[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Rules and Regulations]
[Pages 74121-74584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28612]



[[Page 74121]]

Vol. 76

Wednesday,

No. 230

November 30, 2011

Part II





Department of Health and Human Services





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Centers for Medicare and Medicaid Services





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42 CFR Parts 410, 411, 416 et al.





Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based 
Purchasing Program; Physician Self-Referral; and Patient Notification 
Requirements in Provider Agreements; Final Rule

Federal Register / Vol. 76 , No. 230 / Wednesday, November 30, 2011 / 
Rules and Regulations

[[Page 74122]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 416, 419, 489, and 495

[CMS-1525-FC]
RIN 0938-AQ26


Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based 
Purchasing Program; Physician Self-Referral; and Patient Notification 
Requirements in Provider Agreements

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) for CY 2012 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with this system. In this final rule with 
comment period, we describe the changes to the amounts and factors used 
to determine the payment rates for Medicare hospital outpatient 
services paid under the OPPS.
    In addition, this final rule with comment period updates the 
revised Medicare ambulatory surgical center (ASC) payment system to 
implement applicable statutory requirements and changes arising from 
our continuing experience with this system. In this final rule with 
comment period, we set forth the relative payment weights and payment 
amounts for services furnished in ASCs, specific HCPCS codes to which 
these changes apply, and other ratesetting information for the CY 2012 
ASC payment system.
    We are revising the requirements for the Hospital Outpatient 
Quality Reporting (OQR) Program, adding new requirements for ASC 
Quality Reporting System, and making additional changes to provisions 
of the Hospital Inpatient Value-Based Purchasing (VBP) Program.
    We also are allowing eligible hospitals and CAHs participating in 
the Medicare Electronic Health Record (EHR) Incentive Program to meet 
the clinical quality measure reporting requirement of the EHR Incentive 
Program for payment year 2012 by participating in the 2012 Medicare EHR 
Incentive Program Electronic Reporting Pilot.
    Finally, we are making changes to the rules governing the whole 
hospital and rural provider exceptions to the physician self-referral 
prohibition for expansion of facility capacity and changes to provider 
agreement regulations on patient notification requirements.

DATES: Effective Date: This final rule with comment period is effective 
on January 1, 2012.
    Comment Period: To be assured consideration, comments on the 
payment classifications assigned to HCPCS codes identified in Addenda 
B, AA, and BB of this final rule with comment period with the ``NI'' 
comment indicator and on other areas specified throughout this final 
rule with comment period, and comments on the suspension of the 
effective dates of the Hospital-Acquired Condition (HAC), Agency for 
Healthcare Research and Quality (AHRQ), and Medicare spending per 
beneficiary measures discussed in section XVI.A.2. of this final rule 
with comment period, must be received at one of the addresses provided 
in the ADDRESSES section no later than 5 p.m. EST on January 3, 2012.
    Application Deadline--New Class of New Technology Intraocular 
Lenses: Requests for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
2, 2012, at the following address: ASC/NTOL, Division of Outpatient 
Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 
7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES: In commenting, please refer to file code CMS-1525-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-1525-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-1525-FC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being filed.
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 

Marjorie Baldo, (410) 786-4617, Hospital outpatient prospective payment 
issues.
Char Thompson, (410) 786-2300, Ambulatory surgical center issues.
Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-4533, 
Partial hospitalization and community mental health center issues.
James Poyer, (410) 786-2261, Reporting of Hospital Outpatient Quality 
Reporting (OQR) and ASC Quality Reporting Program issues.
Teresa Schell, (410) 786-8651, Physician Ownership and Investment in 
Hospitals issues.
Georganne Kuberski, (410) 786-0799, Patient Notification Requirements 
issues.
James Poyer, (410) 786-2261, and Ernessa Brawley (410) 786-2075, 
Hospital Value-Based Purchasing (VBP) Program issues.

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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 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 throughout the 
preamble of 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 proposed rule, all of the Addenda will no longer 
appear in the Federal Register as part of the annual OPPS/ASC proposed 
and final rules to decrease administrative burden and reduce costs 
associated with publishing lengthy tables. Instead, these Addenda will 
be published and available only on the CMS Web site. The Addenda 
relating to the OPPS are available at: http://www.cms.gov/HospitalOutpatientPPS. The Addenda relating to the ASC payment system 
are available at: http://www.cms.gov/ASCPayment/. For complete details 
on the availability of the Addenda referenced in this final rule with 
comment period, we refer readers to section XVII. Readers who 
experience any problems accessing any of the Addenda that are posted on 
the CMS Web site identified above should contact Charles Braver at 
(410) 786-0378.

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AMA American Medical Association
AMP Average Manufacturer Price
AOA American Osteopathic Association
APC Ambulatory Payment Classification
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory Surgical Center
ASP Average Sales Price
AWP Average Wholesale Price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical Access Hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CCR Cost-to-Charge Ratio
CDC Centers for Disease Control
CERT Comprehensive Error Rate Testing
CLFS Clinical Laboratory Fee Schedule
CMHC Community Mental Health Center
CMS Centers for Medicare & Medicaid Services
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CQM Clinical Quality Measure
CR Cardiac Rehabilitation
CY Calendar Year
DFO Designated Federal Official
DHS Designated Health Service
DRA Deficit Reduction Act of 2005, Public Law 109-171
DSH Disproportionate Share Hospital
EACH Essential Access Community Hospital
E/M Evaluation and Management
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FACA Federal Advisory Committee Act, Public Law 92-463
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-Service
FSS Federal Supply Schedule
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Condition
HAI Healthcare-Associated Infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152
HCP Healthcare Personnel
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HHA Home Health Agency
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HOPD Hospital Outpatient Department
Hospital OQR Hospital Outpatient Quality Reporting
ICR Intensive Cardiac Rehabilitation
IDE Investigational Device Exemption
IHS Indian Health Service
IQR Inpatient Quality Reporting
I/OCE Integrated Outpatient Code Editor
IOL Intraocular Lens
IPPS [Hospital] Inpatient Prospective Payment System
MAC Medicare Administrative Contractor
MedPAC Medicare Payment Advisory Commission
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NCD National Coverage Determination
NPP Nonphysician practitioner
NQF National Quality Forum
NTIOL New Technology Intraocular Lens
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPPS [Hospital] Outpatient Prospective Payment System
OQR Outpatient Quality Reporting
PBD Provider-Based Department
PHP Partial Hospitalization Program
PPI Producer Price Index
PPS Prospective Payment System
PR Pulmonary Rehabilitation
PRA Paperwork Reduction Act
QAPI Quality Assessment and Performance Improvement
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RFA Regulatory Flexibility Act
RHHI Regional Home Health Intermediary
SBA Small Business Administration
SCH Sole Community Hospital
SDP Single Drug Pricer
SI Status Indicator
TEP Technical Expert Panel
TOPs Transitional Outpatient Payments
VBP Value-Based Purchasing
WAC Wholesale Acquisition Cost

    In this document, we address two payment systems under the Medicare 
program: the OPPS and the ASC payment system. In addition, we are 
making changes to the rules governing limitations on certain physician 
referrals to hospitals in which

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physicians have an ownership or investment interest, the provider 
agreement regulations on patient notification requirements, and the 
rules governing the Hospital Inpatient Value-Based Purchasing (VBP) 
Program. The provisions relating to the OPPS are included in sections 
I. through XII., section XIV., and sections XVII. through XXI. of this 
final rule with comment period. Addenda A, B, C, D1, D2, E, L, M, and 
N, which relate to the OPPS, are referenced in section XVII. of this 
final rule with comment period and are available via the Internet on 
the CMS Web site at the URL indicated in section XVII. The provisions 
related to the ASC payment system are included in sections XIII., XIV., 
and XVII. through XXI. of this final rule with comment period. Addenda 
AA, BB, DD1, DD2, and EE, which relate to the ASC payment system, are 
referenced in section XVII. of this final rule with comment period and 
are available via the Internet on the CMS Web site at the URL indicated 
in section XVII. The provisions relating to physician referrals to 
hospitals in which physicians have an ownership or investment interest 
and to the provider agreement regulations on patient notification 
requirements are included in section XV., and the provisions relating 
to the Hospital Inpatient VBP Program are included in section XVI. of 
this final rule with comment period.

Table of Contents

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule and 
This Final Rule With Comment Period
    A. Legislative and Regulatory Authority for the Hospital 
Outpatient Perspective Payment System
    B. Excluded OPPS Services and Hospitals
    C. Prior Rulemaking
    D. Advisory Panel on Ambulatory Payment Classification (APC) 
Groups
    1. Authority of the APC Panel
    2. Establishment of the APC Panel
    3. APC Panel Meetings and Organizational Structure
    E. Summary of the Major Contents of the CY 2012 OPPS/ASC 
Proposed Rule
    1. Updates Affecting OPPS Payments
    2. OPPS Ambulatory Payment Classification (APC) Group Policies
    3. OPPS Payment for Devices
    4. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    5. Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    6. OPPS Payment for Hospital Outpatient Visits
    7. Payment for Partial Hospitalization Services
    8. Procedures That Would Be Paid Only as Inpatient Procedures
    9. Policies on Supervision Standards for Outpatient Services in 
Hospitals and CAHs
    10. OPPS Payment Status and Comment Indicators
    11. OPPS Policy and Payment Recommendations
    12. Updates to the Ambulatory Surgical Center (ASC) Payment 
System
    13. Reporting Quality Data for Annual Payment Rate Updates
    14. Changes to EHR Incentive Program for Eligible Hospitals and 
CAHs Regarding Electronic Submission of Clinical Quality Measures 
(CQMs)
    15. Changes to Provisions Relating to Physician Self-Referral 
Prohibition and Provider Agreement Regulations on Patient 
Notification Requirements
    16. Additional Changes to the Hospital Inpatient VBP Program
    17. Economic and Federalism Analyses
    F. Public Comments Received in Response to the CY 2012 OPPS/ASC 
Proposed Rule
    G. Public Comments Received on the CY 2011 OPPS/ASC Final Rule 
With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative 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 Median Costs
    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 Median Cost Calculations
    d. Calculation of Single Procedure APC Criteria-Based Median 
Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Allergy Tests (APCs 0370 and 0381)
    (4) Hyperbaric Oxygen Therapy (APC 0659)
    (5) Payment for Ancillary Outpatient Services When Patient 
Expires (APC 0375)
    (6) Endovascular Revascularization of the Lower Extremity (APCs 
0083, 0229, and 0319)
    (7) Non-Congenital Cardiac Catheterization (APC 0080)
    (8) Cranial Neurostimulator and Electrodes (APC 0318)
    (9) Brachytherapy Sources
    e. Calculation of Composite APC Criteria-Based Median Costs
    (1) Extended Assessment and Management Composite APCs (APCs 8002 
and 8003)
    (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (3) Cardiac Electrophysiologic Evaluation and Ablation Composite 
APC (APC 8000)
    (4) Mental Health Services Composite APC (APC 0034)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    (6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 
0418, 0655, and 8009)
    3. Changes to Packaged Services
    a. Background
    b. Packaging Issues
    (1) CMS Presentation of Findings Regarding Expanded Packaging at 
the February 28-March 1, 2011 and August 10-12, 2011 APC Panel 
Meetings
    (2) Packaging Recommendations of the APC Panel at Its February 
28-March 1, 2011 Meeting
    (3) Packaging Recommendations of the APC Panel at Its August 
2011 Meeting
    (4) Other Packaging Proposals and Policies for CY 2012
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. OPPS Payment to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes
    2. Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act
    F. OPPS Payments to Certain Cancer Hospitals Described by 
Section 1886(d)(1)(B)(v) of the Act
    1. Background
    2. Study of Cancer Hospital Costs Relative to Other Hospitals
    3. CY 2011 Proposed Payment Adjustment for Certain Cancer 
Hospitals
    4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was 
Not Finalized
    5. Payment Adjustment for Certain Cancer Hospitals for CY 2012
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Final Outlier Calculation
    4. Outlier Reconciliation
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
    1. Background
    2. OPPS Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New Level II HCPCS Codes and Category I CPT 
Vaccine Codes and Category III CPT Codes for Which We Solicited 
Public Comments in the CY 2012 Proposed Rule
    2. Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Are Soliciting Public Comments 
on This CY 2012 OPPS/ASC Final Rule With Comment Period
    B. OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background
    2. Movement of Procedures From New Technology APCs to Clinical 
APCs

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    D. OPPS APC-Specific Policies
    1. Cardiovascular Services
    a. Cardiovascular Computed Tomography (CCT) (APCs 0340 and 0383)
    b. Cardiac Imaging (APC 377)
    c. Insertion/Replacement/Repair of AICD Leads, Generator, and 
Pacing Electrodes (APC 0108)
    d. Implantable Loop Recorder Monitoring (APC 0690)
    e. Echocardiography (APCs 0128, 0269, 0270, and 0697)
    2. Gastrointestinal Services
    a. Upper Gastrointestinal (GI) Services (APCs 0141, 0419, and 
0422)
    b. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    3. Genitourinary Services
    a. Laser Lithotripsy (APC 0163)
    b. Percutaneous Renal Cryoablation (APC 0423)
    4. Nervous System Services
    a. Revision/Removal of Neurotransmitter Electrodes (APCs 0040 
and 0687)
    b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067)
    c. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0218)
    5. Ocular and Ophthalmic Services
    a. Placement of Amniotic Membrane (APCs 0233 and 0244)
    b. Insertion of Anterior Segment Aqueous Drainage Device (APC 
0673)
    c. Scanning Ophthalmic Diagnostic Imaging (APC 0230)
    d. Intraocular Laser Endoscopy (APC 0233)
    6. Orthopedic and Musculoskeletal Services
    a. Percutaneous Laminotomy/Laminectormy (APC 0208)
    b. Level II Arthroscopy (APC 0042)
    c. Closed Treatment Fracture of Finger, Toe, and Trunk (APCs 
0129, 0138, and 0139)
    d. Level I and II Strapping and Cast Application (APCs 0058 and 
0426)
    7. Radiology Services
    a. Proton Beam Therapy (APCs 0664 and 0667)
    b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0065, 0066, 0067, and 0127)
    c. Adrenal Imaging (APC 0408)
    d. Positron Emission Tomography (PET) Imaging (APC 0308) 
(Created From Myocardial Positron Emission Tomography (PET) Imaging 
(APC 0307) and Nonmyocardial Positron Emission Tomography (PET) 
Imaging (APC 0308))
    e. Device Construction for Intensity Modulated Radiation Therapy 
(IMRT) (APC 0305)
    f. Computed Tomography of Abdomen/Pelvic (APCs 0331 and 0334)
    g. Complex Interstitial Radiation Source Application (APC 0651)
    h. Radioelement Applications (APC 0312)
    8. Respiratory Services
    a. Pulmonary Rehabilitation (APC 0102)
    b. Bronchial Thermoplasty (APC 0415)
    c. Insertion of Bronchial Valve (APC 0415)
    9. Other Services
    a. Skin Repair (APCs 0133, 0134, and 0135)
    b. Nasal Sinus Endoscopy (APC 0075)
    c. Bioimpedance Spectroscopy (APC 0097)
    d. Autologous Blood Salvage (APC 0345)
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 2012 Policy
    2. Provisions for Reducing Transitional Pass-Through Payments To 
Offset Costs Packaged Into APC Groups
    a. Background
    b. CY 2012 Policy
    B. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. APCs and Devices Subject to the Adjustment Policy
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Drugs and Biologicals With Expiring Pass-Through Status in CY 
2011
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2012
    4. Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals and Contrast Agents To Offset 
Costs Packaged Into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Status
    1. Background
    2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    d. Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' 
Drugs and Devices)
    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 2012 Payment Policy
    c. Payment Policy for Therapeutic Radiopharmaceuticals
    4. Payment for Blood Clotting Factors
    5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital 
Claims Data
    VI. Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Policies for Hospital Outpatient Visits
    1. Clinic Visits: New and Established Patient Visits
    2. Emergency Department Visits
    3. Visit Reporting Guidelines
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2012
    C. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
X. Policies for the Supervision of Outpatient Services in Hospitals 
and CAHs
    A. Background
    B. Issues Regarding the Supervision of Hospital Outpatient 
Therapeutic Services Raised by Hospitals and Other Stakeholders
    1. Independent Review Process
    a. Selection of Review Entity
    b. Review Process
    c. Evaluation Criteria
    2. Conditions of Payment and Hospital Outpatient Therapeutic 
Services Described by Different Benefit Categories
    3. Technical Corrections to the Supervision Standards for 
Hospital Outpatient Therapeutic Services Furnished in Hospitals or 
CAHs
    C. Summary of CY 2012 Final Policies on Supervision Standards 
for Outpatient Therapeutic Services in Hospitals and CAHs
    1. Independent Review Process
    2. Conditions of Payment and Hospital Outpatient Therapeutic 
Services Described by Different Benefit Categories
    3. Technical Corrections
XI. Final CY 2012 OPPS Payment Status and Comment Indicators
    A. Final CY 2012 OPPS Payment Status Indicator Definitions
    1. Payment Status Indicators To Designate Services That Are Paid 
Under the OPPS
    2. Payment Status Indicators To Designate Services That Are Paid 
Under a Payment System Other Than the OPPS
    3. Payment Status Indicators to Designate Services That Are Not 
Recognized Under the OPPS But That May Be Recognized by Other 
Institutional Providers
    4. Payment Status Indicators To Designate Services That Are Not 
Payable by Medicare on Outpatient Claims
    B. Final CY 2012 Comment Indicator Definitions
XII. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. APC Panel Recommendations
    C. OIG Recommendations
XIII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative Authority for the ASC Payment System
    2. Prior Rulemaking

[[Page 74126]]

    3. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. Treatment of New Codes
    1. Process for Recognizing New Category I and Category III CPT 
Codes and Level II HCPCS Codes
    2. Treatment of New Level II HCPCS Codes and Category III CPT 
Codes Implemented in April and July 2011 for Which We Solicited 
Public Comments in the CY 2012 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 2012 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 2012 to Covered Surgical Procedures 
Designated as Office-Based
    c. ASC Covered Surgical Procedures Designated as Device-
Intensive
    (1) Background
    (2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2012
    d. ASC Treatment of Surgical Procedures Removed From the OPPS 
Inpatient List for CY 2012
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC-Covered Surgical Procedure Payment Rates for CY 
2012
    c. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    d. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    e. Payment for the Cardiac Resynchronization Therapy Composite
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2012
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Cycle and Evaluation Criteria
    2. NTIOL Application Process for Payment Adjustment
    3. Requests To Establish New NTIOL Classes for CY 2012
    4. Payment Adjustment
    5. Announcement of CY 2012 Deadline for Submitting Requests for 
CMS Review of Appropriateness of ASC Payment for Insertion of an 
NTIOL Following Cataract Surgery
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. ASC Policy and Payment Recommendations
    H. Calculation of the ASC Conversion Factor and the ASC Payment 
Rates
    1. Background
    2. Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2012 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of CY 2012 ASC Payment Rates
XIV. Hospital Outpatient Quality Reporting Program Updates and ASC 
Quality Reporting
    A. Background
    1. Overview
    2. Statutory History of Hospital Outpatient Quality Reporting 
(Hospital OQR) Program
    3. Technical Specification Updates and Data Publication
    a. Maintenance of Technical Specifications for Quality Measures
    b. Publication of Hospital OQR Program Data
    B. Revision to Measures Previously Adopted for the Hospital OQR 
Program for the CY 2013 and CY 2014 Payment Determinations
    1. Background
    2. Revision to OP-22 Left Without Being Seen
    C. New Quality Measures for the CY 2014 and CY 2015 Payment 
Determinations
    1. Considerations in Expanding and Updating Quality Measures 
Under Hospital OQR Program
    2. New Hospital OQR Program Quality Measures for the CY 2014 
Payment Determination
    a. New National Healthcare Safety Network (NHSN) Healthcare 
Associated Infection (HAI) Measure for the CY 2014 Payment 
Determination: Surgical Site Infection (NQF 0299)
    b. New Chart-Abstracted Measures for the CY 2014 Payment 
Determination
    c. New Structural Measures
    (1) Safe Surgery Checklist Use Measure
    (2) Hospital Outpatient Department Volume for Selected 
Outpatient Surgical Procedures Measure
    3. Hospital OQR Program Measures for the CY 2015 Payment 
Determination
    a. Retention of CY 2014 Hospital OQR Measures for the CY 2015 
Payment Determination
    b. New NHSN HAI Measure for the CY 2015 Payment Determination
    D. Possible Quality Measures Under Consideration for Future 
Inclusion in the Hospital OQR Program
    E. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Requirements for the CY 2012 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2012
    F. Extraordinary Circumstances Extension or Waiver for CY 2012 
and Subsequent Years
    G. Requirements for Reporting of Hospital OQR Data for CY 2013 
and Subsequent Years
    1. Administrative Requirements for CY 2013 and Subsequent Years
    2. Form, Manner, and Timing of Data Submission for CY 2013 and 
Subsequent Years
    a. CY 2013 and CY 2014 Data Submission Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS
    b. Eligibility to Voluntarily Sample and Data Submission 
Exception for Low Patient Volume for CY 2013 and Subsequent Years
    c. Population and Sampling Data Requirements Beginning With the 
CY 2013 Payment Determination and for Subsequent Years
    d. Claims-Based Measure Data Requirements for the CY 2013 and CY 
2014 Payment Determinations
    e. Structural Measure Data Requirements for the CY 2013 and CY 
2014 Payment Determinations
    f. Data Submission Deadlines for the NHSN HAI Surgical Site 
Infection Measure for the CY 2014 Payment Determination
    g. Data Submission Requirements for OP-22: ED-Patient Left 
Before Being Seen for the CY 2013 and CY 2014 Payment Determinations
    3. Hospital OQR Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS: Data Validation Approach for 
the CY 2013 Payment Determination
    a. Randomly Selected Hospitals
    b. Use of Targeting Criteria for Data Validation Selection for 
CY 2013
    (1) Background
    (2) Targeting Criteria for Data Validation Selection for CY 2013
    c. Encounter Selection
    d. Validation Score Calculation
    4. Additional Data Validation Conditions Under Consideration for 
CY 2014 and Subsequent Years
    H. Hospital OQR Reconsideration and Appeals Procedures for CY 
2013 and Subsequent Years
    I. Electronic Health Records (EHRs)
    J. 2012 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs
    1. Background
    2. Electronic Reporting Pilot
    3. CQM Reporting Under the Electronic Reporting Pilot
    K. ASC Quality Reporting Program
    1. Background
    2. ASC Quality Reporting Program Measure Selection
    a. Timetable for Selecting ASC Quality Measures
    b. Considerations in the Selection of Measures for the ASC 
Quality Reporting Program
    3. ASC Quality Measures for the CY 2014 Payment Determination
    a. Claims-Based Measures Requiring Submission of Quality Data 
Codes (QDCs) Beginning January 1, 2012
    (1) Patient Burns (NQF 0263)
    (2) Patient Falls (NQF 0266)
    (3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, 
Wrong Implant (NQF 0267)
    (4) Hospital Transfer/Admission (NQF 0265)
    (5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF 
0264)

[[Page 74127]]

    (6) Ambulatory Patient With Appropriate Method of Surgical Hair 
Removal (NQF 0515)
    (7) Selection of Prophylactic Antibiotic: First OR Second 
Generation Cephalosporin (NQF 0268)
    b. Surgical Site Infection Rate (NQF 0299)
    4. ASC Quality Measures for the CY 2015 Payment Determination
    a. Retention of Measures Adopted for the CY 2014 Payment 
Determination in the CY 2015 Payment Determination
    b. Structural Measures for the CY 2015 Payment Determination
    (1) Safe Surgery Checklist Use
    (2) ASC Facility Volume Data on Selected ASC Surgical Procedures
    5. ASC Quality Measures for the CY 2016 Payment Determination
    a. Retention of Measures Adopted for the CY 2015 Payment 
Determination in the CY 2016 Payment Determination
    b. HAI Measure: Influenza Vaccination Coverage Among Healthcare 
Personnel (HCP) (NQF 0431)
    6. ASC Measure Topics for Future Consideration
    7. Technical Specification Updates and Data Publication for the 
CY 2014 Payment Determination
    a. Maintenance of Technical Specifications for Quality Measures
    b. Publication of ASC Quality Reporting Program Data
    8. Requirements for Reporting of ASC Quality Data for the CY 
2014 Payment Determination
    a. Data Collection and Submission Requirements for the Claims-
Based Measures
    b. Data Submission Deadlines for the Surgical Site Infection 
Rate Measure
XV. Changes to Whole Hospital and Rural Provider Exceptions to the 
Physician Self-Referral Prohibition: Exception for Expansion of 
Facility Capacity; and Changes to Provider Agreement Regulations on 
Patient Notification Requirements
    A. Background
    B. Changes Made by the Affordable Care Act
    1. Provisions Relating to Exception to Ownership and Investment 
Prohibition (Section 6001(a) of the Affordable Care Act)
    2. Provisions of Section 6001(a)(3) of the Affordable Care Act
    C. Process for Requesting an Exception to the Prohibition on 
Expansion of Facility Capacity
    1. General Comments
    2. Applicable Hospital
    a. Percentage Increase in Population
    b. Inpatient Admissions
    c. Nondiscrimination
    d. Bed Capacity
    e. Bed Occupancy
    3. High Medicaid Facility
    a. Number of Hospitals in County
    b. Inpatient Admissions
    c. Nondiscrimination
    4. Procedures for Submitting a Request
    5. Community Input
    6. Permitted Increase
    a. Amount of Permitted Increase
    b. Location of Permitted Increase
    7. Decisions
    8. Limitation on Review
    9. Frequency of Request
    D. Changes Related to Provider Agreement Regulations on Patient 
Notification Requirements
XVI. Additional Hospital Value-Based Purchasing (Hospital VBP) 
Program Policies
    A. Hospital VBP Program
    1. Legislative Background
    2. Overview of the Hospital Inpatient VBP Program Final Rule
    3. Additional FY 2014 Hospital VBP Program Measures
    4. Minimum Number of Cases and Measures for the Outcome Domain 
for the FY 2014 Hospital VBP Program
    a. Background
    b. Minimum Number of Cases for Mortality Measures, AHRQ 
Composite Measures, and HAC Measures
    c. Minimum Number of Measures for Outcome Domain
    5. Performance Periods and Baseline Periods for FY 2014 Measures
    a. Clinical Process of Care Domain and Patient Experience of 
Care Domain Performance Period and Baseline Period
    b. Outcome Domain Performance Periods and Baseline Periods
    6. Performance Standards for the FY 2014 Hospital VBP Program
    a. Background
    b. Mortality Measures
    c. Clinical Process of Care and Patient Experience of Care FY 
2014 Performance Standards
    d. AHRQ Measures
    e. HAC Measures
    7. FY 2014 Hospital VBP Program Scoring Methodology
    a. FY 2014 Domain Scoring Methodology
    b. HAC Measures Scoring Methodology
    8. Ensuring HAC Reporting Accuracy
    9. Domain Weighting for FY 2014 Hospital VBP Program
    B. Review and Correction Process Under the Hospital VBP Program
    1. Background
    2. Review and Correction of Data Submitted to the QIO Clinical 
Warehouse on Chart-Abstracted Process of Care Measures and Measure 
Rates
    3. Review and Correction Process for Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) Data
    a. Phase One: Review and Correction of HCAHPS Data Submitted to 
the QIO Clinical Warehouse
    b. Phase Two: Review and Correction of the HCAHPS Scores for the 
Hospital VBP Program
XVII. Files Available to the Public via the Internet
    A. Information in Addenda Related to the Final CY 2012 Hospital 
OPPS
    B. Information in Addenda Related to the Final CY 2012 ASC 
Payment System
XVIII. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. ICRs Regarding Basic Commitments of Providers (Sec.  489.20)
    2. ICRs Regarding Exceptions Process Related to the Prohibition 
of Expansion of Facility Capacity (Sec.  411.362)
    C. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital Outpatient Quality Reporting (Hospital OQR) Program
    2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 
2014, and CY 2015 Payment Determinations
    a. Previously Adopted Hospital OQR Program Measures for the CY 
2012, CY 2013, and CY 2014 Payment Determinations
    b. Additional Hospital OQR Program Measures for CY 2014
    c. Hospital OQR Program Measures for CY 2015
    3. Hospital OQR Program Validation Requirements for CY 2013
    4. Hospital OQR Program Reconsideration and Appeals Procedures
    5. ASC Quality Reporting Program
    6. 2012 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs
    7. Additional Topics
XIX. Response to Comments
XX. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for OPPS and ASC Provisions
    4. Detailed Economic Analyses
    a. Effects of OPPS Changes in This Final Rule With Comment 
Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of This Final Rule With Comment Period on 
Hospitals
    (3) Estimated Effects of This Final Rule With Comment Period on 
CMHCs
    (4) Estimated Effect of This Final Rule With Comment Period on 
Beneficiaries
    (5) Effects on Other Providers
    (6) Effects on the Medicare and Medicaid Programs
    (7) Alternatives Considered
    b. Effects of ASC Payment System Changes in This Final Rule With 
Comment Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of This Final Rule With Comment Period on 
Payments to ASCs
    (3) Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    (4) Alternatives Considered
    c. Accounting Statements and Tables
    d. Effects of Requirements for the Hospital Outpatient Quality 
Reporting (OQR) Program
    e. Effects of Changes to Physician Self-Referral Regulations
    f. Effects of Changes to Provider Agreement Regulations on 
Patient Notification Requirements
    g. Effects of Additional Hospital VBP Program Requirements
    h. Effects of the 2012 Electronic Reporting Pilot
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis

[[Page 74128]]

    D. Conclusion
XXI. Federalism Analysis
Regulation Text

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule and 
This Final Rule With Comment Period

A. Legislative and Regulatory Authority for the Hospital Outpatient 
Prospective Payment System

    When Title XVIII of the Social Security Act (the 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 Part 419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. 
The following Acts made additional changes to the OPPS: the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit 
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 
2006; the Medicare Improvements and Extension Act under Division B of 
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare, 
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), 
enacted on December 29, 2007; the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on 
March 30, 2010 (These two public laws are collectively known as the 
Affordable Care Act.); and most recently the Medicare and Medicaid 
Extenders Act of 2010 (MMEA, Pub. L. 111-309).
    Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment 
classification (APC) group to which the service is assigned. We use the 
Healthcare Common Procedure Coding System (HCPCS) (which includes 
certain Current Procedural Terminology (CPT) codes) to identify and 
group the services within each APC group. The OPPS includes payment for 
most hospital outpatient services, except those identified in section 
I.B. of this 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 community mental health centers 
(CMHCs)) and hospital outpatient services that are furnished to 
inpatients who have exhausted their Part A benefits, or who are 
otherwise not in a covered Part A stay.
    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 for an item or service within the same APC group 
(referred to as the ``2 times rule''). In implementing this provision, 
we generally use the median cost of the item or service assigned to an 
APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
data to appropriately assign them to a clinical APC group, we have 
established special APC groups based on costs, which we refer to as New 
Technology APCs. These New Technology APCs are designated by cost bands 
which allow us to provide appropriate and consistent payment for 
designated new procedures that are not yet reflected in our claims 
data. Similar to pass-through payments, an assignment to a New 
Technology APC is temporary; that is, we retain a service within a New 
Technology APC until we acquire sufficient data to assign it to a 
clinically appropriate APC group.

