressed additional reservations with the proposal in light of their 
inability to conduct impact analysis on the proposed policy due to 
initial errors in the CY 2014 OPPS/ASC proposed rule data. Commenters 
stated that the proposed policy removes CMS' ability to track and 
document differences in patient acuity and is inconsistent with CMS' 
previously stated purpose in creating MS-DRGs under the IPPS to account 
for differences in costs due to differences in patient severity. 
Moreover, commenters stated the proposed policy should not be 
implemented in CY 2014 due to its interaction with CMS' proposal to 
expand packaging and hospitals' administrative training sessions 
currently underway to implement ICD-10. Commenters suggested CMS work 
with the AMA to develop facility-specific CPT codes for E/M clinic 
visits (with no distinction between new and established patients) and 
seek input from industry stakeholders, specifically hospital 
representatives, to develop descriptions for these new codes that allow 
for their consistent application by hospital outpatient clinics. 
Commenters also recommended that CMS develop

[[Page 75041]]

hospital-specific national guidelines for hospitals to report clinic 
visits.
    Commenters expressed a lack of understanding of why this proposal 
is necessary in light of CMS' previous statements that hospitals are 
generally billing appropriately and in a consistent manner that 
distinguishes among the different levels of visits based on the 
required hospital resources and CMS' current utilization of CERT, RACs, 
ZPICs, and other methods of review to identify medically unnecessary 
services. Commenters stated that CMS should conduct selected focused 
audits in lieu of the proposed policy if CMS believes that hospitals 
are upcoding.
    Response: We appreciate all of the public comments we received on 
our proposed policy to create a single new alphanumeric HCPCS G-code 
for hospital use only representing any clinic visit under the OPPS and 
the assignment of the newly created alphanumeric clinic visit HCPCS G-
code to its own newly created APC 0634. We disagree with the commenters 
that the proposed clinic visit code is overly broad. While we agree 
that the proposed clinic APC encompasses a range of visits for 
beneficiaries with different medical issues, we believe that the 
spectrum of hospital resources provided during an outpatient hospital 
clinic visit is appropriately captured and reflected in the single 
level payment for clinic visits. We also believe that a single visit 
code is consistent with a prospective payment system, where payment is 
based on an average estimated relative cost for the service, although 
the cost of individual cases may be more or less costly than the 
average. We do not observe wide disparity among the estimated geometric 
mean costs for new or established clinic visits in our data, and there 
is significantly less disparity in estimated geometric mean costs among 
the current five clinic visit levels than there is among the five ED 
visit levels.
    We believe the proposed payment rate for APC 0634 represents an 
appropriate payment for clinic visits as it is based on the geometric 
mean costs of all visits. Although the cost for any given clinic visit 
may be higher or lower than the geometric mean cost of APC 0634, the 
payment remains appropriate to the hospital delivering a variety of 
clinic visits. The high volume of claims from every level of clinic CPT 
code that we used for ratesetting for the newly created alphanumeric 
Level II HCPCS clinic visit code allows us to have accurate data upon 
which to develop appropriate payment rates.
    With regard to specific concerns for hospitals that treat patients 
with a more complex case-mix, we note that the relatively low estimated 
cost of clinic visits overall would result in much less underpayment or 
overpayment for hospitals that may serve a population with a more 
complex overall case-mix. We also note that the range among the 
geometric mean cost of the current five clinic visit levels is much 
smaller than the range for the current five levels of ED visits. In 
addition, the commenters' support for eliminating distinctions for new 
and established patients suggests that hospitals prefer the 
administrative ease of not tracking new or established patients even 
though we make differential payment for these visits, and we observe 
differential costs for these CPT codes in our claims data.
    We disagree with the commenters' statement that there is a likely 
bias toward including more lower level visit code costs in calculating 
the geometric mean cost for the new collapsed visit codes. Commenters 
have argued that higher level visit codes are more often billed with 
separately paid procedures on the same day of service and that we are 
less likely to be able to isolate claims with a single higher level CPT 
code. For clinic visits, we observed comparable distributions of claims 
between higher and lower levels across new and established clinic visit 
CPT codes in both the single bill claims used for ratesetting and all 
claims. We concluded that the distribution of claims data among higher 
and lower level CPT codes used to establish the proposed payment rate 
for APC 0634 is comparable to the total distribution of claims among 
CPT code levels in the CY 2012 claims data in our CPT cost files. We do 
not believe that our single bill methodology biases the resulting 
geometric mean in any way.
    We disagree with commenters that our proposal for a single payment 
is contrary to CMS' stated purpose in creating MS-DRGs under the IPPS 
to account for differences in costs due to differences in patient 
severity. MS-DRGs are designed to reflect significant differences in 
resource costs for an inpatient stay. The MS-DRG classification of a 
particular discharge is based, as appropriate, on the patient's age, 
sex, principal diagnosis (that is, the diagnosis established after 
study to be chiefly responsible for causing the patient's admission to 
the hospital), secondary diagnoses, procedures performed, and discharge 
status. A single payment for a clinic visit does not pose the same 
level of financial risk. The observed cost differences among levels of 
CPT codes in the claims data are not dramatic. Further, hospitals will 
receive separate payment for many other services furnished in the same 
encounter and will not incur the same level of financial risk as for an 
inpatient stay.
    Regarding the commenters' inability to conduct impact analysis on 
our visit proposal because of some initial limited errors in the 
proposed rule payment files, we note that we released corrected data 
files on August 28, 2013, and extended the comment period to September 
16, 2013, on the technical corrections noted in the correcting document 
published in the Federal Register on September 6, 2013 (78 FR 54842). 
For a more detailed discussion of the OPPS data process, we refer 
readers to section II.A. of this final rule with comment period.
    We disagree with the commenters that hospitals would pressure 
physicians and hospital staff to furnish a diminished level of care to 
beneficiaries in an attempt to mitigate any potential loss of revenue 
associated with a single level clinic visit payment that is based on an 
average of relative costs of all clinic visit codes and is proportional 
to their appearance in the claims data. As with all prospective payment 
systems that depend upon a prospectively established payment derived 
from relative cost, less costly cases generate greater net revenue for 
the hospital than more costly cases. Payments may be greater than or 
less than the cost of any particular case. It is our belief and 
continued expectation that hospitals and physicians and other 
practitioners will furnish appropriate care to Medicare beneficiaries.
    We continue to believe discontinuing the use of the five levels of 
HCPCS visit codes for clinic visits will reduce hospitals' 
administrative burden by eliminating the need for them to develop and 
apply their own internal guidelines to differentiate among five levels 
of resource use for every clinic visit they provide. We believe the 
advantages of this reduced administrative burden outweigh any potential 
loss in CMS' ability to track and document differences in patient 
acuity for clinic visits. We note that the level of CPT code is not the 
only method for assessing patient acuity. Diagnosis coding and the type 
and frequency of other services billed on a visit claim also 
communicate patient acuity. We disagree with the commenters that 
finalization of our proposed clinic visit policy should be delayed 
because of our CY 2014 proposal to expand packaging or the presence of 
hospital training sessions to implement ICD-10 coding. We note that our 
CY 2014 OPPS packaging policies create no additional administrative

[[Page 75042]]

burden for hospital coding for visits. We continue to expect hospitals 
to correctly code for the services they furnish. We also believe that 
the combination of a single HCPCS G-code to describe all clinic visits, 
the discontinuance of the requirement that hospitals track criteria for 
billing either new or established clinic visits, and the discontinuance 
of the requirement for hospitals to distinguish