B. Excluded OPPS Services and Hospitals

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

[[Page 74129]]

C. Prior Rulemaking

    On April 7, 2000, we published in the Federal Register a final rule 
with comment period (65 FR 18434) to implement a prospective payment 
system for hospital outpatient services. The hospital OPPS was first 
implemented for services furnished on or after August 1, 2000. Section 
1833(t)(9) of the Act requires the Secretary to review certain 
components of the OPPS, not less often than annually, and to revise the 
groups, relative payment weights, and other adjustments that take into 
account changes in medical practices, changes in technologies, and the 
addition of new services, new cost data, and other relevant information 
and factors.
    Since initially implementing the OPPS, we have published final 
rules in the Federal Register annually to implement statutory 
requirements and changes arising from our continuing experience with 
this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/. The CY 2011 OPPS/ASC final rule 
with comment period appears in the November 24, 2010 Federal Register 
(75 FR 71800). In that final rule with comment period, we revised the 
OPPS to update the payment weights and conversion factor for services 
payable under the CY 2011 OPPS on the basis of claims data from January 
1, 2009, through December 31, 2009, and to implement certain provisions 
of the Affordable Care Act. In addition, we responded to public 
comments received on the provisions of the CY 2010 final rule with 
comment period (74 FR 60316) pertaining to the APC assignment of HCPCS 
codes identified in Addendum B to that rule with the new interim 
(``NI'') comment indicator, and public comments received on the August 
3, 2010 OPPS/ASC proposed rule for CY 2011 (75 FR 46170).
    On July 18, 2011, the CY 2012 OPPS/ASC proposed rule appeared in 
the Federal Register (76 FR 42170). This proposed rule, with a 60-day 
comment period that ended on August 30, 2011, proposed to revise the 
Medicare OPPS and the ASC payment system to implement applicable 
statutory requirements and changes arising from our continuing 
experience with these systems.

D. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the Advisory Panel on Ambulatory Payment Classification 
(APC) Groups (the APC Panel)
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an outside panel of experts to 
review the clinical integrity of the payment groups and their weights 
under the OPPS. The Act further specifies that the panel will act in an 
advisory capacity. The APC Panel, discussed under section I.D.2. of 
this final rule, fulfills these requirements. The APC Panel is not 
restricted to using data compiled by CMS, and it may use data collected 
or developed by organizations outside the Department in conducting its 
review.
2. Establishment of the APC Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the APC Panel. This expert panel, which may be composed of 
up to 15 representatives of providers (currently employed full-time, 
not as consultants, in their respective areas of expertise) subject to 
the OPPS, reviews clinical data and advises CMS about the clinical 
integrity of the APC groups and their payment weights. The APC Panel is 
technical in nature, and it is governed by the provisions of the 
Federal Advisory Committee Act (FACA). Since its initial chartering, 
the Secretary has renewed the APC Panel's charter five times: on 
November 1, 2002; on November 1, 2004; on November 21, 2006; on 
November 2, 2008 and November 12, 2010. The current charter specifies, 
among other requirements, that: the APC Panel continues to be technical 
in nature; is governed by the provisions of the FACA; may convene up to 
three meetings per year; has a Designated Federal Official (DFO); and 
is chaired by a Federal Official designated by the Secretary.
    The current APC Panel membership and other information pertaining 
to the APC Panel, including its charter, Federal Register notices, 
membership, meeting dates, agenda topics, and meeting reports, can be 
viewed on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. APC Panel Meetings and Organizational Structure
    The APC Panel first met on February 27 through March 1, 2001. Since 
the initial meeting, the APC Panel has held multiple meetings, with the 
last meeting taking place on August 10-12, 2011. Prior to each meeting, 
we publish a notice in the Federal Register to announce the meeting 
and, when necessary, to solicit nominations for APC Panel membership 
and to announce new members.
    The APC Panel has established an operational structure that, in 
part, currently includes the use of three subcommittees to facilitate 
its required APC review process. The three current subcommittees are 
the Data Subcommittee, the Visits and Observation Subcommittee, and the 
Subcommittee for APC Groups and Status Indicator (SI) Assignments 
(previously known as the Packaging Subcommittee).
    The Data Subcommittee is responsible for studying the data issues 
confronting the APC Panel and for recommending options for resolving 
them. The Visits and Observation Subcommittee reviews and makes 
recommendations to the APC Panel on all technical issues pertaining to 
observation services and hospital outpatient visits paid under the OPPS 
(for example, APC configurations and APC payment weights). The 
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 APCs 
to be assigned to HCPCS codes regarding services for which separate 
payment is made.
    Each of these subcommittees was established by a majority vote from 
the full APC Panel during a scheduled APC Panel meeting, and the APC 
Panel recommended that the subcommittees continue at the August 2011 
APC Panel meeting. We accept those recommendations of the APC Panel. 
All subcommittee recommendations are discussed and voted upon by the 
full APC Panel.
    Discussions of the other recommendations made by the APC Panel at 
the February/March 2011 and August 2011 APC Panel meetings are included 
in the sections of this final rule with comment period that are 
specific to each recommendation. For discussions of earlier APC Panel 
meetings and recommendations, we refer readers to previously published 
hospital OPPS/ASC proposed and final rules, the CMS Web site mentioned 
earlier in this section, and the FACA database at: http://fido.gov/facadatabase/public.asp.

E. Summary of the Major Contents of the CY 2012 OPPS/ASC Proposed Rule

    In the CY 2012 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 18, 2011 (76 FR 42170), we set forth proposed changes 
to the Medicare hospital OPPS for CY 2012 to implement statutory 
requirements and changes arising from our continuing

[[Page 74130]]

experience with the system. In addition, we set forth proposed changes 
to the revised Medicare ASC payment system for CY 2012, including 
proposed updated payment weights, covered surgical procedures, and 
covered ancillary items and services based on the proposed OPPS update. 
In addition, we proposed to make changes to the rules governing 
limitations on certain physician referrals to hospitals in which 
physicians have an ownership or investment interest, provider agreement 
regulations on patient notification requirements, and the rules 
governing the Hospital Inpatient Value-Based Purchasing (VBP) Program.
    The following is a summary of the major changes that we proposed to 
make for CY 2012:
1. Updates Affecting OPPS Payments
    In section II. of the proposed rule, we set forth--
     The methodology used to recalibrate the proposed APC 
relative payment weights.
     The proposed changes to packaged services.
     The proposed update to the conversion factor used to 
determine payment rates under the OPPS. In this section, we proposed 
changes in the amounts and factors for calculating the full annual 
update increase to the conversion factor.
     The proposed consideration of adopting a policy that would 
address situations where IPPS wage index adjustments result in 
significant fluctuations in the wage index.
     The proposed update of statewide average default CCRs.
     The proposed application of hold harmless transitional 
outpatient payments (TOPs) for certain small rural hospitals, extended 
by section 3121 of the Affordable Care Act.
     The proposed payment adjustment for rural SCHs.
     The proposed payment adjustment for cancer hospitals.
     The proposed calculation of the hospital outpatient 
outlier payment.
     The calculation of the proposed national unadjusted 
Medicare OPPS payment.
     The proposed beneficiary copayments for OPPS services.
2. OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of the proposed rule, we discussed--
     The proposed additions of new HCPCS codes to APCs.
     The proposed establishment of a number of new APCs.
     Our analyses of Medicare claims data and certain 
recommendations of the APC Panel.
     The application of the 2 times rule and proposed 
exceptions to it.
     The proposed changes to specific APCs.
     The proposed movement of procedures from New Technology 
APCs to clinical APCs.
3. OPPS Payment for Devices
    In section IV. of the proposed rule, we discussed the proposed 
pass-through payment for specific categories of devices and the 
proposed adjustment for devices furnished at no cost or with partial or 
full credit.
4. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of the proposed rule, we discussed the proposed CY 
2012 OPPS payment for drugs, biologicals, and radiopharmaceuticals, 
including the proposed payment for drugs, biologicals, and 
radiopharmaceuticals with and without pass-through status.
5. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of the proposed rule, we discussed the estimate of 
CY 2012 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. OPPS Payment for Hospital Outpatient Visits
    In section VII. of the proposed rule, we set forth our proposed 
policies for the payment of clinic and emergency department visits and 
critical care services based on claims data.
7. Payment for Partial Hospitalization Services
    In section VIII. of the proposed rule, we set forth our proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
8. Procedures That Would Be Paid Only as Inpatient Procedures
    In section IX. of the proposed rule, we discussed the procedures 
that we proposed to remove from the inpatient list and assign to APCs 
for payment under the OPPS.
9. Policies on Supervision Standards for Outpatient Services in 
Hospitals and CAHs
    In section X. of the proposed rule, we discussed proposed policy 
changes relating to the supervision of outpatient services furnished in 
hospitals and CAHs.
10. OPPS Payment Status and Comment Indicators
    In section XI. of the proposed rule, we discussed our proposed 
changes to the definitions of status indicators assigned to APCs and 
presented our proposed comment indicators.
11. OPPS Policy and Payment Recommendations
    In section XII. of the proposed rule, we addressed recommendations 
made by the Medicare Payment Advisory Commission (MedPAC) in its March 
2011 report to Congress, by the Office of Inspector General (OIG), and 
by the APC Panel regarding the OPPS for CY 2012.
12. Updates to the Ambulatory Surgical Center (ASC) Payment System
    In section XIII. of the proposed rule, we discussed the proposed 
updates of the revised ASC payment system and payment rates for CY 
2012.
13. Reporting Quality Data for Annual Payment Rate Updates
    In section XIV. of the proposed rule, we discussed the proposed 
measures for reporting hospital outpatient quality data for the OPD fee 
schedule increase factor for CY 2013 and subsequent calendar years; set 
forth the requirements for data collection and submission; and discuss 
the reduction to the OPPS OPD fee schedule increase factor for 
hospitals that fail to meet the Hospital OQR Program requirements. We 
also discussed proposed measures for reporting ASC quality data for the 
annual payment update factor for CYs 2014, 2015, and 2016; and set 
forth the requirements for data collection and submission for the 
annual payment update.
14. Changes to EHR Incentive Program for Eligible Hospitals and CAHs 
Regarding Electronic Submission of Clinical Quality Measures (CQMs)
    In section XIV.J. of the proposed rule, we proposed to allow 
eligible hospitals and CAHs participating in the Medicare EHR Incentive 
Program to meet the CQM reporting requirement of the EHR Incentive 
Program for payment year 2012 by participating in the 2012 Medicare EHR 
Incentive Program Electronic Reporting Pilot.
15. Changes to Provisions Relating to Physician Self-Referral 
Prohibition and Provider Agreement Regulations on Patient Notification 
Requirements
    In section XV. of the proposed rule, we presented our proposed 
exception

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process for expansion of facility capacity under the whole hospital and 
rural provider exceptions to the physician self-referral law, and 
proposed changes to the provider agreement regulations on patient 
notification requirements.
16. Additional Changes Relating to the Hospital Inpatient VBP Program
    In section XVI. of the proposed rule, we presented our proposed 
requirements for the FY 2014 Hospital Inpatient VBP Program.
17. Economic and Federalism Analyses
    In sections XX. and XXI. of the proposed rule, we set forth an 
analysis of the regulatory and federalism impacts that the proposed 
changes would have on affected entities and beneficiaries.

F. Public Comments Received in Response to the CY 2012 OPPS/ASC 
Proposed Rule

    We received approximately 1,356 timely pieces of correspondence 
containing multiple comments on the CY 2012 OPPS/ASC proposed rule that 
appeared in the Federal Register on July 18, 2011. We note that we 
received some public comments that were outside the scope of the CY 
2012 OPPS/ASC proposed rule. Out of scope public comments are not 
addressed in this CY 2012 OPPS/ASC final rule with comment period. 
Summaries of the public comments that are within the scope of the 
proposed rule and our responses are set forth in the various sections 
of this final rule with comment period under the appropriate headings.

G. Public Comments Received on the CY 2011 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 43 timely pieces of correspondence on the 
CY 2011 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 24, 2010 (75 FR 71800), some of which 
contained multiple comments on the interim APC assignments and/or 
status indicators of HCPCS codes identified with comment indicator 
``NI'' in Addendum B to that final rule with comment period. Summaries 
of those public comments on topics open to comment in the CY 2012 OPPS/
ASC final rule with comment period and our responses to them are set 
forth in various sections of this final rule with comment period under 
the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
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 2012 OPPS/ASC proposed rule (76 FR 42179), for the CY 
2012 OPPS, we proposed to recalibrate the APC relative payment weights 
for services furnished on or after January 1, 2012, and before January 
1, 2013 (CY 2012), using the same basic methodology that we described 
in the CY 2011 OPPS/ASC final rule with comment period. That is, we 
proposed to recalibrate the relative payment weights for each APC based 
on claims and cost report data for hospital outpatient department 
(HOPD) services, using the most recent available data to construct a 
database for calculating APC group weights. Therefore, for the purpose 
of recalibrating the proposed APC relative payment weights for CY 2012, 
we used approximately 138 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, 2010, and before January 1, 2011. For this final rule with 
comment period, for the purpose of recalibrating the final APC relative 
payment weights for CY 2012, we used approximately 148 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, 2010, and before January 1, 
2011. (For exact counts of claims used, we refer readers to the claims 
accounting narrative under supporting documentation for the proposed 
rule and this final rule with comment period on the CMS Web site at: 
http://www.cms.gov/HospitalOutpatientPPS/HORD/.)
    Of the 148 million final action claims for services provided in 
hospital outpatient settings used to calculate the final CY 2012 OPPS 
payment rates for this final rule with comment period, approximately 
112 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 112 million claims, 
approximately 3 million claims were not for services paid under the 
OPPS or were excluded as not appropriate for use (for example, 
erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on 
the claim). From the remaining approximately 109 million claims, we 
created approximately 110 million single records, of which 
approximately 75 million were ``pseudo'' single or ``single session'' 
claims (created from approximately 25 million multiple procedure claims 
using the process we discuss later in this section). Approximately 
888,000 claims were trimmed out on cost or units in excess of +/-3 
standard deviations from the geometric mean, yielding approximately 108 
million single bills for median setting. 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 weights. The bypass process is described in 
section II.A.1.b. of this final rule with comment period. This section 
discusses how we develop ``pseudo'' single procedure claims (as defined 
below), with the intention of using more appropriate data from the 
available claims. In some cases, the bypass process allows us to use 
some portion of the submitted claim for cost estimation purposes, while 
the remaining information on the claim continues to be unusable. 
Consistent with the goal of using appropriate information in our data 
development process, we only use claims (or portions of each claim) 
that are appropriate for ratesetting purposes. Ultimately, we were able 
to use for CY 2012 ratesetting some portion of approximately 94 percent 
of the CY 2010 claims containing services payable under the OPPS.
    The final APC relative weights and payments for CY 2012 in Addenda 
A and B to this final rule with comment period (which are referenced in 
section XVII. of this final rule with comment period and available via 
the Internet on the CMS Web site) were calculated using claims from CY 
2010 that were processed before July 1, 2011, and continue to be based 
on the median hospital costs for services in the APC groups. Under the 
methodology we are adopting in this final rule with comment period, 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.

[[Page 74132]]

We continue to believe that it is appropriate to use the most current 
full calendar year claims data and the most recently submitted cost 
reports to calculate the median costs underpinning the APC relative 
payment weights and the CY 2012 payment rates.
b. Use of Single and Multiple Procedure Claims
    For CY 2012, in general, we proposed to continue to use single 
procedure claims to set the medians on which the APC relative payment 
weights would be based, with some exceptions as discussed below in this 
section. We generally use single procedure claims to set the median 
costs for APCs because we believe that the OPPS relative weights on 
which payment rates are based should be derived from the costs of 
furnishing one unit of one procedure and because, in many 
circumstances, we are unable to ensure that packaged costs can be 
appropriately allocated across multiple procedures performed on the 
same date of service.
    It is generally desirable to use the data from as many claims as 
possible to recalibrate the APC relative payment weights, including 
those claims for multiple procedures. As we have for several years, we 
proposed to continue to use date of service stratification and a list 
of codes to be bypassed to convert multiple procedure claims to 
``pseudo'' single procedure claims. Through bypassing specified codes 
that we believe do not have significant packaged costs, we are able to 
use more data from multiple procedure claims. In many cases, this 
enabled us to create multiple ``pseudo'' single procedure claims from 
claims that were submitted as multiple procedure claims spanning 
multiple dates of service, or claims that contained numerous separately 
paid procedures reported on the same date on one claim. We refer to 
these newly created single procedure claims as ``pseudo'' single 
procedure claims. The history of our use of a bypass list to generate 
``pseudo'' single procedure claims is well documented, most recently in 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71811 
through 71822). In addition, for CY 2008, we increased packaging and 
created the first composite APCs. We have continued our packaging 
policies and the creation of composite APCs for CYs 2009, 2010, and 
2011, and we proposed to continue them for CY 2012. Increased packaging 
and creation of composite APCs also increased the number of bills that 
we were able to use for median calculation by enabling us to use claims 
that contained multiple major procedures that previously would not have 
been usable. Further, for CY 2009, we expanded the composite APC model 
to one additional clinical area, multiple imaging services (73 FR 68559 
through 68569), which also increased the number of bills we were able 
to use to calculate APC median costs. We have continued the composite 
APCs for multiple imaging services for CYs 2010 and 2011, and we 
proposed to continue to create them for CY 2012. We refer readers to 
section II.A.2.e. of the proposed rule and this final rule with comment 
period for a discussion of the use of claims to establish median costs 
for composite APCs.
    We proposed to continue to apply these processes to enable us to 
use as much claims data as possible for ratesetting for the CY 2012 
OPPS. This methodology enabled us to create, for the proposed rule, 
approximately 67 million ``pseudo'' single procedure claims, including 
multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.e.(5) of the proposed rule for further discussion), 
to add to the approximately 33 million ``natural'' single procedure 
claims. For the proposed rule, ``pseudo'' single procedure and ``single 
session'' procedure bills represented approximately 67 percent of all 
single procedure bills used to calculate median costs.
    For CY 2012, we proposed to bypass 460 HCPCS codes for CY 2012 that 
were identified in Addendum N to the proposed rule (which is available 
via the Internet on the CMS Web site). Since the inception of the 
bypass list, which is the list of codes to be bypassed to convert 
multiple procedure claims to ``pseudo'' single procedure claims, we 
have calculated the percent of ``natural'' single 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 2012, data available for the February 28-March 1, 2011 APC 
Panel meeting from CY 2010 claims processed through September 30, 2010, 
and CY 2009 claims data processed through June 30, 2010, used to model 
the payment rates for CY 2011) to determine whether it would be 
appropriate to propose to add additional codes to the previous year's 
bypass list. For CY 2012, we proposed to continue to bypass all of the 
HCPCS codes on the CY 2011 OPPS bypass list. We updated HCPCS codes on 
the CY 2011 bypass list that were mapped to new HCPCS codes for CY 2012 
ratesetting by evaluating data for the replacement codes under the 
empirical criteria described below and also removing the HCPCS codes 
that we proposed to be deleted for CY 2012, which were listed in Table 
1 of the proposed rule. We also proposed to remove HCPCS codes that 
were not separately paid under the OPPS because the purpose of the 
bypass list is to obtain more data for those codes relevant to 
ratesetting. None of these deleted codes were ``overlap bypass codes'' 
(those HCPCS codes that are both on the bypass list and are members of 
the multiple imaging composite APCs). We also proposed to add to the 
bypass list for CY 2012 all HCPCS codes not on the CY 2011 bypass list 
that, using either the CY 2011 final rule data (CY 2009 claims) or the 
February 28-March 1, 2011 APC Panel data (first 9 months of CY 2010 
claims), met the empirical criteria for the bypass list that are 
summarized below. The entire list proposed for CY 2012 (including the 
codes that remain on the bypass list from prior years) was open to 
public comment. Because we must make some assumptions about packaging 
in the multiple procedure claims in order to assess a HCPCS code for 
addition to the bypass list, we assumed that the representation of 
packaging on ``natural'' single procedure claims for any given code is 
comparable to packaging for that code in the multiple procedure claims. 
The proposed criteria for the bypass list were:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The median 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

[[Page 74133]]

cost services billed with the bypassed service.
    In response to comments to 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. For CY 2011, 
based on CY 2009 claims data, we proposed to apply the final market 
basket increase of 3.6 percent published in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 26584) to the $50 packaged cost 
threshold used in the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60325). This calculation led us to a proposed packaged cost 
threshold for bypass list additions for CY 2011 of $50 ($51.80 rounded 
to $50). We stated that we believe that applying the market basket 
increase from the year of claims data to the packaged cost threshold, 
rounded to the nearest $5 increment, would appropriately account for 
the effects of inflation when considering additions to the bypass list 
because the market basket increase reflects the extent to which the 
price of inputs for hospital services is expected to increase compared 
to the price of inputs for hospital services in the prior year. We 
proposed for CY 2012, based on the same rationale described for the CY 
2011 OPPS/ASC final rule with comment period (75 CFR 71812), to 
continue to update the packaged cost threshold by the market basket 
increase. By applying the final CY 2011 market basket increase of 1.85 
percent to the prior non-rounded dollar threshold of $51.80 (75 FR 
71812), we determined that the threshold increases for CY 2012 to $55 
($52.76 rounded to $55, the nearest $5 increment). Therefore, we 
proposed to set the median packaged cost threshold on the CY 2010 
claims at $55 for a code to be considered for addition to the CY 2012 
OPPS bypass list.
     The code is not a code for an unlisted service.
    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 2012 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 on the bypass list 
certain HCPCS codes in order to purposefully direct the assignment of 
packaged costs to a companion code where services always appear 
together and where there would otherwise be few single procedure claims 
available for ratesetting. For example, we have previously discussed 
our reasoning for adding HCPCS code G0390 (Trauma response team 
associated with hospital critical care service) and the CPT codes for 
additional hours of drug administration to the bypass list (73 FR 68513 
and 71 FR 68117 through 68118).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of the proposed rule and this final rule with comment period 
for further discussion of the treatment of ``overlap bypass codes.'') 
This process also created multiple imaging composite ``single session'' 
bills that could be used for calculating composite APC median costs. 
``Overlap bypass codes'' that are members of the proposed multiple 
imaging composite APCs were identified by asterisks (*) in Addendum N 
to the proposed rule (which is available via the Internet on the CMS 
Web site).
    Addendum N to the proposed rule included the proposed list of 
bypass codes for CY 2012. The list of bypass codes contains codes that 
were reported on claims for services in CY 2010 and, therefore, 
includes codes that were in effect in 2010 and used for billing but 
were deleted for CY 2011. We retained these deleted bypass codes on the 
proposed CY 2012 bypass list because these codes existed in CY 2010 and 
were covered OPD services in that period, and CY 2010 claims data are 
used to calculate CY 2012 payment rates. Keeping these deleted bypass 
codes on the bypass list potentially allowed us to create more 
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap 
bypass codes'' that were members of the proposed multiple imaging 
composite APCs were identified by asterisks (*) in the third column of 
Addendum N to the proposed rule. HCPCS codes that we proposed to add 
for CY 2012 were identified by asterisks (*) in the fourth column of 
Addendum N.
    Comment: One commenter recommended that CMS add CPT code 77332 
(Treatment devices, design and construction; simple (simple block, 
simple bolus)) to the bypass list in order to yield additional claims 
for ratesetting for composite APC 8001 (LDR Prostate Brachytherapy 
Composite). The commenter's analysis showed that bypassing the code 
would yield a significant increase in the number of claims to set the 
composite rate.
    Response: As discussed above, we perform an analysis on the natural 
single major claims to determine possible additions to the bypass list. 
In doing so, we apply a set of empirical criteria to identify codes 
that would be appropriate for addition to the bypass list, based on how 
well they represent the clinical use of the service as well as the 
limited packaging impact of bypassing those codes. These criteria are 
consistent with the goal of using appropriate data for ratesetting. The 
commenter suggested that bypassing the code would be appropriate 
because it would yield additional claims without a discussion of the 
impact of bypassing the code. In the APC Panel 2012 data used to create 
the bypass list proposal, the code failed to meet the empirical 
criteria. Of the 134 available natural single major claims, 117 (87 
percent) of those claims contained packaging, which exceeds the 5 
percent limit for a code to be placed on the bypass list. Additionally, 
the median cost of packaging on those claims was $200.23, which exceeds 
the $55 limit for the code to be placed on the bypass list. These data 
suggest that bypassing the code may potentially and relatively often, 
distribute packaged costs, where it

[[Page 74134]]

might not be appropriate. For example, where CPT code 77332 is 
furnished on the day on which a visit was the only other payable 
service, if CPT code 77332 were on the bypass list, the packaging would 
be associated with the visit, not with CPT code 77332, because we use 
the line-item costs for codes on the bypass list without their 
attendant packaging to establish the median cost for the bypass code. 
This would inappropriately reduce the median cost for CPT code 77332. 
While we seek to use as much available information as possible that is 
available in the OPPS claims data set, we do so with the goal of using 
appropriate cost information in setting the APC relative weights. In 
this case, we believe that adding the CPT code 77332 to the bypass list 
would create considerable risk in assigning packaging that rightfully 
should be associated with CPT code 77332 to other services. Therefore 
we are not adding CPT code 77332 to the bypass list for CY 2012.
    Comment: One commenter recommended that CMS continue to explore 
additional methodologies to increase the number of procedure claims 
used for rate setting, including expanding the criteria for inclusion 
on the bypass list.
    Response: We are always seeking additional methodologies that would 
enable us to increase the number of procedure claims used for rate 
setting. However, it is important to us that we ensure that any new 
methodology or change to current methodology or criteria would not 
result in costs that are appropriately packaged into a service being 
inappropriately assigned to another service, as, for example, we 
believe would be the case if we were to place CPT code 77332 on the 
bypass list.
    After consideration of the public comments we received, we are 
adopting as final the proposed ``pseudo'' single claims process and the 
final CY 2012 bypass list of 460 HCPCS codes, as displayed in Addendum 
N of this final rule with comment period (available via the Internet on 
the CMS Web site). Table 1 below contains the list of codes that we are 
removing from the CY 2012 bypass list because these codes were either 
deleted from the HCPCS before CY 2010 (and therefore were not covered 
OPD services in CY 2010) or were not separately payable codes under the 
CY 2012 OPPS because these codes are not used for ratesetting (and 
therefore would not need to be bypassed). None of these deleted codes 
were ``overlap bypass'' codes.
[GRAPHIC] [TIFF OMITTED] TR30NO11.000

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42181), for CY 2012, 
we proposed to continue to use the hospital-specific overall ancillary 
and departmental CCRs to convert charges to estimated costs through 
application of a revenue code-to-cost center crosswalk. To calculate 
the APC median costs on which the proposed CY 2012 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 2010 claims data from the most recent available hospital cost 
reports, in most cases, cost reports beginning in CY 2009. For the CY 
2012 OPPS proposed rates, we used the set of claims processed during CY 
2010. 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/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
    To ensure the completeness of the revenue code-to-cost center 
crosswalk, we reviewed changes to the list of revenue codes for CY 2010 
(the year of the claims data we used to calculate the proposed CY 2012 
OPPS payment rates). For CY 2010, the National Uniform Billing 
Committee added revenue codes 860 (Magnetoencephalography (MEG); 
general classification) and 861 (Magnetoencephalography (MEG)). For 
purposes of applying a CCR to charges reported under revenue codes 860 
and 861, we proposed to use nonstandard Medicare cost report cost 
center 3280 (Electrocardiogram (EKG) and Electroencephalography (EEG)) 
as the primary cost center and to use standard cost center 5400 
(Electroencephalography (EEG)) as the secondary cost center. We believe 
that MEG, which evaluates brain activity, is

[[Page 74135]]

similar to EEG, which also evaluates brain activity, and that the few 
hospitals that furnish MEG are likely to furnish it in the same 
department of the hospital in which they furnish EEG services. 
Therefore, we believe that the CCRs that we apply to the EEG revenue 
codes are more likely to result in a more accurate estimated cost for 
MEG than would the application of the hospital-specific overall 
ancillary CCR. For hospitals that report charges under revenue code 860 
or 861 but do not report costs on their cost report under cost center 
3280 or 5400, we proposed to apply the hospital-specific overall CCR to 
the charges reported under revenue code 860 or 861 for purposes of 
estimating the cost of these services. We discuss MEG, including the 
issue of the CCR to be applied to charges for MEG, in section III.D. of 
this final rule with comment period. We note that revenue codes with 
effective dates in CY 2011 are not relevant to this process because 
these new revenue codes were not applicable to claims for services 
furnished during CY 2010.
    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 is the calculation of median blood costs, as 
discussed in section II.A.2.d.(2) of the proposed rule and 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 for hospitals that filed 
outpatient claims in CY 2010 before determining whether the CCRs for 
such hospitals were valid.
    We then calculated the CCRs for each cost center and the overall 
ancillary CCR for each hospital for which we had claims data. We did 
this using hospital-specific data from the Hospital Cost Report 
Information System (HCRIS). We used the most recent available cost 
report data, in most cases, cost reports with cost reporting periods 
beginning in CY 2009. For the proposed rule, we used the most recently 
submitted cost reports to calculate the CCRs to be used to calculate 
median costs for the proposed CY 2012 OPPS payment rates. If the most 
recent available cost report was submitted but not settled, we looked 
at the last settled cost report to determine the ratio of submitted to 
settled cost using the overall ancillary CCR, and we then adjusted the 
most recent available submitted, but not settled, cost report using 
that ratio. We then calculated both an overall ancillary CCR and cost 
center-specific CCRs for each hospital. We used the overall ancillary 
CCR referenced in section II.A.1.c. of the proposed rule for all 
purposes that require use of an overall ancillary CCR. We proposed to 
continue this longstanding methodology for the calculation of median 
costs for CY 2012.
    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.
    To explore this issue, in August 2006, we awarded a contract to RTI 
International (RTI) to study the effects of charge compression in 
calculating the IPPS cost-based relative weights, particularly with 
regard to the impact on inpatient diagnosis-related group (DRG) 
payments, and to consider methods to better capture the variation in 
cost and charges for individual services when calculating costs for the 
IPPS relative weights across services in the same cost center. RTI 
issued a report in March 2007 with its findings on charge compression, 
which is available on the CMS Web site at: http://www.cms.gov/reports/downloads/Dalton.pdf. Although this report was focused largely on 
charge compression in the context of the IPPS cost-based relative 
weights, because several of the findings were relevant to the OPPS, we 
discussed that report in the CY 2008 OPPS/ASC proposed rule (72 FR 
42641 through 42643) and discussed those findings again in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66599 through 66602).
    In August 2007, we contracted with RTI to evaluate the cost 
estimation process for the OPPS relative weights because its 2007 
report had concentrated on IPPS DRG cost-based relative weights. The 
results of RTI's analyses had implications for both the OPPS APC cost-
based relative weights and the IPPS MS-DRG (Medicare severity) cost-
based relative weights. The RTI final report can be found on RTI's Web 
site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf. For a complete 
discussion of the RTI recommendations, public comments, and our 
responses, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68519 through 68527).
    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. Specifically, we 
finalized our proposal for both the OPPS and IPPS to create one cost 
center for ``Medical Supplies Charged to Patients'' and one cost center 
for ``Implantable Devices Charged to Patients,'' essentially splitting 
the then current CCR for ``Medical Supplies and Equipment'' into one 
CCR for low-cost medical supplies and another CCR for high-cost 
implantable devices in order to mitigate some of the effects of charge 
compression. Accordingly, in Transmittal 20 of the Provider 
Reimbursement Manual, Part II (PRM-II), Chapter 36, Form CMS-2552-96, 
which was issued in July 2009, we created a new subscripted Line 55.01 
on Worksheet A for the ``Implantable Devices Charged to Patients'' cost 
center. This new subscripted cost center, placed under the standard 
line for ``Medical Supplies Charged to Patients,'' is available for use 
for cost reporting periods beginning on or after May 1, 2009. A 
subscripted cost center is the addition of a separate new cost center 
line and description which bears a logical relationship to the standard 
cost center line and is located immediately following a standard cost 
center line. Subscripting a cost center line adds flexibility and cost 
center expansion capability to the cost report. For example, Line 55 of 
Worksheet A on Form CMS 2552-96 (the Medicare hospital cost report) is 
``Medical Supplies Charged to Patients.'' The additional cost center, 
which isolates the costs of ``Implantable Medical Supplies Charged to 
Patients'', was created by adding subscripted Line

[[Page 74136]]

55.01 to Worksheet A and is defined as capturing the costs and charges 
billed with the following UB-04 revenue codes: 0275 (Pacemaker); 0276 
(Intraocular lens); 0278 (other implants); and 0624 (FDA investigations 
devices) (73 FR 48458).
    In preparation for the FY 2012 IPPS proposed rule and the CY 2012 
OPPS proposed rule, we assessed the availability of data in the 
``Implantable Devices Charged to Patients'' cost center. In order to 
develop a robust analysis regarding the use of cost data from the 
``Implantable Devices Charged to Patients'' cost center, we believe 
that it is necessary to have a critical mass of cost reports filed with 
data in this cost center. The cost center for ``Implantable Devices 
Charged to Patients'' is effective for cost reporting periods beginning 
on or after May 1, 2009. We checked the availability of CY 2009 cost 
reports in the December 31, 2010 quarter ending update of HCRIS, which 
is the latest upload of CY 2009 cost report data that we could use for 
the proposed rule. We determined that there were only 437 hospitals 
that had completed the ``Implantable Devices Charged to Patients'' cost 
center (out of approximately 3,500 IPPS hospitals). We stated in the 
proposed rule that we do not believe this is a sufficient amount of 
data from which to generate a meaningful analysis. Therefore, we did 
not propose to use data from the ``Implantable Devices Charged to 
Patients'' cost center to create a distinct CCR for Implantable Devices 
Charged to Patients for use in calculating the OPPS relative weights 
for CY 2012. We stated that we would reassess the availability of data 
for the ``Implantable Devices Charged to Patients'' cost center for the 
CY 2013 OPPS rulemaking cycle. Because there is approximately a 3-year 
lag in the availability of cost report data for IPPS and OPPS 
ratesetting purposes in a given calendar year, we believe we may be 
able to use data from the revised Medicare hospital cost report form to 
estimate costs from charges for implantable devices for the CY 2013 
OPPS relative weights. For a complete discussion of the rationale for 
the creation of the new cost center for ``Implantable Devices Charged 
to Patients,'' public comments, and our responses, we refer readers to 
the FY 2009 IPPS final rule (73 FR 48458 through 45467).
    In the CY 2009 OPPS/ASC final rule with comment period, we 
indicated that we would be making some other OPPS-specific changes in 
response to the RTI report recommendations. Specifically, these changes 
included modifications to the cost reporting software and the addition 
of three new nonstandard cost centers. With regard to modifying the 
cost reporting preparation software in order to offer additional 
descriptions for nonstandard cost centers to improve the accuracy of 
reporting for nonstandard cost centers, we indicated that the change 
would be made for the next release of the cost report software. These 
changes have been made to the cost reporting software with the 
implementation of CMS Transmittal 21, under Chapter 36 of the PRM-II, 
available on the CMS Web site at: http://www.cms.gov/Manuals/PBM/, 
which is effective for cost reporting periods ending on or after 
October 1, 2009.
    We also indicated that we intended to add new nonstandard cost 
centers for ``Cardiac Rehabilitation,'' ``Hyperbaric Oxygen Therapy,'' 
and ``Lithotripsy.'' We note that, in January 2010, CMS issued 
Transmittal 21 which updated the PRM-II, Chapter 36, Form CMS-2552-96. 
One of the updates in this transmittal established nonstandard cost 
centers for ``Cardiac Rehabilitation,'' ``Hyperbaric Oxygen Therapy,'' 
and ``Lithotripsy'' for use on Worksheet A. These three new nonstandard 
cost centers became available for cost reporting periods ending on or 
after October 1, 2009, and are included in the revenue code to cost 
center crosswalk we proposed to use for calculating payment rates for 
the CY 2012 OPPS (76 FR 42183). Specifically, the nonstandard cost 
centers are: 3120 (Cardiac Catheterization Laboratory); 3230 (CAT 
Scan); 3430 (Magnetic Resonance Imaging (MRI)). The revenue code to 
cost center crosswalk that we proposed to use for purposes of 
estimating the median costs of items and services for the CY 2012 OPPS 
is available for review and continuous comment (outside of comment on 
this final rule with comment period) on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
    Furthermore, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 
through 50080), we finalized our proposal to create new standard cost 
centers for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging 
(MRI),'' and ``Cardiac Catheterization,'' and to require that hospitals 
report the costs and charges for these services under new cost centers 
on the revised Medicare cost report Form CMS 2552-10. As we discussed 
in the FY 2009 IPPS/LTCH PPS and CY 2009 OPPS/ASC proposed and final 
rules, RTI found that the costs and charges of CT scans, MRI, and 
cardiac catheterization differ significantly from the costs and charges 
of other services included in the standard associated cost center. RTI 
also concluded that both the IPPS and OPPS relative weights would 
better estimate the costs of those services if CMS were to add standard 
costs centers for CT scans, MRI, 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, MRI, and cardiac catheterization.) The new 
standard cost centers for MRI, CT scans, and cardiac catheterization 
are effective for cost report periods beginning on or after May 1, 
2010, on the revised cost report Form CMS-2552-10. CMS issued the new 
hospital cost report Form CMS-2552-10 on December 30, 2010. The new 
cost report form can be accessed at the CMS Web site at: https://www.cms.gov/Manuals/PBM/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=1&sortOrder=ascending&itemID=CMS021935&intNumPerPage=10. 
Once at this Web site, users should double click on ``Chapter 40.''
    We believe that improved cost report software, the incorporation of 
new standard and nonstandard cost centers, and the elimination of 
outdated requirements will improve the accuracy of the cost data 
contained in the electronic cost report data files and, therefore, the 
accuracy of our cost estimation processes for the OPPS relative 
weights. We will continue our standard practice of examining ways in 
which we can improve the accuracy of our cost estimation processes.
    Comment: Commenters requested that CMS reconsider its position to 
not use the data from the implantable device cost center to calculate 
the APC relative weights for CY 2012. Commenters noted that in the FY 
2012 IPPS proposed rule, CMS found that only 437 hospitals out of 
approximately 3,500 IPPS hospitals reported data in the ``Implantable 
Devices Charged to Patients'' cost center of the Medicare hospital cost 
report based on the December 2010 update of FY 2009 HCRIS. Several 
commenters said that an analysis by their contractor identified nearly 
800 hospitals using the new cost center in the April 2011 HCRIS update 
and estimated that 1000 hospitals would be using the new cost center by 
August 2011. Therefore, the commenters believed there is now a 
sufficient amount of data to use the implantable device CCR to 
calculate the relative weights and improve the

[[Page 74137]]

accuracy of the payment rates. Commenters also suggested that because 
the IPPS and OPPS use CCRs calculated at different levels, the analysis 
of robustness for the new cost center is less significant in the OPPS 
than in the IPPS, and should not be necessary before adopting the CCRs 
from the Implantable Device cost center. One commenter suggested that 
the only justifiable reason to not implement the new CCR would be for 
issues related to suspect data, and that the limited use of the cost 
center should not delay implementation of the new Implantable Medical 
Device cost center CCR. One commenter suggested that, should the 
available data be deemed insufficient, CMS should provide additional 
analysis justifying why that data were insufficient, provide data on 
the representativeness of the hospitals reporting under the implantable 
medical device cost center and explore other alternatives in addressing 
charge compression.
    Response: In the CY 2012 OPPS/ASC proposed rule, we indicated that 
we did not have sufficient cost report data to develop the kind of 
robust analysis that we assured the public we would provide prior to 
implementing a new CCR for implantable medical devices. Therefore, we 
stated that we would reassess the availability of data for CY 2013. We 
have reviewed the availability of FY 2009 cost reports in the June 30, 
2011 quarter ending update of HCRIS, which is the latest upload of FY 
2009 cost report data that we currently have available. We have 
determined that, for cost reporting periods beginning on or after May 
1, 2009, the effective date of line 55.30 (Implantable Devices Charged 
to Patients), there were 363 hospitals paid under the OPPS whose claims 
were used for the calculation of median costs in the CY 2012 OPPS/ASC 
proposed rule (out of approximately 4,000 OPPS hospitals) that have 
completed the ``Implantable Devices Charged to Patients'' cost center 
in the HCRIS data for the quarter ending December 31, 2010. In 
contrast, we found that there were 1,689 OPPS hospitals that reported 
costs in the implantable device cost center in the HCRIS data for the 
quarter ending June 30, 2011, that were used to calculate the median 
costs that are the basis for the CY 2012 payment rates established in 
this final rule with public comment period.
    We agree that there are differences between the OPPS and IPPS in 
the calculation of the CCRs and their use in establishing estimated 
costs. However, we believe that it is important to analyze the CCRs 
used for calculation of the median costs for procedures that use 
implantable devices and the impact of changes in these median costs on 
payments for all services before the new CCRs for implantable devices 
are adopted. Such analysis is important because it allows the 
opportunity for the public to provide comment on the impact of the 
adoption of those CCRs on payment for services that do not use 
implantable devices. In a budget neutral payment system, payment for 
services that do not require implantable devices would be reduced as a 
result of increases in payment for services that use implantable 
devices. Quarterly HCRIS updates and the commenters themselves indicate 
that hundreds of hospitals would report cost report data for the new 
implantable device cost center in the HCRIS data used for this final 
rule with comment period, although such data was not available for the 
proposed rule. This would create the possibility that changes to 
payments for services that include implantable devices that appear in 
the final rule with comment period could be vastly different from the 
proposed payments for those services in the CY 2012 proposed rule. 
Similarly, if we were to use the CCRs for implantable devices in the 
calculation of the median costs for this final rule with comment 
period, the public would not have had an opportunity to comment on the 
impact of their use on payments for services that do not use 
implantable devices.
    We are not finalizing relative payment weights based on the new CCR 
for implantable devices charged to patients for CY 2012 because we 
believe that the transition in reporting charges and costs for 
implantable medical devices from the general medical supplies cost 
centers to a highly specialized cost center for high cost items means 
that the final rule relative weights would otherwise be very different 
from the proposed rule relative weights. In the proposed rule cost 
report data, 363 hospitals reported approximately $4.9 billion in costs 
in the implantable medical device cost center in Worksheet A. In the 
final rule cost report data, 1,689 hospitals reported approximately 
$20.7 billion in costs in the implantable medical device cost center on 
Worksheet A. Therefore, it was not possible to calculate proposed 
payment rates that would reflect the same use of the implantable 
medical device CCR as would be used for the final rule due to the 
transition. To the extent that the use of a CCR for implantable medical 
devices in the final rule might create median costs for services that 
require high cost implantable medical devices that differ significantly 
from those we estimated for the proposed rule, the public would not 
have had an opportunity to comment on the unexpected changes to 
payments for all other services that would occur as a result of using 
the CCR for implantable medical devices.
    We believe that it is more appropriate to wait until CY 2013, when 
we expect to provide an impact analysis that enables the public to 
assess the full impact of the use of the new CCR that is specific to 
implantable devices on payments for all services. Therefore, we are not 
using the CCRs that are specific to implantable devices in calculating 
the APC relative weights for CY 2012.
    Comment: Commenters urged CMS to increase education efforts to 
encourage faster hospital adoption of the use of the implantable 
medical device cost center. One commenter suggested that more 
widespread use of the implantable device cost center would improve the 
validity of payment weights based on those estimated costs.
    Response: We agree that it is important that hospitals understand 
how to accurately report data in the ``Implantable Devices Charged to 
Patients'' cost center, and we have worked to add more clarity to the 
cost report instructions. In addition, we also believe that the 
December 31, 2010 update of HCRIS reflected relatively few entries for 
this cost center because the corresponding cost center line was only 
available for use for cost reporting periods beginning on or after May 
1, 2009. This timing of this effective date meant that hospital data 
for this cost center line would not be evident to CMS until the March 
31, 2011 HCRIS update. However, this update occurred after the December 
31, 2010 HCRIS update we used when we prepared the proposed rule.
    Comment: Commenters suggested that CMS monitor the accuracy of the 
data reported in the implantable device cost center on the Medicare 
hospital cost report. Commenters urged CMS to impress upon the Medicare 
Administrative Contractors (MACs) the importance of establishing a 
mechanism to audit the implantable device cost center to ensure that 
the costs and charges are appropriately reported. In addition, one 
commenter suggested that the cost reporting software be modified to 
create a level 1 error in the case where no data is reported on line 
55.30 (Implantable Devices Charged to Patients) to compel hospitals to 
report that information.
    Response: We agree with the commenters that the cost reporting 
lines, whether they are for implantable devices charged to patients, 
MRI, CT scans, cardiac catheterization, or any

[[Page 74138]]

others, should be subject to greater audit scrutiny from the Medicare 
contractors. The new Medicare cost report form CMS-2552-10, on line 121 
of Worksheet S-2, Part I, asks ``Did this facility incur and report 
costs for implantable devices charged to a patient? Enter in column 1 
`Y' for yes or `N' for no.'' All hospital types, including non-IPPS 
hospitals, CAHs, and Maryland inpatient short-term acute hospitals, are 
required to properly report their costs and charges, and if the answer 
to this question is ``Y'' for any type of hospital, then line 72, 
column 26, of Worksheet B, Part I must be greater than 0, with an 
accurate amount that reflects the hospital's costs for implantable 
devices charged to patients. In addition, we note that a Level 1 edit 
on the CMS-2552-10 form already exists that ensures that line 72, 
column 26, of Worksheet B, Part I (Implantable Devices Charged to 
Patients on Worksheet A of the CMS-2552-10 form) is greater than 0 if 
Worksheet S-2, Part I, line 121 is ``Y.'' The edit is also set up for 
the reverse scenario; that is, if there is an amount on Worksheet B, 
Part I, line 72, column 26, then the response on Worksheet S-2, Part I, 
line 121 must be ``Y.'' We do not agree with commenters that a level 1 
error should be established to force hospitals to report costs on line 
55.30 because it is possible that some hospitals do not provide 
services for which charges are reported in the revenue codes that 
correspond to the costs that are to be reported on line 55.30 (for 
example, psychiatric hospitals).
    Comment: One commenter believed that the standard cost centers for 
Computed Tomography and Magnetic Resonance Imaging would be 
artificially low due to hospital allocation of capital costs across the 
hospital rather than to particular cost centers, and suggested that 
payments based on these CCRs would not accurately reflect the resources 
used in providing those services. As a result, the commenter 
recommended that CMS exercise a similar degree of caution as that in 
the approach for the new ``Implantable Devices Charged to Patients'' 
cost center CCRs before using any data based on the new CT and MRI cost 
centers.
    Response: We provided background on the creation of the new 
standard cost centers in the proposed rule and will reassess the 
availability of data for the ``Implantable Devices Charged to 
Patients'' cost center, and the ``MRI, CT Scans, and Cardiac 
Catheterization'' cost centers, for the CY 2013 OPPS rulemaking cycle. 
If appropriate, we will propose to create distinct CCRs for these cost 
centers at that time.
    Comment: Commenters asked that CMS create a new cost center 
exclusively for the costs of MEG so that the calculation of the median 
cost for MEG would more accurately reflect the expense of the 
equipment, maintenance contract and dedicated staff necessary to 
furnish the service. Several commenters suggested that cost center 5400 
should be the primary cost center assignment and 3280 should be the 
secondary cost center assignment for revenue codes 0860 
(Magnetoencephalography (MEG)--General Classification) and 0861 
Magnoetoecnephalography (MEG). This would reverse the current cost 
center assignments for these revenue codes. Some commenters asked that 
CMS adopt the non-standard subscripted cost center assignment that one 
MAC had allowed for its hospitals that furnish MEG.
    Response: In the absence of recommendations for use of other 
existing cost center's CCRs, we continue to believe that for revenue 
codes 0860 and 0861 nonstandard cost center 3280 ``EKG and EEG'' is an 
appropriate primary cost center mapping and cost center 5400 
``Electroencephalography'' is an appropriate secondary cost center 
mapping. We welcome recommendations on more suitable currently existing 
standard or nonstandard cost center CCRs. We will also discuss the 
issue with the APC Panel.
    With regard to the request to create a new cost center exclusive to 
the costs of MEG, as we stated in the CY 2011 OPPS/ASC final rule with 
comment period, we do not believe a new cost center is needed to 
capture the costs of MEG. Over the past several years, we have either 
proposed or discussed potential new standard and nonstandard cost 
centers for the Medicare hospital cost report in our 2008, 2009, 2010, 
2011 hospital inpatient and outpatient final rules. All of the 
potential cost centers that we have discussed for addition to the cost 
report, whether standard or nonstandard, have demonstrated volume in 
the electronic hospital cost report data. In its July 2008 report on 
using cost report data to estimate costs for both the IPPS and OPPS 
(http://www.rti.org/reports/cms/), RTI International examined the 
electronic hospital cost report database and recommended new standard 
and nonstandard cost centers on the basis of reporting volume across 
hospitals. RTI International typically identified no fewer than 200 
institutions reporting a specific service category, such as cardiac 
catheterization or cardiac rehabilitation, in subscripted or other 
lines for the new nonstandard and standard cost centers. Historically, 
our rationale for adding an official nonstandard cost center to the 
cost report has been at the request of Medicare contractors 
experiencing a significant volume of requests for a cost center for a 
specific type of service.
    In contrast, the volume of MEG services has been and continues to 
be extremely low. In the hospital outpatient CY 2010 OPPS claims data, 
hospitals reported 150 units of MEG spread among the three CPT codes 
for MEG: 75 units of CPT code 95965 (Magnetoencephalography (MEG), 
recording and analysis; for spontaneous brain magnetic activity (e.g. 
epileptic cerebral cortex localization)); 38 units of CPT code 95966 
(Magnetoencephalography (MEG), recording and analysis; for spontaneous 
brain magnetic activity (e.g. epileptic cerebral cortex localization) 
for evoked magnetic fields, single modality (e.g. sensory, motor, 
language or visual cortex localization)); and 37 units of CPT code 
95967 (Magnetoencephalography (MEG), recording and analysis; for 
spontaneous brain magnetic activity (e.g. epileptic cerebral cortex 
localization), for evoked magnetic fields, each additional modality 
(e.g. sensory, motor language, or visual cortex localization (List 
separately in addition to code for primary procedure))). This continues 
the pattern of very low volumes of the total of the 3 MEG codes that 
have been reported in the outpatient setting since the creation of the 
codes in CY 2005 (39 units in CY 2005, 75 units in CY 2006, 102 units 
in CY 2007, 75 units in 2008, 131 units in 2009, and 150 units in CY 
2010). Therefore, we continue to believe that a specific cost center is 
not appropriate for MEG, given the longstanding low volume of this 
service.
    For a discussion of the APC Panel recommendation on the final 
payment policy for MEG, we refer readers to section III.D. of this 
final rule with comment period.
    Comment: Commenters requested that CMS outline a method by which 
more discrete cost center lines could be requested for capital-
expensive services having their own NUBC revenue codes.
    Response: The process by which a hospital may request permission to 
use a subscripted line on a cost report is found in the Provider 
Reimbursement Manual, Part II (PRM-II), Chapter 40. Contractor approval 
is not necessary to subscript lines on the cost report for use in 
reporting nonstandard cost centers, as long as hospitals follow the 
Medicare guidelines in the PRM. However, as discussed above with regard 
to creation of national cost centers, we have either

[[Page 74139]]

proposed or discussed potential new standard and nonstandard cost 
centers for the Medicare hospital cost report in cases where doing so 
would provide more accurate information that would justify the 
resources and costs associated with doing so. For example, we have 
proposed and finalized nonstandard cost centers such as those for 
Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and Lithotripsy (74 
FR 60344) as well as standard cost centers for Implantable Medical 
Devices Charged to Patients, Cardiac Catheterization, Computed 
Tomography, and Magnetic Resonance Imaging through the annual 
rulemaking process.
    Comment: Several commenters requested that CMS modify the revenue 
code-to-cost center crosswalk to include data on the number of 
providers billing using each revenue code in the claims data whose cost 
reports contain the associated cost center under each mapping.
    Response: All of the data that are required to perform this 
analysis is available to the public. The HCRIS data, which include 
information from the hospital cost reports, are available on the CMS 
Web site at http://www.cms.gov/CostReports/CostReportsFY/list.asp#TopOfPage, while our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS, includes information about purchasing the ``OPPS 
Limited Data Set''. The HCRIS data can be used to extract the cost 
center information the commenters request while the claims data in the 
OPPS Limited Data Set include the revenue codes and HCPCS on the claims 
billed by each OPPS provider.
2. Data Development Process and Calculation of Median Costs
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate OPPS payment rates for CY 2012. The 
hospital OPPS page on the CMS Web site on which this final rule with 
comment period is posted provides an accounting of claims used in the 
development of the final payment rates at: http://www.cms.gov/HospitalOutpatientPPS. The accounting of claims used in the development 
of this final rule with comment period is included on the CMS Web site 
under supplemental materials for this CY 2012 OPPS/ASC final rule with 
comment period. 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. 
Our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS, 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 2010 claims that 
were used to calculate the proposed and final payment rates for the CY 
2012 OPPS.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.e. of this final rule with comment period to calculate the 
median costs we use to establish the relative weights used in 
calculating the OPPS payment rates for CY 2012 shown in Addenda A and B 
to the this rule with comment period (which are available via the 
Internet on the CMS Web site). We refer readers to section II.A.4. of 
the proposed rule and this final rule with comment period for a 
discussion of the conversion of APC median 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 ``stability policy'' that the median costs from claims be 
adjusted to limit changes from year to year and asked that CMS limit 
any decreases in payment compared to the prior year to no more than a 
5-percent decline.
    Response: As previously discussed in the CY 2011 OPPS/ASC final 
rule with comment period (FR 75 71833), there are a number of factors 
that contribute to median costs fluctuations from one year to the next 
including (but not limited to) hospital behavior in adjusting mix of 
services, hospital costs and charges changes each year resulting in 
changes to the CCRs, reassignments of HCPCS codes, changes to OPPS 
payment policy (for example, changes to packaging), and implementation 
of composite APCs. We cannot stabilize hospital-driven fundamental 
inputs to the calculation of OPPS payment rates. However, we have 
strived to resolve some of the other potential reasons for instability 
from year to year. Specifically, we continue to seek ways to use more 
claims data so that we have fewer APCs for which there are small 
numbers of single bills used to set the APC median 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, implementing such a system 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.
    Comment: Several commenters expressed concerns over the payment 
reductions for device-dependent APCs, blood and blood products, 
multiple imaging composites, and packaged services citing impact to 
beneficiary access to necessary procedures and patient safety. The 
commenters were also concerned that payments do not accurately reflect 
the costs of providing the procedures.
    Response: We discuss the public comments we received on the payment 
for particular services throughout this final rule with comment period. 
However, in general, we believe that our methodology for calculating 
the payments made for services furnished in hospital outpatient 
departments comports with the statutory requirements and results in 
payments that reflect the relative cost of these services within the 
statutory constraints of a budget neutral system. Indeed, our data show 
significant increase in payment as a percentage of cost since the 
inception of the OPPS.
a. Claims Preparation
    For this final rule with comment period, we used the CY 2010 
hospital outpatient claims processed before July 1, 2011, to calculate 
the median costs of APCs that underpin the relative weights for CY 
2012. To begin the calculation of the relative weights for CY 2012, we 
pulled all claims for outpatient services furnished in CY 2010 from the 
national claims history file. This is not the population of claims paid 
under the OPPS, but all outpatient claims (including, for example, 
critical access hospital (CAH) claims and hospital claims for clinical 
laboratory services for persons who are neither inpatients nor 
outpatients of the hospital).
    We then excluded claims with condition codes 04, 20, 21, and 77 
because these are claims that providers submitted to Medicare knowing 
that no payment would be made. For example,

[[Page 74140]]

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 112 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 and comment on the CMS Web site: http://www.cms.gov/HospitalOutpatientPPS. Revenue codes that we do not use to 
set medians 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 nothing but influenza and pneumococcal 
pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at 
reasonable cost and, therefore, these claims are not used to set OPPS 
rates.
    We next copied line-item costs for drugs, blood, and brachytherapy 
sources 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 
mean and median cost and a per day mean and median cost for drugs and 
nonimplantable biologicals, therapeutic radiopharmaceutical agents, and 
brachytherapy sources, as well as other information used to set payment 
rates, such as a unit-to-day ratio for drugs.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60517), we first adopted a policy to redistribute some portion of total 
cost of packaged drugs and biologicals to the separately payable drugs 
and biologicals as acquisition and pharmacy overhead and handling 
costs. As discussed further in section V.B.3. of this final rule with 
comment, as we proposed, we are continuing this policy for CY 2012. 
Therefore, we used the line-item cost data for drugs and biologicals 
for which we had a HCPCS code with ASP pricing information to calculate 
the ASP+X values, first for all drugs and biologicals with HCPCS codes, 
whether separately paid or packaged, and then for separately payable 
drugs and biologicals and for packaged drugs and biologicals, 
respectively, by taking the ratio of total claim cost for each group 
relative to total ASP dollars (per unit of each drug or biological 
HCPCS code's July 2011 ASP amount multiplied by total units for each 
drug or biological in the CY 2010 claims data). These values are ASP+9 
percent (for all drugs and biologicals with HCPCS codes, whether 
separately paid or packaged), ASP-2 percent (for drugs and biologicals 
that are separately paid), and ASP+192 percent (for drugs and 
biologicals that have HCPCS codes and that are packaged), respectively. 
As we discuss in section V.B.3. of this final rule with comment period, 
and as we proposed, we are redistributing $169 million of the total 
cost in our claims data for coded packaged drugs and biologicals with 
an ASP to payment for separately payable drugs and biologicals. We also 
are redistributing an additional $71.3 million from the cost of uncoded 
packaged drugs billed under pharmacy revenue code series 025X 
(Pharmacy) and 026X (IV Therapy). This total excludes the cost of 
diagnostic and therapeutic radiopharmaceuticals because they are not 
reported under pharmacy revenue codes or under the pharmacy cost center 
on the hospital cost report. Our CY 2012 redistribution of $240.3 
million in estimated costs from coded and uncoded packaged drugs to 
separately payable drugs represents the $200 million in total packaged 
drug costs redistributed from the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71967), updated by the PPI for Pharmaceuticals 
for Human Use, to derive a proportion of redistributed costs to total 
costs. We then updated our analysis for this CY 2012 OPPS/ASC final 
rule with comment period, holding the proportion of redistributed 
pharmacy overhead and handling cost constant, both for packaged coded 
drugs (35 percent) and for packaged uncoded drugs (10.7 percent), 
constant between the proposed rule and the final rule with comment 
period. This allowed us to keep the proportion of redistributed costs 
(and

[[Page 74141]]

thus the ASP+X percent) stable between the proposed rule and the final 
rule with comment period. Redistributing a total of $240.3 million in 
pharmacy overhead cost from packaged drugs and biologicals reduces the 
$1.4 billion cost of packaged drugs and biologicals with HCPCS codes 
and ASPs to $1.16 billion, approximately a 17-percent reduction. 
Redistributing $71.3 million from the cost of uncoded packaged drugs 
and biologicals reduces the $666 million cost of uncoded drugs and 
biologicals to $594.7 million, approximately an 11-percent reduction. 
To implement our CY 2012 policy to redistribute $169 million from the 
pharmacy overhead cost of coded packaged drugs and biologicals to 
separately payable drugs and biologicals and $71.3 million from the 
cost of uncoded packaged drugs, we multiplied the cost of each packaged 
drug or biological with a HCPCS code and ASP pricing information in our 
CY 2010 claims data by 0.77, and we multiplied all uncoded packaged 
pharmacy drug costs in our CY 2010 claims data, excluding those for 
diagnostic radiopharmaceuticals, by 0.89. We also added the 
redistributed $240.3 million to the total cost of separately payable 
drugs and biologicals in our CY 2010 claims data, which increased the 
relationship between the total cost for separately payable drugs and 
biologicals and ASP dollars for the same drugs and biologicals from 
ASP-2 percent to ASP+4 percent. We refer readers to section V.B.3. of 
this final rule with comment period for a complete discussion of our 
policy to pay for separately paid drugs and biologicals and pharmacy 
overhead for CY 2012.
    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 
proposed to come off the inpatient list for CY 2011 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 2012, we proposed to continue the policy we implemented for 
CY 2011 to exclude line-item data for pass-through drugs and 
biologicals (status indicator ``G'' for CY 2010) and nonpass-through 
drugs and biologicals (status indicator ``K'' for CY 2010) 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 2011 OPPS/ASC final rule with comment period (75 
FR 71828) 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 single bills used to determine the mean unit costs for use in the 
ASP+X calculation described in section V.B.3. of this final rule with 
comment period.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    As we proposed, for this CY 2012 final rule with comment period, we 
then split the remaining claims into five groups: single majors; 
multiple majors; single minors; multiple minors; and other claims. 
(Specific definitions of these groups follow below.) For CY 2012, we 
proposed to continue our current policy of defining major procedures as 
any HCPCS code having a status indicator of ``S,'' ``T,'' ``V,'' or 
``X;'' defining minor procedures as any code having a status indicator 
of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' and 
classifying ``other'' procedures as any code having a status indicator 
other than one that we have classified as major or minor. For CY 2012, 
we proposed to continue assigning status indicator ``R'' to blood and 
blood products; status indicator ``U'' to brachytherapy sources; status 
indicator ``Q1'' to all ``STVX-packaged codes;'' status indicator 
``Q2'' to all ``T-packaged codes;'' and status indicator ``Q3'' to all 
codes that may be paid through a composite APC based on composite-
specific criteria or paid separately through single code APCs when the 
criteria are not met. As discussed in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68709), we established status indicators 
``Q1,'' ``Q2,'' and ``Q3'' to facilitate identification of the 
different categories of codes. We proposed to treat these codes in the 
same manner for data purposes for CY 2012 as we have treated them since 
CY 2008. Specifically, we proposed to continue to evaluate whether the 
criteria for separate payment of codes with status indicator ``Q1'' or 
``Q2'' are met in determining whether they are treated as major or 
minor codes. 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 median costs for composite APCs from 
multiple procedure major claims is discussed in section II.A.2.e. of 
this final rule with comment period.
    Specifically, 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

[[Page 74142]]

with a status indicator ``T'' on the same claim on the same date.
    2. Multiple Procedure Major Claims: Claims with more than one 
separately payable procedure (that is, status indicator ``S,'' ``T,'' 
``V,'' or ``X,'' which includes codes with status indicator ``Q3''), or 
multiple units of one payable procedure. These claims include those 
codes with a status indicator ``Q2'' code (``T-packaged'') where there 
was no procedure with a status indicator ``T'' on the same claim on the 
same date of service but where there was another separately paid 
procedure on the same claim with the same date of service (that is, 
another code with status indicator ``S,'' ``V,'' or ``X''). We also 
include, in this set, claims that contained one unit of one code when 
the bilateral modifier was appended to the code and the code was 
conditionally or independently bilateral. In these cases, the claims 
represented more than one unit of the service described by the code, 
notwithstanding that only one unit was billed.
    3. Single Procedure Minor Claims: Claims with a single HCPCS code 
that was assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' 
``R,'' ``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-
packaged'') or status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Procedure Minor Claims: Claims with multiple HCPCS 
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' 
``L,'' ``R,'' ``U,'' or ``N;'' claims that contain more than one code 
with status indicator ``Q1'' (``STVX-packaged'') or more than one unit 
of a code with status indicator ``Q1'' but no codes with status 
indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service; or 
claims that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with 
status indicator ``Q2'' but no code with status indicator ``T'' on the 
same date of service.
    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment or clinical 
laboratory tests, and do not contain a code for a separately payable or 
packaged OPPS service. Non-OPPS claims include claims for therapy 
services paid sometimes under the OPPS but billed, in these non-OPPS 
cases, with revenue codes indicating that the therapy services would be 
paid under the Medicare Physician Fee Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for 
the single major file, the multiple major file, and the multiple minor 
file used for ratesetting. Claims that contain codes to which we have 
assigned status indicator ``Q3'' (composite APC members) appear in both 
the data of the single and multiple major files used in this final rule 
with comment period, depending on the specific composite calculation.
    We did not receive any public comments on our proposed process of 
organizing claims by type. Therefore, for the reasons set forth in the 
proposed rule (76 FR 42185 through 41286), we are finalizing our CY 
2012 proposal without modification. (2) Creation of ``Pseudo'' Single 
Procedure Claims
    As we proposed, 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).
    As we proposed, for this final rule with comment period, we also 
used the bypass codes listed in Addendum N to this final rule with 
comment period (which is referenced in section XVII. of this final rule 
with comment period and available via the Internet on the CMS 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 CY 2012 ``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. Where one unit of a 
single, separately payable procedure code remained on the claim after 
removal of the multiple units of the bypass code, we created a 
``pseudo'' single 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.
    As we proposed, for this final rule with comment period, we then 
assessed the claims to determine if the criteria for the multiple 
imaging composite APCs, discussed in section II.A.2.e.(5) of this final 
rule with comment period, were met. Where the criteria for the imaging 
composite APCs were met, we created a ``single session'' claim for the 
applicable imaging composite service and determined whether we could 
use the claim in ratesetting. For HCPCS codes that are both 
conditionally packaged and are members of a multiple imaging composite 
APC, we first assessed whether the code would be packaged and, if so, 
the code ceased to be available for further assessment as part of the 
composite APC. Because the packaged code would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC median cost. Having identified ``single 
session'' claims for the imaging composite APCs, we reassessed the 
claim to determine if, after removal of all lines for bypass codes, 
including the ``overlap bypass codes,'' a single unit of a single 
separately payable code remained on the claim. If so, we attributed the 
packaged costs on the claim to the single unit of the single remaining 
separately payable code other than the bypass code to create a 
``pseudo'' single procedure claim. We also identified line-items of 
overlap bypass codes as a ``pseudo'' single procedure claim. This

[[Page 74143]]

allowed us to use more claims data for ratesetting purposes.
    As we proposed, for this final rule with comment period, 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 2011 
relative weight, set the units to one on that HCPCS code to reflect our 
policy of paying only one unit of a code with a status indicator of 
``Q1.'' We then packaged all costs for the following into a single cost 
for the ``Q1'' HCPCS code that had the highest CY 2011 relative weight 
to create a ``pseudo'' single procedure claim for that code: additional 
units of the status indicator ``Q1'' HCPCS code with the highest CY 
2011 relative weight; other codes with status indicator ``Q1''; and all 
other packaged HCPCS codes and packaged revenue code costs. We changed 
the status indicator for 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 median cost for the status indicator ``Q1'' 
HCPCS code.
    Similarly, as we proposed, for this final rule with comment period, 
where 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 2011 relative weight, set the 
units to one on that HCPCS code to reflect our policy of paying only 
one unit of a code with a status indicator of ``Q2.'' We then packaged 
all costs for the following into a single cost for the ``Q2'' HCPCS 
code that had the highest CY 2011 relative weight to create a 
``pseudo'' single procedure claim for that code: additional units of 
the status indicator ``Q2'' HCPCS code with the highest CY 2011 
relative weight; other codes with status indicator ``Q2''; and other 
packaged HCPCS codes and packaged revenue code costs. We changed the 
status indicator for the selected code from a data status indicator of 
``N'' to the status indicator of the APC to which the selected code was 
assigned, and we considered this claim as a major procedure claim.
    As we proposed, for this final rule with comment period, where 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 weight for CY 2011 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 2011 relative weight; other codes with status indicator 
``Q2''; codes with status indicator ``Q1'' (``STVX-packaged''); and 
other packaged HCPCS codes and packaged revenue code costs. We favor 
status indicator ``Q2'' over ``Q1'' HCPCS codes because ``Q2'' HCPCS 
codes have higher CY 2011 relative weights. If a status indicator 
``Q1'' HCPCS code had a higher CY 2011 relative weight, it would become 
the primary code for the simulated single bill process. We changed the 
status indicator for the selected status indicator ``Q2'' (``T-
packaged'') code from a data status indicator of ``N'' to the status 
indicator of the APC to which the selected code was assigned and we 
considered this claim as a major procedure claim.
    We 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, where they meet the criteria for single procedure 
claims. Conditionally packaged codes are identified using status 
indicators ``Q1'' and ``Q2,'' and are described in section XI.A.1. of 
this final rule with comment period.
    Lastly, as we proposed, for this final rule with comment period, 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.
    Comment: Commenters supported the proposed process for creating 
pseudo single procedure claims.
    Response: We appreciate the commenters' support and will continue 
to look for ways to refine the process to secure more claims data for 
use in calculating median costs.
    After consideration of the public comments we received, as we 
proposed, we are continuing to apply the proposed methodology described 
above for the purpose of creating pseudo single procedure claims for 
the CY 2012 OPPS.
c. Completion of Claim Records and Median Cost Calculations
(1) General Process
    As we proposed, for this final rule with comment period, 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 referenced in section XVII. of this final rule with comment 
period and available via the Internet on the CMS Web site) and the 
costs of those lines for codes with status indicator ``Q1'' or ``Q2'' 
when they are not separately paid), and the costs of the services 
reported under packaged revenue codes in Table 2 below that appeared on 
the claim without a HCPCS code into the cost of the single major 
procedure remaining on the claim.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we will continue to 
compare the final list of packaged revenue codes that we adopt for CY 
2012 to the revenue codes that the I/OCE will package for CY 2012 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 proposed 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 to the CY 2010 
proposed list of packaged revenue

[[Page 74144]]

codes. For CY 2012, as we did for CY 2011, we reviewed the changes to 
revenue codes that were effective during CY 2010 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we would propose to package for the CY 2012 OPPS. We believe 
that the charges reported under the revenue codes listed in Table 2 
below continue to reflect ancillary and supportive services for which 
hospitals report charges without HCPCS codes. Therefore, for CY 2012, 
as we proposed, we are continuing to package the costs that we derive 
from the charges reported without HCPCS code under the revenue codes 
displayed in Table 2 below for purposes of calculating the median costs 
on which the CY 2012 OPPS are based.
    We did not receive any public comments on our proposed list of 
packaged revenue codes. Therefore, for the reasons set forth in the 
proposed rule (76 FR 42187 through 42188), we are finalizing the 
proposed packaged revenue codes for CY 2012, without modification, 
which are identified in Table 2 below. We note that these revenue codes 
include only revenue codes that were in effect in CY 2010, the year of 
the claims data on which the CY 2012 OPPS payment rates are based.
BILLING CODE 4120-01-P

[[Page 74145]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.001


[[Page 74146]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.002

BILLING CODE 4120-01-C
    In accordance with our longstanding policy, as we proposed, we are 
continuing to exclude: (1) Claims that had zero costs after summing all 
costs on the claim; and (2) claims containing packaging flag number 3. 
Effective for services furnished on or after July 1, 2004, the I/OCE 
assigned packaging flag number 3 to claims on which hospitals submitted 
token charges less than $1.01 for a service with status indicator ``S'' 
or ``T'' (a major separately payable service under the OPPS) for which 
the fiscal intermediary or MAC was required to allocate the sum of 
charges for services with a status indicator equaling ``S'' or ``T'' 
based on the relative weight of the APC to which each code was 
assigned. We do not believe that these charges, which were token 
charges as submitted by the hospital, are valid reflections of hospital 
resources. Therefore, we deleted these claims. We also deleted claims 
for which the charges equaled the revenue center payment (that is, the 
Medicare payment) on the assumption that, where the charge equaled the 
payment, to apply a CCR to the charge would not yield a valid estimate 
of relative provider cost. We are continuing these processes for the CY 
2012 OPPS.
    As we proposed, for this final rule with comment period, for the 
remaining claims, we then standardized 60 percent of the costs of the 
claim (which we have previously determined to be the labor-related 
portion) for geographic differences in labor input costs. We made this 
adjustment by determining the wage index that applied to the hospital 
that furnished the service and dividing the cost for the separately 
paid HCPCS code furnished by the hospital

[[Page 74147]]

by that wage index. The claims accounting that we provide for the 
proposed and final rule contains the formula we use to standardize the 
total cost for the effects of the wage index. As has been our policy 
since the inception of the OPPS, we 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 
median costs.
    In accordance with our longstanding practice, as proposed, for this 
final rule with comment period, we also excluded single and pseudo 
single procedure claims for which the total cost on the claim was 
outside 3 standard deviations from the geometric mean of units for each 
HCPCS code on the bypass list (because, as discussed above, we used 
claims that contain multiple units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 109 million 
claims were left. Using these 109 million claims, we created 
approximately 110 million single and ``pseudo'' single procedure 
claims, of which we used slightly more than 108 million single bills 
(after trimming out approximately 888,000 claims as discussed in 
section II.A.1.a. of this final rule with comment period) in the CY 
2012 median development and ratesetting.
    We used these claims to calculate the final CY 2012 median costs 
for each separately payable HCPCS code and each APC. The comparison of 
HCPCS code-specific and APC medians determines the applicability of the 
2 times rule. Section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median (or mean cost, if elected by the Secretary) for an item 
or service in the group is more than 2 times greater than the lowest 
median cost for an item or service within the same group (the 2 times 
rule). We note that, for purposes of identifying significant HCPCS for 
examination in the 2 times rule, we consider codes that have more than 
1,000 single major claims or codes that have both greater than 99 
single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC median cost to be significant 
(75 FR 71832). This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 100 million single procedure or single session claims we 
use for establishing median 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 median. 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 median. Finally, we reviewed the median 
costs for the services for which we are proposing to pay separately 
under this final rule with comment period, and we reassigned HCPCS 
codes to different APCs where it was necessary to ensure clinical and 
resource homogeneity within the APCs. Section III. of this final rule 
with comment period includes a discussion of many of the HCPCS code 
assignment changes that resulted from examination of the median costs 
and for other reasons. The APC medians were recalculated after we 
reassigned the affected HCPCS codes. Both the HCPCS code-specific 
medians and the APC medians were weighted to account for the inclusion 
of multiple units of the bypass codes in the creation of ``pseudo'' 
single procedure claims.
    As we discuss in sections II.A.2.d. and II.A.2.e. and in section 
VIII.B. of this final rule with comment period, in some cases, APC 
median 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 median 
costs. Section II.A.2.e. of this final rule with comment period 
discusses the calculation of composite APC criteria-based median costs. 
Section VIII.B. of this final rule with comment period addresses the 
methodology for calculating the median costs for partial 
hospitalization services.
    We did not receive any public comments on this aspect of the median 
calculation process that we proposed for CY 2012. Therefore, we are 
adopting it as final.
    After consideration of the public comments we received, we are 
finalizing our proposed methodology for calculating median costs for 
purposes of creating payment weights and subsequent payment rates for 
the CY 2012 OPPS.
(2) APC Panel Recommendations Regarding Data Development
    At the February 28-March 1, 2011 APC Panel Meeting, we provided the 
APC Panel Data Subcommittee with a list of all APCs fluctuating by 
greater than 10 percent when comparing the CY 2011 OPPS final rule 
median costs based on CY 2009 claims processed through June 30, 2010, 
to those based on CY 2010 OPPS/ASC final rule data (CY 2008 claims 
processed through June 30, 2009). We included explanatory data where 
possible to allow the Data Subcommittee to focus on APC median changes 
that required more investigation, based on its request (75 FR 71834). 
The APC Panel Data Subcommittee reviewed the fluctuations in the APC 
median costs but did not express particular concerns with the median 
cost changes.
    We also provided the APC Panel Data Subcommittee with a summary of 
cost and CCR data related to the Myocardial Positron Emission 
Tomography (PET) imaging APC, APC 0307, as well as the associated 
diagnostic radiopharmaceutical, Rb82 rubidium, based on a request for 
data related to the decline in the APC median cost from the CY 2010 
OPPS final rule to the CY 2011 OPPS proposed rule. The Data 
Subcommittee noted a decline in the CCRs associated with the HCPCS 
codes in APC 0307, as well as declines in the line-item costs of the 
associated diagnostic radiopharmaceutical.
    At the February 28-March 1, 2011 APC Panel Meeting, the APC Panel 
made a number of recommendations related to the data process. The 
Panel's recommendations and our responses follow.
    Recommendation 1: The Panel commends the CMS staff for responding 
to the data requests of the Data Subcommittee.
    CMS Response to Recommendation 1: We appreciate this 
recommendation.
    Recommendation 2: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response to Recommendation 2: We are accepting this 
recommendation.
    Recommendation 3: The Panel recommends that Agatha Nolen, D.Ph., 
M.S., F.A.S.H.P., serve as acting chairperson for the winter 2011 
meeting of the Data Subcommittee.
    CMS Response to Recommendation 3: We are accepting this 
recommendation.
    At the August 10-12, 2011 APC Panel Meeting, CMS again provided the 
APC Panel Data Subcommittee with a list of all APCs fluctuating by 
greater than 10 percent when comparing the CY 2012 OPPS proposed rule 
median costs based

[[Page 74148]]

on CY 2010 claims processed through December 21, 2010, to those based 
on CY 2011 OPPS/ASC final rule data (CY 2009 claims processed through 
June 30, 2010). We also gave an overview of the ASP+X calculation and 
the CY 2012 proposal for separately paid drugs, and an overview of the 
proposed payment (with DRG Cap) for Cardiac Resynchronization Therapy-
Defibrillator (CRT-D) composite. The APC Panel made a number of 
recommendations related to specific services. Recommendations (4-9) are 
discussed as part of the discussion of the specific service to which 
they pertain.
    Recommendation 10: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response to Recommendation 10: We are accepting this 
recommendation.
    Recommendation 14: The Panel recommends that Daniel J. Pothen, 
M.S., R.H.I.A, C.H.P.S., C.P.H.I.M.S., C.C.S., C.C.S.-P., C.H.C., be 
named the chair of the Data Subcommittee
    CMS Response to Recommendation 14: We are accepting this 
recommendation.
d. Calculation of Single Procedure APC Criteria-Based Median Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years and a detailed 
discussion of how we developed the standard device-dependent APC 
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66739 through 66742). Overviews of the 
procedure-to-device edits and device-to-procedure edits used in 
ratesetting for device-dependent APCs are available in the CY 2005 OPPS 
final rule with comment period (69 FR 65761 through 65763) and the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42190), for CY 2012, 
we proposed to use the standard methodology for calculating median 
costs for device-dependent APCs that was finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 71834 through 71837). (We 
referred readers to section II.D.6. and II.A.e.6. of the proposed rule 
for detailed explanations of the proposed nonstandard methodology 
regarding cardiac resynchronization therapy). This methodology utilizes 
claims data that generally represent the full cost of the required 
device. Specifically, we proposed to calculate the median costs for 
device-dependent APCs for CY 2012 using only the subset of single 
procedure claims from CY 2010 claims data that pass the procedure-to-
device and device-to-procedure edits; do not contain token charges 
(less than $1.01) for devices; do not contain the ``FB'' modifier 
signifying that the device was furnished without cost to the provider, 
supplier, or practitioner, or where a full credit was received; and do 
not contain the ``FC'' modifier signifying that the hospital received 
partial credit for the device. The procedure-to-device edits require 
that when a particular procedural HCPCS code is billed, the claim must 
also contain an appropriate device code, while the device-to-procedure 
edits require that a claim that contains one of a specified set of 
device codes also contain an appropriate procedure code. We stated in 
the proposed rule that we continue to believe the standard methodology 
for calculating median costs for device-dependent APCs gives us the 
most appropriate median costs for device-dependent APCs in which the 
hospital incurs the full cost of the device.
    Table 3 of the proposed rule (76 FR 42191) listed the APCs for 
which we proposed to use our standard device-dependent APC ratesetting 
methodology (as explained in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71834 through 71837)) for CY 2012. In the 
proposed rule, we noted that there are five proposed device-dependent 
APC title changes and one proposed deletion for CY 2012. As discussed 
in detail in section II.A.2.d.(6) of the proposed rule, we proposed to 
change the title of APC 0083 from ``Coronary or Non-Coronary 
Angioplasty and Percutaneous Valvuloplasty'' to ``Level I Endovascular 
Revascularization of the Lower Extremity''; the title of APC 0229 from 
``Transcatheter Placement of Intravascular Shunt and Stents'' to 
``Level II Endovascular Revascularization of the Lower Extremity''; and 
the title of APC 0319 from ``Endovascular Revascularization of the 
Lower Extremity'' to ``Level III Endovascular Revascularization of the 
Lower Extremity.'' We also proposed to change the title of APC 0040 
from ``Percutaneous Implantation of Neurostimulator Electrodes'' to 
``Level I Implantation/Revision/Replacement of Neurostimulator 
Electrodes,'' and the title of APC 0061 from ``Laminectomy, 
Laparoscopy, or Incision for Implantation of Neurostimulator 
Electrodes'' to ``Level II Implantation/Revision/Replacement of 
Neurostimulator Electrodes,'' as discussed in section III.D.1. of the 
proposed rule. In addition, as discussed in section II.A.2.e.(6) of the 
proposed rule, we proposed to delete APC 0418 (Insertion of Left 
Ventricular Pacing Electrode) for CY 2012. As we discussed in detail in 
section III.D.6. of the proposed rule, we proposed to limit the payment 
for services that are assigned to APC 0108 to the proposed IPPS 
standardized payment amount for MS-DRG 227 (Cardiac Defibrillator 
Implant without Cardiac Catheterization and without Medical 
Complications and Comorbidities), and we proposed to continue to apply 
the device edits and other standard features of the device-dependent 
APCs to APC 0108. Finally, we referred readers to Addendum A to the 
proposed rule for the proposed payment rates for device-dependent APCs 
for CY 2012.
    Comment: Several commenters supported CMS' proposal to continue 
using the standard methodology for calculating median costs for device-
dependent APCs as well as the continued use of device coding edits to 
ensure that hospitals are reporting charges for implanted devices. Some 
commenters recommended that CMS continue examining and refining the 
ratesetting methodology for procedures involving devices in order to 
encourage the continued development and proliferation of new 
technology, and that CMS further improve the accuracy of estimates for 
the costs of devices included in multiple procedure claims used for the 
purpose of setting relative weights. Some commenters asked for 
continued focus on coding education, particularly as it impacts the use 
of proper HCPCS supply codes, so that these codes are appropriately 
reported by hospital coders. Other commenters supported the mandatory 
reporting of all device HCPCS codes.
    Response: We appreciate the commenters' support of the continued 
use of the standard device-dependent APC ratesetting methodology and 
the procedure-to-device and device-to-procedure edits. As we have 
stated in the past (75 FR 71835 and 74 FR 60367), we agree with the 
commenters that we should continue to encourage the development and 
proliferation of new technology under the OPPS. We have special 
mechanisms to provide payment for new technologies and services under 
the OPPS, including new technology APCs and transitional pass-through 
payments devices. We refer readers to sections III.C. and IV.A., 
respectively, of

[[Page 74149]]

this final rule with comment period for more information on these 
payment methodologies. For all OPPS services, we continue our efforts 
to use the data from as many claims as possible, through approaches 
such as use of the bypass list and date splitting of claims as 
described further in section II.A. of this final rule with comment 
period, and through methodologies such as increased packaging and 
composite APCs.
    As we have stated in the past (73 FR 68535 through 68536 and 74 FR 
60367), we agree that accurate reporting of device, supply, and 
technology charges will help to ensure that these items are 
appropriately accounted for in future years' OPPS payment rates. We 
encourage stakeholders to carefully review HCPCS code descriptors, as 
well as any guidance CMS may have provided for specific HCPCS codes. In 
addition, we have provided further instructions on the billing of 
medical and surgical supplies in the October 2008 OPPS update 
(Transmittal 1599, Change Request 6196, dated September 19, 2008) and 
the April 2009 OPPS update (Transmittal 1702, Change Request 6416, 
dated March 13, 2009). For HCPCS codes that are paid under the OPPS, 
providers may also submit inquiries to the AHA Central Office on HCPCS, 
which serves as a clearinghouse on the proper use of Level I HCPCS 
codes for hospitals and certain Level II HCPCS codes for hospitals, 
physicians, and other health professionals. Inquiries must be submitted 
using the approved form, which may be downloaded from the AHA Web site 
(http://www.ahacentraloffice.org) and either faxed to (312) 422-4583 or 
mailed directly to the AHA Central Office: Central Office on HCPCS, 
American Hospital Association, One North Franklin, Floor 29, Chicago, 
IL 60606.
    Comment: Some commenters concurred with CMS' proposed determination 
that APC 0385 (Level I Prosthetic Urological Procedures) and APC 0386 
(Level II Prosthetic Urological Procedures) should be categorized as 
device-dependent APCs. Other commenters expressed appreciation for the 
proposed increase in payment for APC 0425 (Level II Arthroplasty or 
Implantation with Prosthesis).
    Response: We appreciate the commenters' support of the designation 
of APC 0385 and APC 0386 as device-dependent APCs and the proposed 
payment increase for APC 0425.
    Comment: Several commenters expressed concern that the proposed CY 
2012 payment rate for the implantation of cochlear implants, described 
by CPT code 69930 (cochlear device implantation, with or without 
mastoidectomy) which is assigned to APC 0259 (Level VII ENT 
Procedures), decreased by approximately 12 percent from that in the CY 
2011 OPPS/ASC final rule with comment period. According to commenters, 
this payment rate is inconsistent with the average decrease in proposed 
payment of all OPPS APCs relative to CY 2011 of approximately 6 percent 
and is insufficient to cover hospitals' costs for providing this 
service and ensure that beneficiaries will continue to have access to 
cochlear implants. The commenters observed, based on their analysis of 
Medicare claims data, that while the overall median cost of APC 0259 
decreased, the component parts of the APC (that is, the device, the 
procedure, and the other bundled supplies and services) either remained 
the same or increased. The commenters requested that CMS evaluate the 
data upon which the proposed CY 2012 payment rate for APC 0259 is based 
in order to ensure its validity.
    Response: We appreciate the commenters' concerns regarding the 
proposed payment rate for procedures involving cochlear implants. Under 
the standard device-dependent APC ratesetting methodology, the median 
cost for APC 0259 is calculated using only those single bills that 
reflect the full cost of the cochlear implant device. While we will 
monitor the changes in APC 0259 over time, we believe that the payment 
rate for this service, calculated according to the standard device-
dependent APC ratesetting methodology for the proposed rule and this 
final rule with comment period, appropriately reflects hospitals' 
relative costs for providing this procedure as reported to us in the 
claims and cost report data. We note that the median cost for CPT code 
69930 calculated from the CY 2010 hospital claims and cost report data 
available for this final rule with comment is $28,892, approximately 6 
percent less than the median cost of $30,730 calculated from the CY 
2009 hospital claims and cost report data upon which the final CY 2011 
payment rate was calculated.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2012 payment policies for device-dependent 
APCs with modification. The CY 2012 OPPS payment rates for device-
dependent APCs are based on their median costs calculated from CY 2010 
claims and the most recent cost report data, using only single 
procedure claims that pass the procedure-to-device and device-to-
procedure edits, do not contain token charges for devices (less than 
$1.01), do not have an ``FB'' modifier signifying that the device was 
furnished without cost or with full credit, and do not contain an 
``FC'' modifier signifying that the hospital received partial credit 
for the device. We continue to believe that the median costs calculated 
from the single claims that meet these criteria represent the most 
valid estimated relative costs of these services to hospitals when they 
incur the full cost of the devices required to perform the procedures.
    Table 3 below lists the APCs for which we used our standard device-
dependent APC ratesetting methodology for CY 2012. We note that we are 
not finalizing our proposal to limit the payment for services that are 
assigned to APC 0108 to the IPPS standardized payment amount for MS-DRG 
227, and that we are continuing to apply the device edits and other 
standard features of the device-dependent APCs to this APC for CY 2012. 
We also are deleting APC 0418 and changing the titles of APC 0108 and 
0655 as we proposed. We refer readers to section II.A.2.e.(6) of this 
final rule with comment period for a detailed discussion of these final 
policies. We also note that we are revising the APC titles for APC 
0083, 0229, and 0319 for CY 2012, as we discuss in section II.A.2.d.(6) 
of this final rule with comment period and that we are changing the APC 
titles for APC 0040 and APC 0061 as discussed in section III.D.4.a. of 
this final rule with comment period. We refer readers to Addendum A to 
this final rule with comment period (which is available via the 
Internet on the CMS Web site) for the final payment rates for these 
APCs for CY 2012.
BILLING CODE 4120-01-P

[[Page 74150]]

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[[Page 74151]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.005

BILLING CODE 4120-01-C
(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 2012 OPPS/ASC proposed rule (76 FR 42191 through 42192), 
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 calculated the median costs upon which the 
proposed CY 2012 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.
    As we stated in the proposed rule (76 FR 42192), 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 believe that continuing 
with this methodology in CY 2012 would result in median costs for blood 
and blood products that appropriately reflect the relative estimated 
costs of these products for hospitals without blood cost centers and, 
therefore, for these blood products in general.
    Comment: Some commenters asserted that there is a gap between CMS' 
proposed payments for blood and blood products and the costs incurred 
by

[[Page 74152]]

hospitals for the acquisition, management, and processing of blood and 
blood products, including high volume products such as leukocyte 
reduced red blood cells, described by HCPCS codes P9016 (Red blood 
cells, leukocytes reduced, each unit), P9021 (Red blood cells unit), 
and P9040 (Red blood cells, leukoreduced irradiated). These commenters 
stated that CMS should implement appropriate payment policies, such as 
paying no less than the payment rates in effect for CY 2011 for 
individual blood products in CY 2012, to close the gap between OPPS 
payment and the costs of blood and blood products and to ensure 
continued beneficiary access. They stated that this action is crucial, 
given that those costs continue to rise for a variety of reasons. For 
example, one commenter cited federally mandated requirements and 
recommendations by the U.S. Food and Drug Administration (FDA) as 
having a significant impact on the increasing costs of blood products, 
while another commenter noted that transfusion safety officers are 
being hired in most major hospitals to address improper transfusion and 
inappropriate use of blood. The commenters argued that, given the 2-
year lag inherent in available claims data in the OPPS ratesetting 
process, the use of hospital claims data without adjustments likely 
will not reflect these rising costs in a timely manner.
    Response: As we indicated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71838 through 71839), we continue to believe that 
using blood-specific CCRs applied to hospital claims data results in 
payments that appropriately reflect hospitals' relative costs of 
providing blood and blood products as reported to us by hospitals, 
which would reflect hospitals' changing costs due to factors cited by 
the commenters, such as FDA requirements, to the extent that these are 
affecting blood costs. We annually update payment groups and payment 
weights using the most recently available hospital claims and cost 
report data. This process allows us to recalibrate the payment groups 
and payment weights in response to changes in hospitals' costs from 
year to year in the most timely manner possible. A fundamental 
principle of the OPPS is that it is based on relative weights, and as 
we have stated in the past (73 FR 68541), it is the relativity of the 
costs to one another, rather than absolute cost, that is important in 
setting payment rates. To deviate from our standard OPPS ratesetting 
methodology by paying no less than the payment rates in effect for CY 
2011 for individual blood products in CY 2012 would skew this 
relativity. We also note that the median costs per unit (calculated 
using the blood-specific CCR methodology) for this final rule with 
comment period increase for the majority of the most commonly provided 
blood and blood products (including the highest volume blood and blood 
product, described by HCPCS code P9016) compared to the CY 2011 median 
costs. For all APCs whose payment rates are based upon relative payment 
weights, we note that the quality and accuracy of reported units and 
charges significantly influence the median costs that are the basis for 
our payment rates, especially for low volume items and services.
    After consideration of the public comments we received, we are 
finalizing, without modification, our CY 2012 proposal to calculate 
median costs upon which the CY 2012 payments rates for blood and blood 
products are based 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 (the methodology we have utilized since CY 2005). We 
believe that continuing this methodology in CY 2012 results in median 
costs for blood and blood products that appropriately reflect the 
relative estimated costs of these products for hospitals without blood 
cost centers and, therefore, for these products in general.
    We refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site) for 
the final CY 2012 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) Allergy Tests (APCs 0370 and 0381)
    In the CY 2006 OPPS final rule with comment period (70 FR 68610), 
we discussed the confusion raised by a number of providers related to 
the reporting of units for single and multiple allergy tests described 
by CPT codes 95004 through 95078. According to the providers, while 
some of these codes instruct providers to specify the number of tests 
or use the singular word ``tests'' or ``testing'' in their descriptors, 
others do not contain such instruction or do not contain ``tests'' or 
``testing'' in their descriptors. In light of the variable hospital 
billing that may be inconsistent with the CPT code descriptors, as 
discussed in detail in the CY 2006 OPPS final rule with comment period 
(70 FR 68610), we examined CY 2004 claims and determined that the 
charges reported on many single procedure claims represent a ``per 
visit'' charge, rather than a ``per test'' charge, including claims for 
the allergy test codes that instruct providers to specify the number of 
tests. As a result of our analysis of our claims data, we 
differentiated single allergy tests (``per test'' from multiple allergy 
tests (``per visit'') by placing these services in two different APCs. 
We believed that making this distinction clarified billing for these 
services and more accurately placed them with like services sharing 
similar resource costs. We also provided billing guidance in CY 2006 in 
Transmittal 804 (issued on January 3, 2006) specifically clarifying 
that hospitals should report charges for the CPT codes that describe 
single allergy tests to reflect charges ``per test'' rather than ``per 
visit'' and should bill the appropriate number of units (as defined in 
the CPT code descriptor) of these CPT codes to describe all of the 
tests provided. Since 2006, we have analyzed our claims data to 
determine whether the reporting of these services has improved.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42192), we proposed to 
continue to use our methodology of differentiating single allergy tests 
(``per test'') from multiple allergy tests (``per visit'') by assigning 
these services to two different APCs to provide accurate payments for 
these tests in CY 2012. Specifically, services proposed to be assigned 
to APC 0381 (Single Allergy Tests) reflect the CPT codes that describe 
single allergy tests in which CPT instructions direct providers to 
specify the number of tests performed. Alternatively, the procedures 
proposed for assignment to APC 0370 (Allergy Tests) describe multiple 
allergy tests per encounter; therefore, for these procedures, only one 
unit of the service is billed even if multiple tests are performed.
    As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42192), 
our analysis of the CY 2010 claims data available for the proposed rule 
for the single allergy tests, specifically those services assigned to 
APC 0381, did not reflect improved and more consistent hospital billing 
practices of ``per test'' for single allergy tests. The median cost of 
APC 0381 calculated for the proposed rule according to the standard 
single

[[Page 74153]]

claims OPPS methodology was approximately $51, significantly higher 
than the CY 2011 OPPS/ASC final rule median cost of approximately $33 
that was calculated according to the ``per unit'' methodology, and 
greater than we would expect for these procedures that are to be 
reported ``per test'' with the appropriate number of units. Some claims 
for single allergy tests still appear to provide charges that represent 
a ``per visit'' charge, rather than a ``per test'' charge. Therefore, 
consistent with our payment policy for single allergy tests since CY 
2006, we calculated a proposed ``per unit'' median cost for APC 0381, 
based upon 601 claims containing multiple units or multiple occurrences 
of a single CPT code. The proposed CY 2012 median cost for APC 0381 
using the ``per unit'' methodology was approximately $34. For a full 
discussion of the ``per unit'' methodology for APC 0381, we refer 
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66737).
    In addition, we proposed that multiple allergy tests continue to be 
assigned to APC 0370 with a median cost calculation based on the 
standard OPPS methodology for CY 2012. This resulted in a proposed APC 
median cost of approximately $97 based on 283 claims.
    We did not receive any public comments on our CY 2012 proposal for 
payment of single or multiple allergy tests. We are finalizing our CY 
2012 proposal, without modification, to calculate a ``per unit'' median 
cost for APC 0381 as described above in this section. The final CY 2012 
median cost of APC 0381 is approximately $31.
    Furthermore, we also are finalizing our CY 2012 proposal, without 
modification, to use the standard OPPS methodology to set the APC 
payment rate for APC 0370. We are revising the title of APC 0370 from 
``Allergy Tests'' to ``Multiple Allergy Tests'' so that the APC title 
more accurately describes all the services assigned to the APC. The 
final CY 2012 median cost of APC 0370 is approximately $80 based on 306 
claims.
(4) Hyperbaric Oxygen Therapy (APC 0659)
    Since the implementation of OPPS in August 2000, the OPPS has 
recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full 
body chamber, per 30 minute interval) for hyperbaric oxygen (HBOT) 
provided in the hospital outpatient setting. In the CY 2005 final rule 
with comment period (69 FR 65758 through 65759), we finalized a ``per 
unit'' median cost calculation for APC 0659 (Hyperbaric Oxygen) using 
only claims with multiple units or multiple occurrences of HCPCS code 
C1300 because delivery of a typical HBOT service requires more than 30 
minutes. We observed that claims with only a single occurrence of the 
code were anomalies, either because they reflected terminated sessions 
or because they were incorrectly coded with a single unit. In the same 
rule, we also established that HBOT would not generally be furnished 
with additional services that might be packaged under the standard OPPS 
APC median cost methodology. This enabled us to use claims with 
multiple units or multiple occurrences. Finally, we also used each 
hospital's overall CCR to estimate costs for HCPCS code C1300 from 
billed charges rather than the CCR for the respiratory therapy or other 
departmental cost centers. Our rationale for using the hospital's 
overall CCR can be found in the CY 2005 OPPS final rule with comment 
period (69 FR 65758 through 65759). The public comments on the CY 2005 
OPPS proposed rule effectively demonstrated that hospitals report the 
costs and charges for HBOT in a wide variety of cost centers. Since CY 
2005, we have used this methodology to estimate the median cost for 
HBOT. The median costs of HBOT using this methodology have been 
relatively stable for several years.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42192), we proposed to 
continue using the same methodology to estimate a ``per unit'' median 
cost for HCPCS code C1300 for CY 2012. This methodology resulted in a 
proposed APC median cost of approximately $107 using 370,519 claims 
with multiple units or multiple occurrences for HCPCS code C1300 for CY 
2012.
    We did not receive any public comments on our proposal to continue 
to use our established ratesetting methodology for calculating the 
median cost of APC 0659 for payment of HBOT for CY 2012. We are 
finalizing our CY 2012 proposal, without modification, to continue to 
use our established ratesetting methodology for calculating the median 
cost of APC 0659 for payment of HBOT, with a final CY 2012 median cost 
of approximately $105.
(5) Payment for Ancillary Outpatient Services When Patient Expires (APC 
0375)
    In the November 1, 2002 final rule with comment period (67 FR 
66798), we discussed the creation of the new HCPCS modifier ``-CA'' to 
address situations where a procedure on the OPPS inpatient list must be 
performed to resuscitate or stabilize a patient (whose status is that 
of an outpatient) with an emergent, life-threatening condition, and the 
patient dies before being admitted as an inpatient. HCPCS modifier 
``CA'' is defined as a procedure payable only in the inpatient setting 
when performed emergently on an outpatient who expires prior to 
admission. In Transmittal A-02-129, issued on January 3, 2003, we 
instructed hospitals on the use of this modifier. For a complete 
description of the history of the policy and the development of the 
payment methodology for these services, we refer readers to the CY 2007 
OPPS final rule with comment period (71 FR 68157 through 68158).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42192 through 42193), 
we proposed to continue to use our established ratesetting methodology 
for calculating the median cost of APC 0375 (Ancillary Outpatient 
Services When Patient Expires) and to continue to make one payment 
under APC 0375 for the services that meet the specific conditions for 
using HCPCS modifier ``-CA.'' That is, we proposed to calculate the 
relative payment weight for APC 0375 by using all claims reporting a 
status indicator ``C'' (inpatient procedures) appended with HCPCS 
modifier ``-CA.'' For the history and detailed explanation of the 
methodology, we refer readers to the CY 2004 OPPS final rule (68 FR 
63467 through 63468). We stated in the proposed rule that we continue 
to believe that this established ratesetting methodology results in the 
most appropriate aggregate median cost for the ancillary services 
provided in these unusual clinical situations.
    We stated that we believe that hospitals are reporting the HCPCS 
modifier ``-CA'' according to the policy initially established in CY 
2003. We noted that the claims frequency for APC 0375 has been 
relatively stable over the past few years. We noted that the median 
cost for APC 0375 has decreased based on the CY 2010 OPPS claims data 
used for the development of the proposed rates for CY 2012 compared to 
that for CY 2011. Variation in the median cost for APC 0375 is expected 
because of the small number of claims and because the specific cases 
are grouped by the presence of the HCPCS modifier ``-CA'' appended to 
an inpatient only procedure and not according to the standard APC 
criteria of clinical and resource homogeneity. Cost variation for APC 
0375 from year to year is anticipated and acceptable as long as 
hospitals continue judicious reporting of the HCPCS modifier ``-CA.'' 
Table 4 of the proposed rule showed the number of claims and the median 
costs

[[Page 74154]]

for APC 0375 for CYs 2007, 2008, 2009, 2010, and 2011, and the proposed 
median cost for APC 0375 for CY 2012. For CY 2012, we proposed a median 
cost of approximately $5,711 for APC 0375 based on 155 claims.
    We did not receive any public comments regarding this proposal. For 
the reasons explained in the CY 2012 OPPS/ASC proposed rule, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
use our established ratesetting methodology for calculating the median 
cost of APC 0375, which has a final CY 2012 APC median cost of 
approximately $6,039. Table 4 below shows the number of claims and the 
final median costs for APC 0375 for CYs 2007, 2008, 2009, 2010, 2011, 
and 2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.006

(6) Endovascular Revascularization of the Lower Extremity (APCs 0083, 
0229, and 0319)
    For the CY 2011 update, the AMA's CPT Editorial Panel created 16 
new CPT codes in the Endovascular Revascularization section of the 2011 
CPT code book to describe endovascular revascularization procedures of 
the lower extremity performed for occlusive disease. In the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we 
discussed the process and methodology by which we assigned the new CY 
2011 endovascular revascularization CPT codes to APCs that we believe 
are comparable with respect to clinical characteristics and resources 
required to furnish the services. Specifically, we were able to use the 
existing CY 2009 hospital outpatient claims data and most recent cost 
report data to create simulated medians for 12 of the 16 new separately 
payable codes for CY 2011. Because the endovascular revascularization 
CPT codes are new for CY 2011, we used our CY 2009 single and 
``pseudo'' single claims data to simulate the new CY 2011 CPT code 
definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 71844), many of the new endovascular 
revascularization CPT codes were previously reported using a 
combination of CY 2009 CPT codes. In order to simulate median costs, we 
selected claims that we believe meet the definition for each of the new 
endovascular revascularization CPT codes. Table 7 showed the criteria 
we applied to select a claim to be used in the calculation of the 
median cost for the new codes (shown in Column A). As we stated in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71842), we 
developed these criteria based on our clinicians' understanding of 
services that were reported by CY 2009 CPT codes that, in various 
combinations, reflect the services provided that are described by the 
new CPT codes for CY 2011.
    After determining the simulated median costs for the procedures, we 
assigned each CPT code to appropriate APCs based on their clinical 
homogeneity and resource use. Of the 16 new codes, we assigned 9 CPT 
codes to APC 0083 (Coronary or Non-Coronary Angioplasty and 
Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter 
Placement of Intravascular Shunts), and created new APC 0319 
(Endovascular Revascularization of the Lower Extremity) for 2 CPT 
codes. Table 8 of the CY 2011 OPPS/ASC final rule with comment period 
displayed their final CY 2011 APC assignments and CPT median costs (75 
FR 71845). We noted that because these CPT codes are new for CY 2011, 
they are identified with comment indicator ``NI'' in Addendum B to the 
CY 2011 OPPS/ASC final rule with comment period to identify them as a 
new interim APC assignment for the new year and subject to public 
comment. We specifically requested public comment on our methodology 
for simulating the median costs for these new CY 2011 CPT codes in 
addition to public comments on the payment rates themselves (75 FR 
71845).
    At its February 28-March 1, 2011 meeting, the APC Panel recommended 
that CMS provide data to allow the Panel to investigate and monitor the 
APC weights for the lower extremity revascularization procedures in 
light of CPT coding changes for CY 2011. In the CY 2012 OPPS/ASC 
proposed rule, we indicated that we were accepting the APC Panel's 
recommendation and will provide additional data to the Panel at an 
upcoming meeting.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42190), we proposed to 
continue with the CY 2011 methodology that was described previously in 
this section in determining the APC assignments for the CPT codes that 
describe endovascular revascularization of the lower extremity. The 
predecessor endovascular revascularization CPT codes were in existence 
prior to CY 2011 and were assigned to APCs based on claims data and 
cost report data. Given that these data are available for the services 
described by the predecessor endovascular revascularization CPT codes, 
we proposed to continue for CY 2012 to use the existing hospital 
outpatient claims and cost report data from the previous endovascular 
revascularization CPT codes to simulate an estimated median cost for 
the new endovascular revascularization CPT codes in determining the 
appropriate APC

[[Page 74155]]

assignments. As has been our practice since the implementation of the 
OPPS in 2000, we review our latest claims data for ratesetting and, if 
necessary, revise the APC assignments for the upcoming year. In this 
case, review of the procedures with significant claims data in APC 0083 
showed a 2 times rule violation. Specifically, APC 0083, as it was 
initially configured, showed that the range of the CPT median costs for 
the procedures with significant claims data was approximately between 
$3,252 (for CPT code 35476 (Transluminal balloon angioplasty, 
percutaneous; venous)) and $7,174 (for CPT code 37221 
(Revascularization, endovascular, open or percutaneous, iliac artery, 
unilateral, initial vessel; with transluminal stent placement(s), 
includes angioplasty within the same vessel, when performed)), 
resulting in a 2 times rule violation. Because of its median cost, we 
stated that we believe that CPT code 37221 would be more appropriately 
placed in APC 0229, which had an initial estimated median cost of 
approximately $8,606, based on the clinical and resource 
characteristics of other procedures also assigned to APC 0229. 
Therefore, for CY 2012, we proposed to revise the APC assignment for 
CPT code 37221, from APC 0083 to APC 0229, to accurately reflect the 
cost and clinical features of the procedure. This proposed reassignment 
of CPT code 37221 from APC 0083 to APC 0029 would eliminate the 2 times 
rule violation for APC 0083 noted above. Based on this reconfiguration, 
the CY 2010 claims data available for the proposed rule were used to 
calculate a median cost of approximately $4,683 for APC 0083, 
approximately $8,218 for APC 0229, and approximately $14,556 for APC 
0319. All three proposed median costs for CY 2012 were significantly 
greater than the CY 2011 OPPS/ASC final rule median costs of 
approximately $3,740 for APC 0083, approximately $7,940 for APC 0229, 
and approximately $13,751 for APC 0319.
    In addition, we proposed to revise the APC titles for APCs 0083, 
0229, and 0319 to better describe the procedures assigned to these 
APCs. Specifically, we proposed to revise the APC title for APC 0083 
from ``Coronary or Non-Coronary Angioplasty and Percutaneous 
Valvuloplasty'' to ``Level I Endovascular Revascularization of the 
Lower Extremity''; for APC 0229, from ``Transcatheter Placement of 
Intravascular Shunt and Stents'' to ``Level II Endovascular 
Revascularization of the Lower Extremity''; and for APC 0319, from 
``Endovascular Revascularization of the Lower Extremity'' to ``Level 
III Endovascular Revascularization of the Lower Extremity.''
    We solicited public comments on the proposed status indicators and 
APC assignments for the endovascular revascularization of the lower 
extremity CPT codes for CY 2012. Table 5 of the proposed rule listed 
the endovascular revascularization of the lower extremity CPT codes 
along with their proposed status indicator and APC assignments for CY 
2012. As noted previously, because these CPT codes are new for CY 2011, 
they are identified with comment indicator ``NI'' in Addendum B to the 
CY 2011 OPPS/ASC final rule with comment period to identify them as a 
new interim APC assignment for the new year and subject to public 
comment. We specifically requested public comment on our methodology 
for simulating the median costs for these new CY 2011 CPT codes in 
addition to public comments on the payment rates themselves (75 FR 
71845). We respond to any public comments received on the CY 2011 OPPS/
ASC final rule with comment period and the CY 2012 OPPS/ASC proposed 
rule below.
    At its August 10-12, 2011 meeting, the APC Panel supported CMS' 
proposal to move HCPCS code 37221 (Revascularization, endovascular, 
open or percutaneous, iliac artery, unilateral, initial vessel; with 
transluminal stent placement(s), includes angioplasty within the same 
vessel, when performed) to APC 0229.
    Comment: Several commenters supported the CY 2012 proposal to 
rename APCs 0083, 0229, and 0319 to better describe the procedures 
assigned to these APCs, and requested that CMS finalize these changes. 
The commenters also supported the proposed status indicator assignments 
of ``T'' for each of these APCs. One commenter agreed with the proposed 
renaming of APC 0229 and 0319 but asked that CMS change the APC title 
of APC 0038 to ``Coronary Angioplasty, Valvuloplasty, and Level I 
Endovascular Revascularization of the Lower Extremity'' in order to 
reflect the coronary as well as endovascular procedures assigned to 
that APC.
    Response: We appreciate the commenters' support of our proposal to 
revise the titles for APCs 0083, 0229, and 0319. We agree with the 
commenter that a title of ``Coronary Angioplasty, Valvuloplasty, and 
Level I Endovascular Revascularization of the Lower Extremity'' would 
more accurately describe the procedures assigned to APC 0083. 
Therefore, we are finalizing our CY 2012 proposal, with modification, 
to revise the APC title for APC 0083 from ``Coronary or Non-Coronary 
Angioplasty and Percutaneous Valvuloplasty'' to ``Coronary Angioplasty, 
Valvuloplasty, and Level I Endovascular Revascularization of the Lower 
Extremity''; for APC 0229, from ``Transcatheter Placement of 
Intravascular Shunt and Stents'' to ``Level II Endovascular 
Revascularization of the Lower Extremity''; and for APC 0319, from 
``Endovascular Revascularization of the Lower Extremity'' to ``Level 
III Endovascular Revascularization of the Lower Extremity.'' We also 
are finalizing our proposal, without modification, to continue to 
assign status indicator ``T'' to each of these APCs.
    Comment: Many commenters supported our overall methodology for 
calculating simulated medians for the endovascular revascularization 
CPT codes established for 2011 and agreed with the APC reassignment for 
CPT code 37221 from APC 0083 to APC 0229. A few commenters cited that, 
during the August 2011 APC Panel meeting, the APC Panel recommended 
that CMS finalize this proposal.
    Response: We appreciate the commenters' support of our overall 
methodology for calculating simulated medians for the endovascular 
revascularization CPT codes established for 2011. Based on our analysis 
of the hospital claims and cost report data available for this final 
rule with comment period, and in accordance with the feedback we 
received from many commenters, we continue to believe that CPT code 
37221 is more appropriately placed in APC 0229 than in APC 0083. Our 
data shows 4,673 simulated single claims (out of 4,710 total claims) 
for CPT code 37221 with a CPT median cost of approximately $7,053, 
which is closer to the APC median cost of approximately $8,088 for APC 
0229 than to the APC 0083 median cost of approximately $4,611.28. We 
also note that if CPT code 37221 were assigned to APC 0083, a 2 times 
violation would likely result. Therefore, after consideration of the 
public comments received and the APC Panel recommendation at its August 
2011 meeting, we are finalizing our proposal, without modification, to 
assign CPT code 37221 to APC 0229, which has a final CY 2012 median 
cost of approximately $8,088.
    Comment: Several commenters disagreed with the continued APC 
assignment for CPT code 37223 (Revascularization, endovascular, open or 
percutaneous, iliac artery, each additional ipsilateral iliac vessel; 
with transluminal stent placement(s),

[[Page 74156]]

includes angioplasty within the same vessel, when performed) in APC 
0083. They stated that the service described by CPT code 37223 is more 
similar clinically and in terms of resource utilization to the 
procedures assigned to APC 0229 because this service involves stent 
placement. The commenters also argued that CPT code 37223 is an add-on 
code to CPT code 37221, and should be assigned to APC 0229, which is 
the APC to which CPT code 37221 is assigned. They pointed out that CPT 
codes 37206 (Transcatheter placement of an intravascular stent(s) 
(except coronary, carotid, and vertebral vessel, and lower extremity 
arteries), percutaneous; each additional vessel) and 37208 
(Transcatheter placement of an intravascular stent(s) (non-coronary 
vessel other than iliac and lower extremity arteries), open; each 
additional vessel) are also add-on CPT codes, and that they are 
assigned to the same APC as the primary codes with which they are 
billed (that is, APC 0229). The commenters further added that CPT code 
37223, like CPT code 37221, requires the use of an implantable 
endovascular stent, and that the CY 2012 OPPS proposed payment rate of 
approximately $4,520 for CPT code 37223 does not take the cost of the 
device into consideration. They noted that any efficiencies to be 
gained by performing the procedure described by CPT code 37223 at the 
same time as the procedure described by CPT code 37223 would be 
captured appropriately in the multiple procedure discount that would 
apply as a result of both procedures being assigned status indicator 
``T.''
    Response: We are unable to simulate a median cost for CPT code 
37223 using the CY 2010 claims data available for this final rule with 
comment period because we have no single service claims data that 
appropriately describe the procedure associated with CPT code 37223. 
Therefore, analysis of our hospital outpatient claims data does not 
support an APC reassignment for CPT code 37223 from APC 0083 to APC 
0229 based on resource homogeneity, and we believe that the service 
described by CPT code 37223 is clinically similar to procedures in APC 
0083. We note that we will have CY 2011 hospital claims available for 
CPT code 37223 and the other new endovascular revascularization CPT 
codes for the first time for CY 2013 OPPS ratesetting, and that we will 
closely monitor our data to ensure that the APC placements 
appropriately reflect hospitals' costs for these procedures.
    We also note that when hospitals report CPT code 37223, we expect 
them to also report one of the following device HCPCS C-codes for the 
implantable stent used in those procedures:
     C1874 (Stent, coated/covered, with delivery system)
     C1875 (Stent, coated/covered, without delivery system)
     C1876 (Stent, non-coated/non-covered, with delivery 
system)
     C1877 (Stent, non-coated/non-covered, without delivery 
system)
     C2617 (Stent, non-coronary, temporary, without delivery 
system)
     C2625 (Stent, non-coronary, temporary, with delivery 
system)
    These HCPCS C-codes were made effective April 1, 2001, and are a 
part of the procedure-to-device edits for CPT code 37223. Procedure-to-
device edits, which have been in place for many procedures since 2005, 
require that when a particular service or procedural CPT or Level II 
HCPCS code is billed, the claim must also contain an appropriate device 
code.
    After analysis of our claims data and consideration of the public 
comments received, we are finalizing our proposal, without 
modification, to continue to assign CPT code 37223 to APC 0083, which 
has a final CY 2012 median cost of approximately $4,611.
    Comment: Some commenters disagreed with the APC assignment for CPT 
codes 37224 (Revascularization, endovascular, open or percutaneous, 
femoral/popliteal artery(s), unilateral; with transluminal angioplasty) 
and 37235 (Revascularization, endovascular, open or percutaneous, 
tibial/peroneal artery, unilateral, each additional vessel; with 
transluminal stent placement(s) and atherectomy, includes angioplasty 
within the same vessel, when performed) to APC 0083, and stated that 
both procedures would be more appropriately placed in APC 0229 based on 
the economic and clinical coherence to other procedures already 
assigned to APC 0229.
    Response: Analysis of our hospital outpatient claims shows 4,288 
simulated single claims (out of 4,320 total claims) with a median cost 
of approximately $5,418 for CPT code 37224, while there were no claims 
submitted upon which we could simulate a median cost for CPT code 
37235. The range of the median costs for APC 0083 with significant 
claims data is approximately between $3,230 to approximately $5,766, 
which is in line with the median cost of approximately $5,418 for CPT 
code 37224. Based on our claims data, we believe that CPT code 37224 is 
appropriately placed in APC 0083 which has a final median cost is 
approximately $4,611. As is the case with CPT code 37223, we do not 
have claims data to support the reassignment of CPT code 37235 to a 
different APC. We also believe that CPT codes 37224 and 37235 are 
sufficiently similar clinically to the other procedures in APC 0083 to 
warrant their continued placement in that APC. Therefore, we will 
continue to assign CPT codes 37224 and 37235 to APC 0083 for CY 2012.
    We note that, similar to CPT code 37223, both CPT codes 37224 and 
37235 are included as part of the procedure-to-device edits, and 
hospitals are reminded to refer to the latest edits on the CMS OPPS Web 
site. The updated lists of edits can be found under ``Device, 
Radiolabeled Product, and Procedure Edits'' at http://www.cms.gov/HospitalOutpatientPPS/.
    After consideration of the public comments received on the CY 2011 
OPPS/ASC final rule with comment period and the CY 2012 OPPS/ASC 
proposed rule and review of our claims data, we are finalizing our CY 
2012 proposal, without modification, to continue with the CY 2011 
methodology that we described in the CY 2012 OPPS/ASC proposed rule (76 
FR 42193 through 42194) in determining the APC assignments for the CPT 
codes that describe endovascular revascularization of the lower 
extremity for the reasons set forth above. We also are finalizing our 
CY 2012 proposal, without modification, to revise the APC assignment 
for CPT code 37221, from APC 0083 to APC 0229. We are finalizing our CY 
2012 proposal, with modification, to revise the APC titles for APCs 
0083, 0229, and 0319 as described previously. Table 5 below lists the 
endovascular revascularization of the lower extremity CPT codes along 
with their final status indicator and APC assignments for CY 2012.

[[Page 74157]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.007

(7) Non-Congenital Cardiac Catheterization (APC 0080)
    For CY 2011, the AMA CPT Editorial Panel deleted 19 non-congenital 
cardiac catheterization-related CPT codes and replaced them with 20 new 
CPT codes in the Cardiac Catheterization and Injection-Related section 
of the 2011 CPT Code Book to describe more precisely the specific 
services provided during cardiac catheterization procedures. In 
particular, the CPT Editorial Panel deleted 19 non-congenital cardiac 
catheterization-related CPT codes from the 93500 series and created 14 
new CPT codes in the 93400 series and 6 in the 93500 series. We 
discussed these coding changes in detail in the CY 2011 OPPS/ASC final 
rule with comment period, along with the process by which we assigned 
the new CPT codes to APCs that we believe are comparable with respect 
to clinical characteristics and resources required to furnish the 
cardiac catheterization services described by the new CPT codes (75 FR 
71846 through 71849). As discussed in the final rule with comment 
period, we were able to use the existing CY 2009 hospital outpatient 
claims data and the most recent cost report data to create simulated 
medians for the new separately payable CPT codes for CY 2011. 
Specifically, to estimate the hospital costs associated with the 20 new 
non-congenital cardiac catheterization-related CPT codes based on their 
CY 2011 descriptors, we used claims and cost report data from CY 2009. 
Because of the substantive coding changes associated with the new non-
congenital cardiac catheterization-related CPT codes for CY 2011, we 
used our CY 2009 single and ``pseudo'' single claims data to simulate 
the new CY 2011 CPT code definitions. We stated that many of the new 
CPT codes were previously reported using multiple CY 2009 CPT codes, 
and we provided a crosswalk of the new CY 2011 cardiac catheterization 
CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in 
Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71849). Table 11 showed the criteria we applied to select a claim to be 
used in the calculation of the median cost for the new codes (shown in 
column A). As we stated in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71847 through 71848), we developed these criteria based 
on our clinicians' understanding of services that were reported by CY 
2009 CPT codes that, in various combinations, reflect the services 
provided that are described in the new CPT codes. We used approximately 
175,000 claims for the new non-congenital catheterization-related CPT 
codes, together with the single and ``pseudo'' single procedure claims 
for the remaining congenital catheterization-related CPT codes in APC 
0080, to calculate CPT level median costs and the median cost for APC 
0080 of approximately $2,698. We noted that, because the CPT codes 
listed in Table 11 are new for CY 2011, they were identified with 
comment indicator ``NI'' in Addendum B of that final rule with comment 
period to identify them

[[Page 74158]]

as subject to public comment. We specifically requested public comment 
on our methodology for simulating the median costs for these new CY 
2011 CPT codes, in addition to public comments on the payment rates 
themselves (75 FR 71848).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42195), for CY 2012, 
we proposed to continue to use the CY 2011 methodology in determining 
the APC assignments for the cardiac catheterization CPT codes. The 
predecessor cardiac catheterization CPT codes were in existence prior 
to CY 2011 and were assigned to APC 0080 based on claims data and cost 
report data. Given that these data are available for the services 
described by the predecessor cardiac catheterization CPT codes, we 
proposed for CY 2012 to continue to use the existing hospital 
outpatient claims and cost report data from the predecessor cardiac 
catheterization CPT codes to simulate an estimated median cost for the 
new cardiac catheterization CPT codes in determining the appropriate 
APC assignments. As has been our practice since the implementation of 
the OPPS in 2000, we review our latest claims data for ratesetting and, 
if necessary, revise the APC assignments for the upcoming year. Based 
on analysis of the CY 2010 claims data available for the proposed rule, 
the proposed median cost for APC 0080 was approximately $2,822 for CY 
2012, which was slightly greater than the median cost of approximately 
$2,698 for the CY 2011 OPPS/ASC final rule with comment period. For CY 
2012, we did not propose any changes to the CY 2011 APC assignments of 
any of the codes assigned to APC 0080 because the claims data available 
for the proposed rule support continuation of these APC assignments.
    We solicited public comments on the proposed status indicators and 
the APC assignments for CY 2012 for the cardiac catheterization CPT 
codes. Table 6 of the proposed rule listed the new CY 2011 cardiac 
catheterization CPT codes along with their proposed status indicators 
and APC assignments for CY 2012.
    Comment: Some commenters supported our CY 2012 proposal for payment 
of non-congenital cardiac catheterization.
    Response: We appreciate the commenters' support of our payment 
methodology for the non-congenital cardiac catheterization procedures. 
Therefore, consistent with our rationale set forth above, we are 
finalizing our CY 2012 proposal, without modification, to continue with 
the CY 2011 methodology in determining the APC assignments for the non-
congenital cardiac catheterization CPT codes. The final CY 2012 median 
cost for APC 0080 is approximately $2,721.
    Table 6 below lists the CY 2012 cardiac catheterization CPT codes 
along with their final status indicators and APC assignments for CY 
2012.

[[Page 74159]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.008

(8) Cranial Neurostimulator and Electrodes (APC 0318)
    For CY 2011, the AMA CPT Editorial Panel created a new CPT code 
64568 (Incision for implantation of cranial nerve (e.g., vagus nerve) 
neurostimulator electrode array and pulse generator) and indicated that 
it describes the services formerly included in the combinations of (1) 
CPT code 64573 (Incision for implantation of neurostimulator 
electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement 
of cranial neurostimulator pulse generator or receiver, direct or 
inductive coupling; with connection to a single electrode array); or 
(2) CPT code 64573 and CPT code 61886 (Insertion or replacement of 
cranial neurostimulator pulse generator or receiver, direct or 
inductive coupling; with connection to two or more electrode arrays). 
As we discussed in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71850), our standard process for assigning new CPT codes to APCs 
is to assign the code to the APC that we believe contains services that 
are comparable with respect to clinical characteristics and resources 
required to furnish the service. A new CPT code is given a comment 
indicator of ``NI'' to identify it as a new interim APC assignment for 
the first year and the APC assignment for the new code is then open to 
public comment. In some, but not all, cases, we are able to use the 
existing data from established codes to simulate an estimated median 
cost for the new code to guide us in the assignment of the new code to 
an APC. For CY 2011, in the case of the new neurostimulator electrode 
and pulse generator implantation CPT code, we were able to use the 
existing CY 2009 claims and most current cost report data to create a 
simulated median cost.
    Specifically, to estimate the hospital costs of CPT code 64568 
based on its CY 2011 descriptor, we used CY 2009 claims and the most 
recent cost report data, using the single and ``pseudo'' single claims 
within this data set to simulate the definition of this service. We 
selected claims with CPT code 64573 on which CPT code 61885 or 61886 
was also present and consistent with the description of the new CPT 
code 64568. We treated the summed costs on these claims as if they were 
a

[[Page 74160]]

single procedure claim for CPT code 64568. We created an estimated 
median cost of approximately $22,562 for CPT code 64568 from 298 single 
claims to set a final payment rate for CY 2011 for the new code. We 
created APC 0318 (Implantation of Cranial Neurostimulator Pulse 
Generator and Electrode) for CY 2011, to which CPT code 64568 is the 
only procedure assigned. APC 0225 (Implantation of Neurostimulator 
Electrodes, Cranial Nerve), which contained only the predecessor CPT 
code 64573, was deleted effective January 1, 2011. We noted that, 
because CPT code 64568 is new for CY 2011, it was identified with 
comment indicator ``NI'' in Addendum B of the CY 2011 OPPS/ASC final 
rule with comment period to identify it as subject to public comment. 
We specifically requested public comment on our methodology for 
simulating the median costs for this new CY 2011 CPT code, in addition 
to public comments on the payment rate itself (75 FR 71850).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42195 through 42196), 
we proposed to use the same methodology we used in CY 2011 to estimate 
the hospital costs of CPT code 64568 and to continue to maintain CPT 
code 64568 as the only code assigned to APC 0318 for CY 2012.
    Comment: One commenter on the CY 2011 OPPS final rule with comment 
period expressed appreciation for CMS' efforts to establish APC 0318.
    Response: We appreciate the commenters' support for the creation of 
APC 0318.
    We did not receive any public comments on our proposals for cost 
estimation or APC assignment of CPT code 64568 for CY 2012. We are 
finalizing our CY 2012 proposal, without modification, to use the same 
methodology we used in CY 2011 to estimate hospital costs of CPT code 
64568. For this final rule with comment period, we created an estimated 
median cost of approximately $24,262 for CPT code 64568 from 455 single 
claims to set a payment rate for APC 0318 for CY 2012. We are 
maintaining CPT code 64568 as the only code assigned to APC 0318 for CY 
2012.
(9) Brachytherapy Sources
(A) Background
    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Pub. L. 108-173 (MMA), mandated the creation of additional groups of 
covered OPD services that classify devices of brachytherapy consisting 
of a seed or seeds (or radioactive source) (``brachytherapy sources'') 
separately from other services or groups of services. The additional 
groups must reflect the number, isotope, and radioactive intensity of 
the brachytherapy sources furnished and include separate groups for 
palladium-103 and iodine-125 sources.
    Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of 
Public Law 108-173, established payment for brachytherapy sources 
furnished from January 1, 2004 through December 31, 2006, based on a 
hospital's charges for each brachytherapy source furnished adjusted to 
cost. Under section 1833(t)(16)(C) of the Act, charges for the 
brachytherapy sources may not be used in determining any outlier 
payments under the OPPS for that period in which payment is based on 
charges adjusted to cost. Consistent with our practice under the OPPS 
to exclude items paid at cost from budget neutrality consideration, 
these items were excluded from budget neutrality for that time period 
as well.
    Subsequent to the MMA, various amendments to the Act were made that 
resulted in the extension of the payment period for brachytherapy 
sources based on a hospital's charges adjusted to cost through December 
31, 2009. The CY 2011 OPPS/ASC final rule with comment period 
summarizes these amendments to the Act and our proposals to pay for 
brachytherapy sources at prospective payment rates based on their 
source specific median costs from CY 2007 through CY 2009 (75 FR 71977 
through 71981).
    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 
median costs. For CY 2011, we continued to use the general OPPS 
prospective payment methodology for brachytherapy sources, consistent 
with section 1833(t)(2)(C) of the Act (75 FR 71980). We also finalized 
our proposals to continue the policy we first implemented in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60537 and 75 FR 
71980) regarding payment for new brachytherapy sources for which we 
have no claims data, based on the same reasons we discussed in the 2008 
OPPS/ASC final rule with comment period (72 FR 66786; which was 
superseded by section 142 of Pub. L. 110-275). That policy is intended 
to enable us to assign future new HCPCS codes for new brachytherapy 
sources to their own APCs, with prospective payment rates based on our 
consideration of external data and other relevant information regarding 
the expected costs of the sources to hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, for CYs 2010 and 2011, we finalized proposals to 
subject brachytherapy sources to outlier payments under section 
1833(t)(5) of the Act, and also to subject brachytherapy source payment 
weights to scaling for purposes of budget neutrality (75 FR 71980 
through 71981 and 75 FR 60537). Hospitals could receive outlier 
payments for brachytherapy sources if the costs of furnishing 
brachytherapy sources meet the criteria for outlier payment. In 
addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with 
comment period (74 FR 60534 and 75 FR 71978 and 71979, respectively), 
implementation of prospective payments for brachytherapy sources 
provided opportunities for eligible hospitals to receive additional 
payments in CY 2010 and CY 2011 under certain circumstances through the 
7.1 percent rural adjustment, as described in section II.E. of this 
final rule with comment period.
(B) OPPS Payment Policy
    As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 
through 60534, and 75 FR 71978), we believe that adopting the general 
OPPS prospective payment methodology for brachytherapy sources is 
appropriate for a number of reasons. The general OPPS payment 
methodology uses median costs based on claims data to set the relative 
payment weights for hospital outpatient services. This payment 
methodology results in more consistent, predictable, and equitable 
payment amounts per source across hospitals by eliminating some of the 
extremely high and low payment amounts resulting from payment based on 
hospitals' charges adjusted to cost. We believe that the OPPS 
prospective payment methodology, as opposed to payment based on 
hospitals' charges adjusted to cost, would also provide hospitals with 
incentives for efficiency in the provision of brachytherapy services to 
Medicare beneficiaries. Moreover, this approach is consistent with our 
payment methodology for the vast majority of items and services paid 
under the OPPS.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42196 through 42197), 
we proposed to use the median costs from CY 2010 claims data for 
setting the proposed CY 2012 payment rates for brachytherapy sources, 
as we proposed for most other items and services that will be paid 
under the CY 2012 OPPS. We proposed to continue the other payment 
policies for brachytherapy

[[Page 74161]]

sources we finalized and first implemented in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60537). We proposed to pay for 
the stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, 
at a rate equal to the lowest stranded or non-stranded prospective 
payment rate for such sources, respectively, on a per source basis (as 
opposed, for example, to a per mCi), which is based on the policy we 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66785). The proposed payment methodology for NOS sources would 
provide payment to a hospital for new sources and, at the same time, 
encourage interested parties to quickly bring new sources to our 
attention so that specific coding and payment could be established.
    We also proposed to continue the policy we first implemented in the 
CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding 
payment for new brachytherapy sources for which we have no claims data, 
based on the same reasons we discussed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66786; which was superseded for a 
period of time by section 142 of Pub. L. 110-275). That policy is 
intended to enable us to assign new HCPCS codes for new brachytherapy 
sources to their own APCs, with prospective payment rates set based on 
our consideration of external data and other relevant information 
regarding the expected costs of the sources to hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, as we did for CY 2011, we proposed to subject 
brachytherapy sources to outlier payments under section 1833(t)(5) of 
the Act, and also to subject brachytherapy source payment weights to 
scaling for purposes of budget neutrality. Hospitals can receive 
outlier payments for brachytherapy sources if the costs of furnishing 
brachytherapy sources meet the criteria for outlier payment. In 
addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with 
comment period (74 FR 60534 and 75 FR 71978 through 71979, 
respectively), implementation of prospective payments for brachytherapy 
sources would provide opportunities for eligible hospitals to receive 
additional payments in CY 2012 under certain circumstances through the 
7.1 percent rural adjustment, as described in section II.E. of the 
proposed rule.
    Therefore, we proposed to pay for brachytherapy sources at 
prospective payment rates based on their source-specific median costs 
for CY 2012. We referred readers to Addendum B to the proposed rule 
(which is available via the Internet on the CMS Web site) for the 
proposed CY 2012 payment rates for brachytherapy sources, identified 
with status indicator ``U.'' For more detailed discussion of the 
legislative history surrounding brachytherapy sources and our proposed 
and final policies for CY 2004 through CY 2011, we refer readers to the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71977 through 
71981).
    Comment: Some commenters requested that CMS discard its prospective 
payment methodology for brachytherapy sources based on source-specific 
median costs, and revert to payments based on brachytherapy charges 
adjusted to costs, for a variety of reasons. The commenters claimed 
that the claims data show a huge variation in costs per unit; that 
there continues to be, in the CY 2012 proposed rule data, longstanding 
instability and fluctuation of costs; that more than one half of the 
current brachytherapy sources have proposed payment rates based on 50 
or fewer hospitals (a number that a commenter reported has declined 
from 2010 to 2012); and that proposed payment rates are unstable and 
fluctuate significantly. The commenters were also concerned that rank 
order anomalies continue to exist in proposed source payment rates, 
such as between C2635, high activity palladium, and C2640 and C2641, 
which represent forms of low activity palladium. The commenters also 
claimed that the charges adjusted to cost method would cost the 
Medicare program approximately $10.8 million less than the prospective 
payment methodology based on median cost per source. The commenters 
claimed that the number of hospitals providing brachytherapy treatment 
and the number of beneficiaries treated with brachytherapy have 
declined from 2010 to 2011 because some hospitals cannot recover their 
costs under the prospective payment rates adopted in CY 2010. The 
commenters also pointed out that High Dose Rate (HDR) Iridium-192 may 
treat multiple patients over a 90-day source life, making its true cost 
dependent on the number of patients treated, and thus making fair 
prospective payment difficult to achieve.
    Response: As we stated previously (72 FR 66782; 74 FR 60534; 75 FR 
71979), we believe that median costs based on hospital claims data for 
brachytherapy sources have produced reasonably consistent per-source 
cost estimates over the past several years, comparable to the patterns 
we have observed for many other OPPS services whose payments are set 
based upon relative payment weights from claims data. We believe that 
our per-source payment methodology specific to each source's 
radioisotope, radioactive intensity, and stranded or non-stranded 
configuration, supplemented by payment based on the number of sources 
used in a specific clinical case, adequately accounts for the major 
expected sources of variability across treatments. As we also explained 
previously (72 FR 66782; 74 FR 60535; 75 FR 71979), a prospective 
payment system such as the OPPS relies on the concept of averaging, 
where the payment may be more or less than the estimated cost of 
providing a service for a particular patient, but with the exception of 
outlier cases, it is adequate to ensure access to appropriate care. In 
the case of brachytherapy sources for which the law requires separate 
payment groups, without packaging, the costs of these individual items 
could be expected to show greater variation than some other APCs under 
the OPPS because higher variability in costs for some component items 
and services is not balanced with lower variability for others and 
because relative weights are typically estimated using a smaller set of 
claims. Nevertheless, we believe that prospective payment for 
brachytherapy sources based on median costs from claims calculated 
according to the standard OPPS methodology is appropriate and provides 
hospitals with the greatest incentives for efficiency in furnishing 
brachytherapy treatment.
    As we have stated previously (75 FR 71979), under the budget 
neutral provision for the OPPS, it is the relativity of costs of 
services, not their absolute costs, that is important, and we believe 
that brachytherapy sources are appropriately paid according to the 
standard OPPS payment approach. Furthermore, we are not concerned that 
some sources may have median costs and payment rates based on 50 or 
fewer providers, because it is not uncommon for OPPS prospective 
payment rates to be based on claims from a relatively small number of 
hospitals that furnished the service in the year of claims data 
available for the OPPS update year. Fifty hospitals may report hundreds 
of brachytherapy source claims for many cases and comprise the universe 
of providers using particular low volume sources, for which we are 
required to pay separately by statute. Further, our methodology for 
estimating median costs for brachytherapy sources utilizes all line-
item charges for those sources, which allows us to use all

[[Page 74162]]

hospital reported charge and estimated cost information to set payment 
rates for these items. Therefore, no brachytherapy source claims are 
lost. We have no reason to believe that prospective payment rates based 
on claims from those providers furnishing a particular source do not 
appropriately reflect the cost of that source to hospitals.
    In the case of high and low activity iodine-125 sources, our claims 
data show that the cost of the high activity source is greater than the 
low activity sources, as we have noticed in the past. However, this 
relationship is reversed for palladium-103 sources, as one commenter 
pointed out. As we have stated in the past (75 FR 71979), we have no 
information about the expected cost differential between high and low 
activity sources of various isotopes other than what is available in 
our claims and hospital cost report data. For high activity palladium-
103, only 12 hospitals reported this service in CY 2010, compared to 
150 and 211 providers for low activity palladium sources described by 
HCPCS codes C2640 and C2641, respectively. As we stated regarding this 
issue in the CY 2010 and CY 2011 OPPS/ASC final rule with comment 
period (74 FR 60535 and 75 FR 71979), it is clear that fewer providers 
furnished high activity palladium-103 sources than low activity 
palladium sources, and we expect that the hospital cost distribution 
for those hospitals could be different than the cost distribution of 
the large number of providers reporting the low activity sources. These 
varied cost distributions clearly contribute to the observed 
relationship in median costs between the different types of sources. 
However, we see no reason why our standard ratesetting methodology for 
brachytherapy sources that relies on all claims from all hospitals 
furnishing brachytherapy sources would not yield valid median costs for 
those hospitals furnishing the different brachytherapy sources upon 
which CY 2012 prospective payments rates are based.
    Prospective payment for brachytherapy sources based on their median 
costs makes the source payment an integral part of the OPPS, rather 
than a separate cost-based payment methodology within the OPPS, as 
indicated previously (75 FR 71980). We believe that consistent and 
predictable prospectively established payment rates under the OPPS for 
brachytherapy sources are appropriate because we do not believe that 
the hospital resource costs associated with specific brachytherapy 
sources would vary greatly across hospitals or clinical conditions 
under treatment, other than through differences in the numbers of 
sources utilized that would be accounted for in the standard OPPS 
payment methodology we are finalizing for CY 2012.
    As we indicated in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71980), we agree that high dose rate (HDR) brachytherapy 
sources such as HDR irirdium-192 have a fixed active life and must be 
replaced every 90 days; as a result, hospitals' per-treatment cost for 
the source would be dependent on the number of treatments furnished per 
source. The source cost must be amortized over the life of the source. 
Therefore, in establishing their charges for HDR iridium, we expect 
hospitals to project the number of treatments that would be provided 
over the life of the source and establish their charges for the source 
accordingly, as we have stated previously (72 FR 66783; 74 FR 60535; 75 
FR 71980). For most of these OPPS services, our practice is to 
establish prospective payment rates based on the median costs from 
hospitals' claims data to provide incentives for efficient and cost-
effective delivery of these services.
    We do not agree with the commenters that prospective brachytherapy 
source payment based on median costs would increase aggregate Medicare 
expenditures using the charges-adjusted-to-cost methodology compared to 
the proposed prospective payment methodology. Our past studies, such as 
that discussed in the CY 2010 final rule with comment period (74 FR 
60535), have shown that payment at charges adjusted to cost results in 
higher aggregate payment for brachytherapy sources than does 
prospective payment. As we indicated in the CY 2010 final rule with 
comment period and the CY 2011 final rule with comment period (74 FR 
60535 and 75 FR 71980), we have traditionally found that charge 
inflation for brachytherapy sources appears to be higher than the 
market basket inflation update applicable to prospective payments under 
the OPPS. Therefore, we found that the estimated payments we calculated 
for brachytherapy charges adjusted to cost were greater than the 
estimated prospective payment rates because the hospital market basket 
grows more slowly than the charges for brachytherapy sources. The 
commenter did not provide its aggregate payments study in its comment 
to the CY 2012 OPPS/ASC proposed rule, and we do not know whether the 
commenter's study took into account factors such as charge inflation. 
Moreover, the OPPS is a prospective payment system that ensures 
equitable prospective payment of services across providers, and 
efficient use of resources, including brachytherapy sources, which 
since CY 2010 are part of OPPS prospective payment.
    Concerning the comment that some providers may have decided to 
discontinue offering brachytherapy services because the OPPS payment 
rates for sources were too low, as we have noted in the past (75 FR 
71980), there are many reasons why some providers may discontinue 
services, such as brachytherapy. For example, changes in medical 
technology or emphasis on different treatment forms for a medical 
condition can influence whether a set of services are continued. In 
addition, providers accept payment from a number of payers in addition 
to Medicare, and we believe a global shift by a provider to discontinue 
any services would be influenced by factors other than our payment 
rates alone.
    Comment: One commenter supported the proposed payment policy for 
new brachytherapy sources for which we have no claims data, namely, to 
assign new HCPCS codes for new brachytherapy sources to their own APCs, 
with prospective payment rates based on CMS' consideration of external 
data and other relevant information regarding the expected costs of the 
sources to hospitals.
    Response: We appreciate the commenter's support for this payment 
policy.
    After consideration of the public comments we received, we are 
finalizing our proposal to pay for brachytherapy sources at prospective 
payment rates based on their source-specific median costs for CY 2012. 
We refer readers to Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site) for the final 
CY 2012 payment rates for brachytherapy sources, identified with status 
indicator ``U.'' We also are finalizing our proposals to continue our 
policies regarding payment for NOS codes for stranded and non-stranded 
sources and new brachytherapy sources for which we have no claims data. 
Specifically, we are finalizing our proposals to continue payment for 
stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a 
rate equal to the lowest stranded or non-stranded prospective payment 
for such sources, respectively as discussed in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66786); and our proposal to 
assign HCPCS codes for new brachytherapy sources to their own APCs, 
with proposed payment rates based on consideration of external data and 
other

[[Page 74163]]

relevant information, in the absence of claims data. Once claims data 
are available, our standard ratemaking process will be applied to the 
calculation of the median cost for the new brachytherapy source.
    Consistent with our policy regarding APC payments made on a 
prospective basis, we are finalizing our proposal to subject the cost 
of brachytherapy sources to the outlier provision of section 1833(t)(5) 
of the Act, and also to subject brachytherapy source payment weights to 
scaling for purposes of budget neutrality.
    As stated in the proposed rule (76 FR 42197), we continue to invite 
hospitals and other parties to submit recommendations to us for new 
HCPCS codes to describe new brachytherapy sources consisting of a 
radioactive isotope, including a detailed rationale to support 
recommended new sources. Such recommendations should be directed to the 
Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare 
and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We 
will continue to add new brachytherapy source codes and descriptors to 
our systems for payment on a quarterly basis.
e. Calculation of Composite APC Criteria-Based Median Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide only necessary, high quality care 
and to provide that care as efficiently as possible. For CY 2008, we 
developed composite APCs to provide a single payment for groups of 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
Combining payment for multiple independent services into a single OPPS 
payment in this way enables hospitals to manage their resources with 
maximum flexibility by monitoring and adjusting the volume and 
efficiency of services themselves. An additional advantage to the 
composite APC model is that we can use data from correctly coded 
multiple procedure claims to calculate payment rates for the specified 
combinations of services, rather than relying upon single procedure 
claims which may be low in volume and/or incorrectly coded. Under the 
OPPS, we currently have composite APC policies for extended assessment 
and management services, low dose rate (LDR) prostate brachytherapy, 
cardiac electrophysiologic evaluation and ablation services, mental 
health services, and multiple imaging services. We refer readers to the 
CY 2008 OPPS/ASC final rule with comment period for a full discussion 
of the development of the composite APC methodology (72 FR 66611 
through 66614 and 66650 through 66652).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42197), for CY 2012, 
we proposed to continue, with some modifications, our established 
composite APC policies for extended assessment and management, LDR 
prostate brachytherapy, cardiac electrophysiologic evaluation and 
ablation, mental health services, and multiple imaging services, as 
discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), 
II.A.2.e.(4), and II.A.2.e.(5), respectively, of the proposed rule. We 
also proposed to create a new composite APC for cardiac 
resynchronization therapy services, as discussed in section 
II.A.2.e.(6) of the proposed rule.
    After consideration of the public comments we received as discussed 
below, for CY 2012, we are finalizing, without modification, our 
proposal to modify some aspects of our established composite APC 
policies for extended assessment and management, LDR prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation, 
mental health services, and multiple imaging services, as discussed in 
sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and 
II.A.2.e.(5), respectively, of this final rule with comment period. We 
also are finalizing, with modification, our proposal to create a new 
composite APC for cardiac resynchronization therapy services, as 
discussed in section II.A.2.e.(6) of this final rule with comment 
period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42197 through 42198), 
for CY 2012, we proposed to continue to include composite APC 8002 
(Level I Extended Assessment and Management Composite) and composite 
APC 8003 (Level II Extended Assessment and Management Composite) in the 
OPPS for CY 2012. For CY 2008, we created these two composite APCs to 
provide payment to hospitals in certain circumstances when extended 
assessment and management of a patient occur (an extended visit). In 
most circumstances, observation services are supportive and ancillary 
to the other services provided to a patient. In the circumstances when 
observation care is provided in conjunction with a high level visit or 
direct referral and is an integral part of a patient's extended 
encounter of care, payment is made for the entire care encounter 
through one of two composite APCs as appropriate.
    As defined for the CY 2008 OPPS, composite APC 8002 describes an 
encounter for care provided to a patient that includes a high level 
(Level 5) clinic visit or direct referral for observation services in 
conjunction with observation services of substantial duration (72 FR 
66648 through 66649). Composite APC 8003 describes an encounter for 
care provided to a patient that includes a high level (Level 4 or 5) 
Type A emergency department visit, a high level (Level 5) Type B 
emergency department visit, or critical care services in conjunction 
with observation services of substantial duration. HCPCS code G0378 
(Observation services, per hour) is assigned status indicator ``N,'' 
signifying that its payment is always packaged. As noted in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66648 through 66649), 
the Integrated Outpatient Code Editor (I/OCE) evaluates every claim 
received to determine if payment through a composite APC is 
appropriate. If payment through a composite APC is inappropriate, the 
I/OCE, in conjunction with the OPPS Pricer, determines the appropriate 
status indicator, APC, and payment for every code on a claim. The 
specific criteria that must be met for the two extended assessment and 
management composite APCs to be paid are provided below in the 
description of the claims that were selected for the calculation of the 
proposed CY 2012 median costs for these composite APCs. We did not 
propose to change these criteria for the CY 2012 OPPS.
    When we created composite APCs 8002 and 8003 for CY 2008, we 
retained as general reporting requirements for all observation services 
those criteria related to physician order and evaluation, 
documentation, and observation beginning and ending time as listed in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812). 
These are more general requirements that encourage hospitals to provide 
medically reasonable and necessary care and help to ensure the proper 
reporting of observation services on correctly coded hospital claims 
that reflect the full charges associated with all hospital resources 
utilized to provide the reported services. We also issued guidance 
clarifying the correct method for reporting the starting time for 
observation services (sections 290.2.2 through 290.5 in the Medicare 
Claims Processing Manual (Pub. 100-4), Chapter 4, through Transmittal 
1745, Change Request 6492, issued May 22, 2009 and implemented July 6, 
2009).

[[Page 74164]]

We did not propose to change these reporting requirements for the CY 
2012 OPPS.
    For CY 2012, we proposed to continue the extended assessment and 
management composite APC payment methodology for APCs 8002 and 8003 (76 
FR 42198). We stated that we continue to believe that the composite 
APCs 8002 and 8003 and related policies provide the most appropriate 
means of paying for these services. We proposed to calculate the median 
costs for APCs 8002 and 8003 using all single and ``pseudo'' single 
procedure claims for CY 2010 that meet the criteria for payment of each 
composite APC.
    Specifically, to calculate the proposed median costs for composite 
APCs 8002 and 8003, we selected single and ``pseudo'' single procedure 
claims that met each of the following criteria:
    1. Did not contain a HCPCS code to which we have assigned status 
indicator ``T'' that is reported with a date of service 1 day earlier 
than the date of service associated with HCPCS code G0378. (By 
selecting these claims from single and ``pseudo'' single claims, we 
already assure that they would not contain a code for a service with 
status indicator ``T'' on the same date of service.);
    2. Contained eight or more units of HCPCS code G0378; and
    3. Contained one of the following codes:
     In the case of composite APC 8002, HCPCS code G0379 
(Direct referral of patient for hospital observation care) on the same 
date of service as HCPCS code G0378; or CPT code 99205 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 5)); or CPT code 99215 (Office or other outpatient visit for the 
evaluation and management of an established patient (Level 5)) provided 
on the same date of service or one day before the date of service for 
HCPCS code G0378.
     In the case of composite APC 8003, CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)); CPT code 99291 
(Critical care, evaluation and management of the critically ill or 
critically injured patient; first 30-74 minutes); or HCPCS code G0384 
(Level 5 hospital emergency department visit provided in a Type B 
emergency department) provided on the same date of service or one day 
before the date of service for HCPCS code G0378. (As discussed in 
detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68684), we added HCPCS code G0384 to the eligibility criteria for 
composite APC 8003 for CY 2009.)
    As discussed further in section VII. of the proposed rule and this 
final rule with comment period, and consistent with our CY 2008, CY 
2009, CY 2010, and CY 2011 final policies (as discussed in section IX. 
of the final rules with comment period for these calendar years), when 
calculating the median costs for the clinic, Type A emergency 
department visit, Type B emergency department visit, and critical care 
APCs (0604 through 0617 and 0626 through 0630), we utilize our 
methodology that excludes those claims for visits that are eligible for 
payment through the two extended assessment and management composite 
APCs, that is APC 8002 or APC 8003. We believe that this approach 
results in the most accurate cost estimates for APCs 0604 through 0617 
and 0626 through 0630 for CY 2012.
    At its February 28-March 1, 2011 meeting, the APC Panel recommended 
that CMS consider expanding the extended assessment and management 
composite APCs for CY 2012. In the proposed rule, we indicated that we 
are accepting this recommendation.
    As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42198), 
consistent with our decision to accept the APC Panel's recommendation, 
we have examined various ways of potentially expanding the current 
extended assessment and management composite APCs to further limit the 
possibility that total beneficiary copayments would exceed the 
inpatient deductible during extended observation encounters. We did not 
propose for CY 2012 the expanded extended assessment and management 
composite APCs that we analyzed because, while the composites that we 
modeled would serve to further limit the number of beneficiaries with 
copayments that exceeded the inpatient deductible, the modeled 
composites also had the effect of possibly increasing copayments by a 
small amount for the majority of beneficiaries undergoing extended 
observation. In addition, expanded assessment and management composite 
APCs do not address certain concerns about extended observation 
services raised by stakeholders at CMS' observation listening session 
last year (that is, observation time not counting towards the 3-day 
prior hospitalization requirement for the skilled nursing facility 
benefit). As we stated in the proposed rule, we will continue our 
efforts to model other composite structures for a possible new extended 
assessment and management composite structure for CY 2013.
    In summary, for CY 2012, we proposed to continue to include 
composite APCs 8002 and 8003 in the OPPS. We proposed to continue the 
extended assessment and management composite APC payment methodology 
and criteria that we finalized for CYs 2009, 2010, and 2011. We also 
proposed to calculate the median costs for APCs 8002 and 8003 using the 
same methodology that we used to calculate the medians for composite 
APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we used 
all single and ``pseudo'' single procedure claims from CY 2010 that met 
the criteria for payment of each composite APC and applied the standard 
packaging and trimming rules to the claims before calculating the 
proposed CY 2012 median costs. The proposed CY 2012 median cost 
resulting from this methodology for composite APC 8002 was 
approximately $395, which was calculated from 16,770 single and 
``pseudo'' single bills that met the required criteria. The proposed CY 
2012 median cost for composite APC 8003 was approximately $735, which 
was calculated from 225,874 single and ``pseudo'' single bills that met 
the required criteria.
    Comment: Commenters supported CMS' policy to package payment for 
observation care and to not provide additional payment through an 
extended assessment and management composite APC payment when 
observation services are billed with significant surgical procedures. 
One commenter stated that the observation services in such cases are 
most likely related to post-procedural recovery, and thus no additional 
payment is warranted. The commenter argued, however, that when 
observation services are billed along with minor surgical procedures, 
the observation services should be paid separately. The commenter 
suggested that CMS utilize the MPFS definition of minor surgical 
procedures and reassign the codes currently assigned status indicator 
``T'' to two newly created status indicators ``T1''(for general 
surgical procedures) and ``T2'' (for minor surgical procedure as 
defined in MPFS) in order to allow observation services to be paid 
separately when provided with a minor surgical procedure with the 
suggested status indicator ''T2.''
    Response: We appreciate the commenters' support of our policy not 
to allow payment of APC 8002 or 8003 for claims that include a HCPCS 
code to which we have assigned status indicator ``T'' that is reported 
with a date of service on the same day as or one day prior to the date 
of the service

[[Page 74165]]

associated with HCPCS code G0378. We agree with the commenters that 
payment for such services is included in the payment for the surgical 
procedure. We appreciate the commenter's suggestions to define minor 
surgical procedures and to develop new status indicators to allow for 
separate payment for observation services when billed with a minor 
surgical procedure and will take these suggestions into consideration 
for possible future rulemaking. At this time, we have not proposed to 
make any policy changes to allow for separate payment for observation 
services when billed with a minor surgical procedure, nor have we 
proposed to create new status indicators for CY 2012. Therefore, we are 
not making any such changes in this final rule with comment period.
    After consideration of the public comments we received, we are 
adopting as final, without modification, our CY 2012 proposal to 
continue to include composite APCs 8002 and 8003 in the OPPS and to 
continue the extended assessment and management composite APC payment 
methodology and criteria that we finalized for CYs 2009 through 2011. 
We applied the standard packaging and trimming rules to the claims and 
calculated the median costs for APCs 8002 and 8003 using all single and 
``psuedo'' single procedure claims from CY 2010 that meet the criteria 
for payment of each composite APC. The final CY 2012 median cost 
resulting from this methodology for APC 8002 is approximately $393, 
which was calculated from 18,447 single and ``psuedo'' single bills 
that met the required criteria. The final CY 2012 median cost for 
composite APC 8003 is approximately $721, which was calculated from 
247,334 single and ``psuedo'' single bills that met the required 
criteria.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex). Generally, 
the component services represented by both codes are provided in the 
same operative session in the same hospital on the same date of service 
to the Medicare beneficiary being treated with LDR brachytherapy for 
prostate cancer. As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66653), OPPS payment rates for CPT code 77778, in 
particular, had fluctuated over the years. We were frequently informed 
by the public that reliance on single procedure claims to set the 
median costs for these services resulted in use of mainly incorrectly 
coded claims for LDR prostate brachytherapy because a correctly coded 
claim should include, for the same date of service, CPT codes for both 
needle/catheter placement and application of radiation sources, as well 
as separately coded imaging and radiation therapy planning services 
(that is, a multiple procedure claim).
    In order to base payment on claims for the most common clinical 
scenario, and to further our goal of providing payment under the OPPS 
for a larger bundle of component services provided in a single hospital 
encounter, beginning in CY 2008, we 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 median cost derived from claims for the same date of 
service that contain both CPT codes 55875 and 77778 and that do not 
contain other separately paid codes that are not on the bypass list. In 
uncommon occurrences in which the services are billed individually, 
hospitals have continued to receive separate payments for the 
individual services. We refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66652 through 66655) for a full history 
of OPPS payment for LDR prostate brachytherapy and a detailed 
description of how we developed the LDR prostate brachytherapy 
composite APC.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42199), we proposed to 
continue paying for LDR prostate brachytherapy services using the 
composite APC methodology proposed and implemented for CY 2008 through 
CY 2011. That is, we proposed to use CY 2010 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 2011 practice, we proposed not to use the 
claims that meet these criteria in the calculation of the median costs 
for APCs 0163 (Level IV Cystourethroscopy and Other Genitourinary 
Procedures) and 0651 (Complex Interstitial Radiation Source 
Application), the APCs to which CPT codes 55875 and 77778 are assigned, 
respectively. We proposed that the median costs for APCs 0163 and 0651 
would continue to be calculated 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 median cost upon which to base 
the composite APC payment rate.
    Using a partial year of CY 2010 claims data available for the CY 
2012 proposed rule, we were able to use 556 claims that contained both 
CPT codes 55875 and 77778 to calculate the median cost upon which the 
proposed CY 2012 payment for composite APC 8001 is based. The proposed 
median cost for composite APC 8001 for CY 2012 was approximately 
$3,364. This was an increase compared to the CY 2011 final median cost 
for this composite APC of approximately $3,195 based on 849 single bill 
claims from a full year of CY 2009 claims data. The proposed CY 2012 
median cost for this composite APC was slightly less than $3,555, the 
sum of the proposed median costs for APCs 0163 and 0651 ($2,658 + 
$897), the APCs to which CPT codes 55875 and 77778 map if one service 
is billed on a claim without the other. We stated that we believe the 
proposed CY 2012 median cost for composite APC 8001 of approximately 
$3,364, calculated from claims we believe to be correctly coded, would 
result in a reasonable and appropriate payment rate for this service in 
CY 2012.
    Comment: One commenter expressed concern with CMS' methodology to 
use claims for median cost calculation for APC 8001 with both CPT codes 
55875 and 77778 on the same date of service and no other separately 
paid services that are not on the bypass list, which resulted in 556 CY 
2012 proposed rule claims. The commenter noted that this is only 12 
percent of all CY 2012 proposed rule claims containing CPT codes 55875 
and 77778. The commenter stated that its analysis of commonly included 
procedure codes with LDR procedures would include CPT code

[[Page 74166]]

77332 (Treatment devices, design and construction; simple (simple 
block, simple bolus)), which the commenter recommended be added to the 
bypass list. This would add 406 claims to the median cost calculation 
based on the commenter's analysis of CY 2012 proposed rule claims.
    Response: We disagree with the commenter that 556 claims is not a 
robust number of single claims for ratesetting purposes. There are many 
services for which we have median costs based on hundreds of single and 
``pseudo'' single claims. Moreover, the CY 2012 proposed rule median 
cost of approximately $3,364, the CY 2012 final median cost of 
approximately $3,340, and the CY 2011 final median cost of 
approximately $3,195 all compare favorably and show stability in the 
median cost calculation for APC 8001. We do not believe the median cost 
would remain stable to such a degree if the claims used in ratesetting 
for composite APC 8001 were inadequate or inaccurately reflected 
hospitals' costs for providing the service described by CPT codes 55875 
and 77778. We also do not believe it is appropriate to include CPT code 
77332 on the bypass list for the reasons discussed in section II.A.1.b. 
of this final rule with comment period.
    Comment: One commenter requested that CMS implement the proposed CY 
2012 payment rate for composite APC 8001, due to the increased median 
cost for APC 8001.
    Response: We appreciate the commenter's support for our proposed 
payment rate for composite APC 8001. We note that we base final OPPS 
rates on median costs calculated using a full year of hospital claims 
and cost report data rather than a partial year's data, which were the 
data available for the proposed rule.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to continue paying for 
LDR prostate brachytherapy services using the composite APC methodology 
implemented for CYs 2008, 2009, 2010, and 2011 described above in this 
section. The final CY 2012 median cost for composite APC 8001 is 
approximately $3,340, calculated from 595 single bills.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Cardiac electrophysiologic evaluation and ablation services 
frequently are performed in varying combinations with one another 
during a single episode of care in the hospital outpatient setting. 
Therefore, correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). 
As a result, there would never be many single bills for cardiac 
electrophysiologic evaluation and ablation services, and those that are 
reported as single bills would often represent atypical cases or 
incorrectly coded claims. As described in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66655 through 66659), the APC Panel and 
the public expressed persistent concerns regarding the limited and 
reportedly unrepresentative single bills available for use in 
calculating the median costs for these services according to our 
standard OPPS methodology.
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one specified electrophysiologic ablation 
service. Calculating a composite APC for these services allowed us to 
utilize many more claims than were available to establish the 
individual APC median costs for these services, and we also saw this 
composite APC as an opportunity to advance our stated goal of promoting 
hospital efficiency through larger payment bundles. In order to 
calculate the median cost upon which the payment rate for composite APC 
8000 is based, we used multiple procedure claims that contained at 
least one CPT code from group A for evaluation services and at least 
one CPT code from group B for ablation services reported on the same 
date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66656) identified the CPT codes 
that are assigned to groups A and B. For a full discussion of how we 
identified the group A and group B procedures and established the 
payment rate for the cardiac electrophysiologic evaluation and ablation 
composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66655 through 66659). Where a service in group A 
is furnished on a date of service that is different from the date of 
service for a code in group B for the same beneficiary, payments are 
made under the appropriate single procedure APCs and the composite APC 
does not apply.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42200), 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 2011. Consistent with our CY 2008 through CY 
2011 practice, we proposed not to use the claims that meet the 
composite payment criteria in the calculation of the median costs for 
APC 0085 and APC 0086, to which the CPT codes in both groups A and B 
for composite APC 8000 are otherwise assigned. Median costs for APCs 
0085 and 0086 would continue to be calculated using single procedure 
claims. We stated that we continue to believe that the composite APC 
methodology for cardiac electrophysiologic evaluation and ablation 
services is the most efficient and effective way to use the claims data 
for the majority of these services and best represents the hospital 
resources associated with performing the common combinations of these 
services that are clinically typical. Furthermore, this approach 
creates incentives for efficiency by providing a single payment for a 
larger bundle of major procedures when they are performed together, in 
contrast to continued separate payment for each of the individual 
procedures.
    For CY 2012, using a partial year of CY 2010 claims data available 
for the proposed rule, we were able to use 11,156 claims containing a 
combination of group A and group B codes and calculated a proposed 
median cost of approximately $11,598 for composite APC 8000. This was 
an increase compared to the CY 2011 final median cost for this 
composite APC of approximately $10,673 based on a full year of CY 2009 
claims data. We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 
42200) that we believe the proposed median cost of $11,598 calculated 
from a high volume of correctly coded multiple procedure claims would 
result in an accurate and appropriate proposed payment for cardiac 
electrophysiologic evaluation and ablation services when at least one 
evaluation service is furnished during the same clinical encounter as 
at least one ablation service.
    Comment: One commenter supported CMS' proposal to continue its 
current composite methodology for cardiac electrophysiologic evaluation 
and ablation services, stating that it is the most efficient and 
effective method to use claims data for most of the cardiac

[[Page 74167]]

electrophysiologic services, and best represents the resources 
associated with the combined services.
    Response: We appreciate the commenter's support.
    We are finalizing our proposal for CY 2012, without modification, 
to continue to pay for cardiac electrophysiologic evaluation and 
ablation services using the composite APC methodology implemented for 
CY 2008 through CY 2011. For this final rule with comment period, we 
were able to use 11,706 claims from CY 2010 containing a combination of 
group A and group B codes and calculated a final CY 2012 median cost of 
approximately $11,313 for composite APC 8000. Table 7 below list the 
groups of procedures upon which we based composite APC 8000 for CY 
2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.009


[[Page 74168]]


(4) Mental Health Services Composite APC (APC 0034)
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42200 through 42201), 
for CY 2012, 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, which we consider to be the most 
resource-intensive of all outpatient mental health treatment for CY 
2012. 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. We stated that we continue to believe that 
the costs associated with administering a partial hospitalization 
program represent the most resource-intensive of all outpatient mental 
health treatment. Therefore, we did not believe that we should pay more 
for a day of individual mental health services under the OPPS than the 
partial hospitalization per diem payment.
    As discussed in detail in section VIII. of the proposed rule, for 
CY 2012, we proposed to continue using a provider-specific two tiered 
payment approach for partial hospitalization services that 
distinguishes payment made for services furnished in a CMHC from 
payment made for services furnished in a hospital. Specifically, we 
proposed one APC for partial hospitalization program days with three 
services furnished in a CMHC (APC 0172 (Level I Partial Hospitalization 
(3 services) for CMHCs)) and one APC for days with four or more 
services furnished in a CMHC (APC 0173 (Level II Partial 
Hospitalization (4 or more services) for CMHCs)). We proposed that the 
payment rates for these two APCs be based upon the median per diem 
costs calculated using data only from CMHCs. Similarly, we proposed one 
APC for partial hospitalization program days with three services 
furnished in a hospital (APC 0175, Level I Partial Hospitalization (3 
services) for Hospital-Based PHPs), and one APC for days with four or 
more services furnished in a hospital (APC 0176, Level II Partial 
Hospitalization (4 or more services) for Hospital-Based PHPs). We 
proposed that the payment rates for these two APCs be based on the 
median per diem costs calculated using data only from hospitals.
    Because our longstanding policy of limiting the aggregate payment 
for specified less resource-intensive mental health services furnished 
on the same date to the payment rate for the most resource-intensive of 
all outpatient mental health treatment, for CY 2012, we proposed to 
continue to set the payment rate for APC 0034 (Mental Health Services 
Composite) at the same rate as we proposed for APC 0176, which is the 
maximum partial hospitalization per diem payment. As we stated in the 
CY 2012 OPPS/ASC proposed rule (76 FR 42201), we believe this APC 
payment rate would provide the most appropriate payment for composite 
APC 0034, taking into consideration the intensity of the mental health 
services and the differences in the HCPCS codes for mental health 
services that could be paid through this composite APC compared with 
the HCPCS codes that could be paid through partial hospitalization APC 
0176. When the aggregate payment for specified mental health services 
provided by one hospital to a single beneficiary on one date of service 
based on the payment rates associated with the APCs for the individual 
services exceeds the maximum per diem partial hospitalization payment, 
we proposed that those specified mental health services would be 
assigned to APC 0034. We proposed that APC 0034 would have the same 
payment rate as APC 0176 and that the hospital would continue to be 
paid one unit of APC 0034. The I/OCE currently determines whether to 
pay these specified mental health services individually or to make a 
single payment at the same rate as the APC 0176 per diem rate for 
partial hospitalization for all of the specified mental health services 
furnished by the hospital on that single date of service, and we 
proposed for CY 2012 that it would continue to determine this.
    We did not receive any comments on this proposal. We continue to 
believe that the costs associated with administering a partial 
hospitalization program represent the most resource intensive of all 
outpatient mental health treatment, and we do not believe that CMS 
should pay more for a day of individual mental health services under 
the OPPS than the partial hospitalization per diem payment. Therefore, 
we are finalizing our CY 2012 proposal, without modification, to limit 
the aggregate payment for specified less intensive outpatient mental 
health services furnished on the same date by a hospital to the payment 
for a day of partial hospitalization, specifically APC 0176.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Prior to CY 2009, hospitals received a full APC payment for each 
imaging service on a claim, regardless of how many procedures were 
performed during a single session using the same imaging modality. 
Based on extensive data analysis, we determined that this practice 
neither reflected nor promoted the efficiencies hospitals can achieve 
when performing multiple imaging procedures during a single session (73 
FR 41448 through 41450). As a result of our data analysis, and in 
response to ongoing recommendations from MedPAC to improve payment 
accuracy for imaging services under the OPPS, we expanded the composite 
APC model developed in CY 2008 to multiple imaging services. Effective 
January 1, 2009, we provide a single payment each time a hospital bills 
more than one imaging procedure within an imaging family on the same 
date of service. We utilize three imaging families based on imaging 
modality for purposes of this methodology: (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 13 of the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71859 through 71860).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement at section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included in the policy do not involve contrast, both CT/CTA 
and MRI/MRA scans can be provided either with or without contrast. The 
five multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs as having at least one or more imaging procedures from 
the same family performed with contrast on the same date of service. 
For example, if the hospital performs an MRI without contrast during 
the same session as at least one other MRI with contrast, the hospital 
will receive payment for APC 8008, the ``with contrast'' composite APC.

[[Page 74169]]

    Hospitals continue to use the same HCPCS codes to report imaging 
procedures, and the I/OCE determines when combinations of imaging 
procedures qualify for composite APC payment or map to standard (sole 
service) APCs for payment. We 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).
    At its February 2010 meeting, the APC Panel recommended that CMS 
continue providing analysis on an ongoing basis of the impact on 
beneficiaries of the multiple imaging composite APCs as data become 
available. In the CY 2011 OPPS/ASC proposed rule, we indicated that we 
were accepting this recommendation and would provide the requested 
analysis to the APC Panel at a future meeting (75 FR 46212). As we 
discuss in the CY 2012 OPPS/ASC proposed rule, at the February 28-March 
1, 2011 APC Panel meeting, CMS staff provided an updated analysis of 
the multiple imaging composite APCs to the Panel, comparing partial 
year CY 2010 imaging composite cost and utilization data to comparable 
CY 2009 data in order to meet the APC Panel request that we provide 
analysis of the impact on beneficiaries of the multiple imaging 
composite APCs (76 FR 42201).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42201), for CY 2012, 
we proposed to continue paying for all multiple imaging procedures 
within an imaging family performed on the same date of service using 
the multiple imaging composite payment methodology. The proposed CY 
2012 payment rates for the five multiple imaging composite APCs (APC 
8004, APC 8005, APC 8006, APC 8007, and APC 8008) were based on median 
costs calculated from a partial year of CY 2010 claims available for 
the CY 2012 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 median costs, we used the same methodology that 
we used to calculate the final CY 2011 median costs for these composite 
APCs. That is, we removed any HCPCS codes in the OPPS imaging families 
that overlapped with codes on our bypass list (``overlap bypass 
codes'') to avoid splitting claims with multiple units or multiple 
occurrences of codes in an OPPS imaging family into new ``pseudo'' 
single claims. The imaging HCPCS codes that we removed from the bypass 
list for purposes of calculating the proposed multiple imaging 
composite APC median costs appear in Table 9 of the CY 2012 OPPS/ASC 
proposed rule. (We noted that, consistent with our proposal in section 
II.A.1.b. of the CY 2012 proposed rule to add CPT code 71550 (Magnetic 
resonance (eg, proton) imaging, chest (eg, for evaluation of hilar and 
mediastinal lymphadenopathy); without contrast material(s)) to the list 
of bypass codes for CY 2012, we also proposed to add CPT code 71550 to 
the list of proposed OPPS imaging family services overlapping with 
HCPCS codes on the proposed CY 2012 bypass list (76 FR 42201 through 
42202). We integrated the identification of imaging composite ``single 
session'' claims, that is, claims with multiple imaging procedures 
within the same family on the same date of service, into the creation 
of ``pseudo'' single procedure claims to ensure that claims were split 
in the ``pseudo'' single process into accurate reflections of either a 
composite ``single session'' imaging service or a standard sole imaging 
service resource cost. Like all single bills, the new composite 
``single session'' claims were for the same date of service and 
contained no other separately paid services in order to isolate the 
session imaging costs. Our last step after processing all claims 
through the ``pseudo'' single process was to reassess the remaining 
multiple procedure claims using the full bypass list and bypass process 
in order to determine if we could make other ``pseudo'' single bills. 
That is, we assessed whether a single separately paid service remained 
on the claim after removing line-items for the ``overlap bypass 
codes.''
    As discussed in detail in section III.D.2. of the CY 2012 OPPS/ASC 
proposed rule, we proposed to establish two APCs to which we would 
propose to assign the codes created for CY 2011 by the AMA's CPT 
Editorial Board for combined abdominal and pelvis CT services (76 FR 
42235). Specifically, we proposed to create new APC 0331 (Combined 
Abdominal and Pelvis CT Without Contrast), to which we proposed to 
assign CPT code 74176 (Computed tomography, abdomen and pelvis; without 
contrast material); and we proposed to create new APC 0334 (Combined 
Abdominal and Pelvis CT With Contrast), to which we proposed to assign 
CPT codes 74177 (Computed tomography, abdomen and pelvis; with contrast 
material(s)) and 74178 (Computed tomography, abdomen and pelvis; 
without contrast material in one or both body regions, followed by 
contrast material(s) and further sections in one or both body regions) 
for the CY 2012 OPPS. As noted and listed in section III.D.2. of the 
proposed rule, we selected claims of predecessor codes of new CPT codes 
74176, 74177, and 74178 to calculate the costs of proposed new APCs 
0331 and 0334, respectively (76 FR 42235). Therefore, we proposed not 
to use those claims listed in Table 21 in section III.D.2. of the 
proposed rule in calculating the costs of APCs 8005 and 8006.
    We were able to identify 1 million ``single session'' claims out of 
an estimated 2 million potential composite cases from our ratesetting 
claims data, or approximately half of all eligible claims, to calculate 
the proposed CY 2012 median costs for the multiple imaging composite 
APCs. We listed in Table 8 of the proposed rule the HCPCS codes that 
would be subject to the proposed multiple imaging composite policy, the 
approximate proposed median costs for the imaging composite APCs, and 
their respective families for CY 2012. The HCPCS codes listed in Table 
8 were assigned status indicator ``Q3''' in Addendum B to the proposed 
rule (which is available via the Internet on the CMS Web site) to 
identify their status as potentially payable through a composite APC. 
Their proposed composite APC assignment was identified in Addendum M to 
the proposed rule (which is available via the Internet on the CMS Web 
site). Table 9 of the proposed rule listed the OPPS imaging family 
services that overlap with HCPCS codes on the proposed CY 2012 bypass 
list.
    Comment: Some commenters requested that CMS provide separate APC 
payment when multiple imaging services are provided on the same date of 
service but at different times, because, according to the commenters, 
services at different times require additional resources than services 
performed together. The commenters indicated that hospitals providing 
emergent services are more likely than other hospitals to provide 
multiple imaging services, some of which are provided in the same day 
but at different times. The commenters stated that when imaging 
services are not provided at the same encounter, the same economies of 
scale are not realized as when imaging services are provided together. 
For example, cases in which it

[[Page 74170]]

is necessary to perform CT scans of the chest, abdomen, and pelvis, and 
also a CT scan of the brain and/or soft tissues of the neck, must be 
split into two separate encounters separated by a period of time, due 
to required repositioning of the patient, and safety requirements. One 
commenter requested that hospitals report a modifier or condition code 
to report situations in which multiple imaging services are provided on 
the same date but at different times, in order to afford additional 
payment in those circumstances. The commenter further opined that the 
fact that CMS allows separate payment for multiple E/M services on the 
same date of service shows that CMS recognizes that resources are 
expended for each clinic visit, and that this is an identical concept 
to multiple imaging services on the same date but at differing 
sessions.
    Response: As we stated in the CY 2010 and CY 2011 final rules with 
comment period (74 FR 60399 and 75 FR 71858 through 71859), we do not 
agree with the commenters that multiple imaging procedures of the same 
modality provided on the same date of service but at different times 
should be exempt from the multiple imaging composite payment 
methodology. As we indicated in the CY 2009 through CY 2011 OPPS/ASC 
final rules with comment period (73 FR 68565; 74 FR 60399; 75 FR 
71859), we believe that composite payment is appropriate even when 
procedures are provided on the same date of service but at different 
times because hospitals do not expend the same facility resources each 
and every time a patient is seen for a distinct imaging service in a 
separate imaging session. In most cases, we expect that patients in 
these circumstances would receive imaging procedures at different times 
during a single prolonged hospital outpatient encounter. The 
efficiencies that may be gained from providing multiple imaging 
procedures during a single session are achieved in ways other than 
merely not having to reposition the patient. Even if the same level of 
efficiencies could not be gained for multiple imaging procedures 
performed on the same date of service but at different times, we expect 
that any higher costs associated with these cases would be reflected in 
the claims data and cost reports we use to calculate the median costs 
for the multiple imaging composite APCs and, therefore, in the payment 
rates for the multiple imaging composite APCs. Therefore, we do not 
believe it is necessary or appropriate for hospitals to report imaging 
procedures provided on the same date of service but during different 
sittings any differently than they would report imaging procedures 
performed consecutively in one sitting with no time in between the 
imaging services. In addition, for the above reasons, we do not believe 
it is necessary to implement a modifier or condition code to 
distinguish between such cases. We believe that the comparison to our 
E/M visit policy of providing separate payments to separate clinic 
visits on the same day is not relevant because, unlike radiology 
departments, clinics often operate independently from each other in 
different parts of the hospital with separate staffs providing 
different services.
    Comment: A few commenters, who expressed concern that providers may 
receive inadequate compensation and a resulting decrease in beneficiary 
access, stated that CMS should continue to provide analyses to the APC 
Panel of the impact of its imaging composite APC policy on payment and 
usage of imaging services. One commenter noted the updated analysis 
that CMS staff provided at the February 28-March 1, 2011 APC Panel 
meeting. The commenter appreciated the shared information, and 
recommended that CMS continue to monitor costs, provide information on 
the impact of multiple imaging composite APCs, and use the information 
learned to ensure beneficiary access, as well as to evaluate whether 
the existing multiple imaging composite APC methodology accurately 
reflects all costs of proving the services. Other commenters agreed 
with CMS' decision not to propose any expansion of imaging composite 
APCs, opining that no expansion of the imaging composite APCs should be 
considered until robust data on the current policy is available for 
public review and comment. One commenter expressed concern with CMS' 
proposal to create two additional multiple imaging composite APCs.
    Response: We will continue to monitor the multiple imaging 
composite APC rate methodology and the cost of providing imaging 
services. We will report any information to the APC Panel and the 
public, as appropriate. Any expansion to the multiple imaging composite 
APCs would be subject to notice and comment rulemaking. We note that we 
did not propose to create two additional multiple imaging composite 
APCs for CY 2012 as one commenter indicated.
    Comment: Some commenters stated that, while they understood the 
multiple imaging composite APCs are intended to encourage efficiencies, 
they were concerned that the methodology employs arbitrary reductions 
absent data and may adversely affect beneficiary access to those 
imaging services subject to the policy. Other commenters stated that 
the efficiencies to be gained from multiple imaging procedures cannot 
be extrapolated across modalities.
    Response: The median costs upon which the payment rates for the 
multiple imaging composite APCs are based are calculated using CY 2010 
claims that qualified for composite payment, including those with only 
two imaging procedures and those with substantially higher numbers of 
imaging procedures. Therefore, because the payment rates reflect actual 
hospitals' actual costs for providing multiple imaging services during 
a single session, we do not agree with the commenter that the policy 
employs arbitrary reductions. As we have stated in the past (75 FR 
71858 and 74 FR 60400), we do not agree that the composite APC payment 
rates are insufficient to reflect the current costs of diagnostic 
imaging procedures when more than two imaging procedures are performed, 
and we do not believe that, in aggregate, OPPS payment for multiple 
imaging services will be inadequate so as to limit beneficiary access. 
We note that the multiple imaging composite APC methodology is applied 
only when multiple imaging procedures of the same imaging modality are 
performed during the same session, and is not applied across imaging 
modalities.
    After consideration of the public comments we received, we are 
adopting our CY 2012 proposal, without modification, to continue paying 
for all multiple imaging procedures within an imaging family performed 
on the same date of service using the multiple imaging composite 
payment methodology. The CY 2012 payment rates for the five multiple 
imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 
8008) are based on median costs calculated from the CY 2010 claims that 
would have qualified for composite payment under the current policy 
(that is, those claims with more than one procedure within the same 
family on a single date of service). Using the same ratesetting 
methodology described in the CY 2012 OPPS/ASC proposed rule (76 FR 
42202), we were able to identify approximately 1.1 million ``single 
session'' claims out of an estimated 2.2 million potential composite 
cases from our ratesetting claims data, or approximately half of all 
eligible claims, to calculate the final CY 2012 median costs for the 
multiple imaging composite APCs.

[[Page 74171]]

    Table 8 below lists the HCPCS codes that will be subject to the 
multiple imaging composite policy and their respective families and 
approximate composite APC median costs for CY 2012. Table 9 below lists 
the OPPS imaging family services that overlap with HCPCS codes on the 
CY 2012 bypass list.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR30NO11.010


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[GRAPHIC] [TIFF OMITTED] TR30NO11.011


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[GRAPHIC] [TIFF OMITTED] TR30NO11.012


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[GRAPHIC] [TIFF OMITTED] TR30NO11.013


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[GRAPHIC] [TIFF OMITTED] TR30NO11.014

BILLING CODE 4120-01-C

[[Page 74176]]

(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 
0655, and 8009)
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizes a pacing electrode implanted in combination with either a 
pacemaker or an implantable cardioverter defibrillator (ICD). CRT 
performed by the implantation of an ICD along with a pacing electrode 
is referred to as ``CRT-D.'' CRT performed by the implantation of a 
pacemaker along with a pacing electrode is referred to as ``CRT-P.''
    CRT-D services are described by combinations of CPT codes for the 
insertion of pulse generators and the insertion of the leads associated 
with ICDs, along with the insertion of the pacing electrode. For the 
implantation of a pulse generator, hospitals may use CPT code 33240 
(Insertion of single or dual chamber pacing cardioverter-defibrillator 
pulse generator), which is the only CPT code assigned to APC 0107 
(Insertion of Cardioverter-Defibrillator) for CY 2011, in combination 
with CPT code 33225 (Insertion of pacing electrode, cardiac venous 
system, for left ventricular pacing, at time of insertion of pacing 
cardioverter-defibrillator or pacemaker pulse generator (including 
upgrade to dual chamber system)), which is assigned to APC 0418 
(Insertion of Left Ventricular Pacing Electrode) for CY 2011. For the 
implantation of a pulse generator and leads, hospitals may use CPT code 
33249 (Insertion or repositioning of electrode lead(s) for single or 
dual chamber pacing cardioverter-defibrillator and insertion of pulse 
generator), which is the only CPT code assigned to APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) for CY 2011, in 
combination with CPT code 33225.
    For CRT-P services, hospitals may use CPT codes 33206 (Insertion or 
replacement of permanent pacemaker with transvenous electrode(s); 
atrial) and 33207 (Insertion or replacement of permanent pacemaker with 
transvenous electrode(s); ventricular), which are assigned to APC 0089 
(Insertion/Replacement of Permanent Pacemaker and Electrodes) for CY 
2011, in combination with CPT code 33225. Hospitals also may use CPT 
code 33208 (Insertion or replacement of permanent pacemaker with 
transvenous electrode(s); atrial and ventricular), for the implantation 
of a pacemaker with leads, which is assigned to APC 0655 (Insertion/
Replacement/Conversion of a Permanent Dual Chamber Pacemaker), in 
combination with CPT code 33225.
    A number of commenters who responded to prior OPPS proposed rules, 
as well as public presenters to the APC Panel, have recommended that 
CMS establish new composite APCs for CRT-D services, citing significant 
fluctuations in the median cost for CPT code 33225 and the payment rate 
for APC 0418. The commenters and presenters have pointed out 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 single or pseudo single claims upon which to 
calculate an accurate median cost. These commenters and presenters also 
asserted that claims data for these services demonstrate that the 
percentage of single claims available for use in CRT ratesetting is 
very low compared to the total number of claims submitted for CRT-D or 
CRT-P services. The APC Panel at its February and August 2009 meetings 
recommended that CMS evaluate the implications of the creation of a new 
composite APC for CRT-D services and recommended that CMS reconsider 
creating a composite APC or a group of composite APCs for CRT-D and 
CRT-P services. While we did not propose to create any new composite 
APCs for CY 2010 or CY 2011, we accepted both of these APC Panel 
recommendations (75 FR 71852).
    As described in the CY 2012 OPPS/ASC proposed rule (76 FR 42203 
through 42206), in response to the APC Panel recommendations and the 
comments we received, we evaluated the implications of creating four 
composite APCs for CRT services, which would include the ICD and 
pacemaker insertion procedures listed previously in this section 
(described by CPT codes 33240, 33249, 33206, 33207, and 33208) 
performed in combination with the insertion of a pacing electrode 
(described by CPT code 33225). Table 10 of the proposed rule and Table 
10 below outline the four potential composite APCs that we modeled. 
Specifically, we provide a description of each potential composite APC, 
the combination of CPT codes that we used to define the potential 
composite APC, the frequency of claims that met the definition of the 
potential composite APC that could be used to calculate a median cost 
for the potential composite APC, and the median cost calculated for the 
potential composite APC using CY 2010 claims data available for the 
proposed rule, that is, those claims processed between January 1 and 
December 31, 2010.

[[Page 74177]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.016

    For CY 2012, under the authority of section 1833(t)(1)(B) of the 
Act, we proposed to create a new composite APC 8009 (Cardiac 
Resynchronization Therapy with Defibrillator Composite), listed as 
potential composite APC ``B'' in Table 10 above, for CRT-D services. 
This proposed composite APC was the only modeled composite in the study 
with significant claims volume, as shown above in Table 10, and would 
provide a single payment for a procedure currently assigned to APC 0418 
together with a procedure currently assigned to APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) when performed 
on the same date of service. Specifically, we proposed to create 
composite APC 8009, which would be used when the procedures described 
by CPT code 33225 and CPT code 33249 are performed on the same day, in 
order to recognize the inherent challenges in calculating accurate 
median costs for CPT code 33225 based on single procedure claims 
utilized in the standard OPPS ratesetting methodology, and to address 
the public commenters' concerns regarding the fluctuations in median 
costs for APC 0418. We stated that we believe a composite payment 
methodology is appropriate for these services and would result in more 
accurate payment for these services because such a methodology is 
specifically designed to provide payment for two or more procedures 
when they are provided in the same encounter, thus enabling us to use 
more claims data to calculate median costs, and to use claims data that 
more accurately represents the full cost of the services when they are 
furnished in the same encounter. We also stated that we believe that 
there is sufficient claims volume for CPT code 33225 and CPT code 33249 
provided in the same encounter to warrant creation of the composite 
APC. In addition, we indicated that we believe the claims volume for 
CPT 33225 and CPT 33249 is sufficient to demonstrate that these 
services are commonly performed

[[Page 74178]]

together. While the other combinations of CRT procedures listed in 
Table 10 may also be performed together, we did not propose to 
implement composite APCs for these services because of the low 
frequency with which CPT code 33225 was reported in the claims data in 
combination with other CPT codes that describe the insertion of an ICD 
and a pacemaker. As we have stated previously (74 FR 60392), because of 
the complex claims processing and ratesetting logic involved, in the 
past, we have explored composite APCs only for combinations of services 
that are commonly performed together. Because of the low frequency of 
the other combinations of CRT procedures listed in Table 10 above, we 
did not consider them to be commonly performed together.
    Under the authority of section 1833(t)(2)(E) of the Act, we also 
proposed to cap the payment rate for composite APC 8009 at the most 
comparable Medicare-severity diagnosis-related group (MS-DRG) payment 
rate established under the IPPS that would be provided to acute care 
hospitals for providing CRT-D services to hospital inpatients. 
Specifically, we proposed a payment rate for APC 8009 as the lesser of 
the APC 8009 median cost or the IPPS payment rate for MS-DRG 227 
(Cardiac Defibrillator Implant without Cardiac Catheterization without 
Major Complication or Comorbidity), as adopted in the FY 2012 IPPS/LTCH 
PPS final rule. We stated that we would establish the OPPS payment 
amount as the FY 2012 IPPS standardized payment amount for MS-DRG 227 
under this proposal. In the FY 2012 IPPS/LTCH proposed rule, this 
amount was $26,364.93. We calculated the standardized payment rate for 
MS-DRG 227 ($26,364.93) by multiplying the normalized weight from Table 
5 of the FY 2012 IPPS/LTCH proposed rule (5.1370) by the sum of the 
non-labor and labor-related shares of the proposed FY 2012 IPPS 
operating standardized amount (nonwage-adjusted) ($5,132.36), which 
were obtained from Table 1B of the FY 2012 IPPS/LTCH proposed rule. For 
further detail on the calculation of the IPPS proposed FY 2012 payments 
rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 
FR 26028 through 26029).
    We stated that we consider the standardized payment rate for MS-DRG 
227 to represent appropriate payment for a comparable package of 
services furnished to outpatients. We also stated that we believe that, 
because this MS-DRG includes defibrillator implantation for those 
inpatients without major complications or comorbidities, it represents 
the payment made for hospital inpatients who are most similar to 
patients who would receive CRT-D services on an outpatient basis 
because hospital outpatients are generally less sick than hospital 
inpatients and because patients who have complications or comorbitities 
would be most likely to be admitted to inpatient status to receive CRT-
D services. Similar to the proposed payment rate for composite APC 
8009, the proposed payment rate for MS-DRG 227 included the device 
costs associated with CRT-D services, along with the service costs 
associated with CPT codes 33225 and 33249, which are the procedures 
that are reported for implanting those devices. We stated that we 
believe that we should not pay more for these services under the 
proposed OPPS composite APC payment than under the IPPS because the 
OPPS payment would, by definition, include fewer items and services 
than the corresponding IPPS MS-DRG payment. For example, the IPPS MS-
DRG payment includes payment for drugs and diagnostic tests that would 
be separately payable under the OPPS. We explained that a payment cap 
is necessary, therefore, to ensure that we do not create an 
inappropriate payment incentive to provide CRT-D services in one 
setting of care as opposed to another by paying more for CRT-D services 
in the outpatient setting compared to the inpatient setting. We also 
explained that we believe that limiting payment for CRT-D services 
under the OPPS to the IPPS MS-DRG payment will ensure appropriate and 
equitable payment to hospitals because patients who receive these 
services in the hospital outpatient setting are not as sick as patients 
who have been admitted to receive this same service in the hospital 
inpatient setting. Therefore, we expect it would be less costly to 
provide care for these patients, who would also spend less time in the 
facility.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42241 through 42242), 
we also addressed cases when CPT codes 33225 and 33249 are performed on 
different dates of service. We proposed to retain CPT code 33249 in APC 
0108, but to reassign CPT code 33225 to APC 0108 on the basis that 
these codes are similar in clinical characteristics and median cost. We 
proposed to revise the title of APC 0108 to read ``Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes'' 
for CY 2012. We also proposed to reassign CPT code 33224 (Insertion of 
pacing electrode, cardiac venous system, for left ventricular pacing, 
with attachment to previously placed pacemaker or pacing cardioverter-
defibrillator pulse generator (including revision of pocket, removal, 
insertion, and/or replacement of generator)) from APC 0418 to APC 0655, 
and to change the title of APC 0655 from ``Insertion/Replacement/
Conversion of a Permanent Dual Chamber Pacemaker'' to ``Insertion/
Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing 
Electrode.'' In the CY 2012 OPPS/ASC proposed rule (76 FR 42205), we 
stated that we believe that reassigning CPT code 33224 to APC 0655 will 
promote stability in payment for CPT code 33224 because CPT code 33224 
would then be assigned to an APC with similar median costs, but with a 
higher volume of services and, therefore, will benefit from the 
stability in APC median costs and payment rates that generally result 
as the volume of services within an APC increases. Because these 
proposed actions would result in APC 0418 containing no CPT codes, we 
proposed to delete APC 0418.
    In addition, as with composite APC 8009 and under the authority of 
section 1833(t)(2)(E) of the Act, we proposed to limit the payment for 
services assigned to APC 0108 to the IPPS standardized payment amount 
for MS-DRG 227. In other words, we proposed a payment rate for APC 0108 
as the lesser of the APC 0108 median cost or the IPPS standardized 
payment rate for MS-DRG 227. We stated that we believe that MS-DRG 227 
is the most comparable DRG to APC 0108 because, like APC 0108, MS-DRG 
227 includes implantation of a defibrillator in patients who do not 
have medical complications or comorbidities. If we were to base payment 
for APC 0108 on our calculated median cost of approximately $27,361, it 
would result in a payment under the CY 2012 OPPS that would exceed our 
proposed standardized payment under the IPPS for MS-DRG 227 of 
$26,364.93. We stated that we do not believe that it would be equitable 
to pay more for the implantation of a cardioverter defibrillator or 
implantation of a left ventricular pacing electrode for an outpatient 
encounter, which, by definition, includes fewer items and services than 
an inpatient stay during which the patient has the same procedure.
    In order to ensure that hospitals correctly code for CRT services 
in the future, we proposed to create claim processing edits that would 
return claims to providers unless CPT code 33225 is billed in 
conjunction with one of the following CPT codes, as specified by the 
AMA in the CPT code book:

[[Page 74179]]

     33206 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial);
     33207 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); ventricular);
     33208 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial and ventricular);
     33212 (Insertion or replacement of pacemaker pulse 
generator only; single chamber, atrial or ventricular);
     33213 (Insertion or replacement of pacemaker pulse 
generator only; dual chamber, atrial or ventricular);
     33214 (Upgrade of implanted pacemaker system, conversion 
of single chamber system to dual chamber system (includes removal of 
previously placed pulse generator, testing of existing lead, insertion 
of new lead, insertion of new pulse generator));
     33216 (Insertion of a single transvenous electrode, 
permanent pacemaker or cardioverter-defibrillator);
     33217 (Insertion of 2 transvenous electrodes, permanent 
pacemaker or cardioverter-defibrillator);
     33222 (Revision or relocation of skin pocket for 
pacemaker);
     33233 (Removal of permanent pacemaker pulse generator);
     33234 (Removal of transvenous pacemaker electrode(s); 
single lead system, atrial or ventricular);
     33235 (Removal of transvenous pacemaker electrode(s); dual 
lead system, atrial or ventricular);
     33240 (Insertion of single or dual chamber pacing 
cardioverter-defibrillator pulse generator); or
     33249 (Insertion or repositioning of electrode lead(s) for 
single or dual chamber pacing cardioverter-defibrillator and insertion 
of pulse generator).
    In summary, for CY 2012, we proposed to create a composite APC for 
CRT-D services billed with CPT code 33225 and CPT code 33249 on the 
same date of service (Composite APC 8009 (Cardiac Resynchronization 
Therapy--ICD Pulse Generator and Leads)), for which we proposed that 
payment would be capped at the IPPS payment rate for MS-DRG 227. In 
other words, we would calculate payment for APC 8009 based on the 
lesser of the APC 8009 median cost or the IPPS standardized payment for 
MS-DRG 227. We also proposed to reassign CPT code 33225 to APC 0108 and 
to continue to assign CPT code 33249 to APC 0108 when they are 
furnished on different dates of service; to calculate payment for APC 
0108 based on the lesser of the APC 0108 median cost or the IPPS 
standardized payment for MS-DRG 227; and to delete APC 0418. Finally, 
we proposed to implement claims processing edits that would return to 
providers incorrectly coded claims on which a pacing electrode 
insertion (CPT code 33225) is billed without an ICD or pacemaker 
insertion. The proposed changes would all be made in a budget neutral 
manner, in the same way that payment for other composite APCs and the 
reassignment of codes to APCs are budget neutral within the OPPS.
    At its August 10-11 meeting, the APC Panel recommended that CMS 
establish the payment rates for APC 8009 (Cardiac Resynchronization 
Therapy with Defibrillator, Composite) and APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) using only 
outpatient claims data. We are accepting this recommendation and will 
use only outpatient claims data to establish the payment rates for ICD 
and CRT-D implantation procedures, as discussed in greater detail in 
response to comments below.
    Comment: Many commenters supported the creation of a composite APC 
for CRT-D services, and the restructuring of APC 0108 in order to 
address the median cost fluctuations in APC 0418. Many commenters 
objected to the proposal to cap payments for the composite APC 8009 and 
for APC 0108 at the IPPS payment rate for MS-DRG 227. While some 
commenters acknowledged that limiting the payment for CRT-D services 
provided to hospital outpatients makes intuitive sense and applauded 
CMS for exploring Medicare payment across payment systems rather than 
limiting policy proposals to within a single payment system, they 
expressed concern that CMS had not demonstrated that the services 
included in composite APC 8009 and APC 0108 are the same services 
included in MS-DRG 227. Many commenters noted that there could be 
legitimate explanations for the higher hospital outpatient cost 
estimates for CRT that would support higher hospital outpatient 
payments, such as the inclusion of less expensive ICD-only cases in the 
MS-DRG 227 payment bundle and geographic variations in cost for CRT-D 
devices provided to hospital inpatients and hospital outpatients. They 
asserted that MS-DRG 227 is an inappropriate comparator because it 
includes CRT-D implantation procedures, along with less expensive ICD-
only cases. Other commenters argued that a payment cap is inappropriate 
because the proposed payment rate of approximately $26,365 for 
composite APC 8009 would fail to cover the cost of CRT-D devices used 
in the procedures described by CPT codes 33225 and 33249 based on CMS' 
calculation of APC costs associated with devices presented in Table 24 
of the CY 2012 OPPS/ASC proposed rule.
    The leading manufacturers of CRT devices argued that the payment 
cap is unnecessary, projecting that average actual payment differences 
(after accounting for wage index adjustments, indirect medical 
education (IME) payments, and disproportionate share hospital (DSH) 
payments) under the CRT-D composite APC (with no payment cap applied) 
and MS-DRG 227 would be unsubstantial and unlikely to create 
inappropriate payment incentives, indicating that a significant shift 
in site of care (from hospital inpatient to hospital outpatient) for 
implantable defibrillator implants has already been taking place over 
the past several years despite lower OPPS payment rates. Other 
commenters urged CMS to postpone the proposal to link IPPS and OPPS 
payments for CRT services until data from the new cost centers for 
implantable devices provides more accurate information for median cost 
development.
    Many commenters also stated that the cap as described in the 
proposed rule is not an accurate reflection of the equivalent IPPS 
payment for CRT-D services because the operating and capital 
standardized amounts paid to inpatient hospitals were not included, 
indicating that, according to the IPPS final rule, the total payment 
cap should be approximately $29,000. Other commenters added that IME 
and DSH payments also should be included in the cap calculation. The 
commenters urged CMS to take these MS-DRG payment adjustments into 
consideration if an IPPS payment cap were applied to composite APC 8009 
and APC 0108.
    Response: We appreciate the commenters' suggestions presented in 
response to our proposal to cap the OPPS payment for CRT-D services at 
the IPPS payment for MS-DRG 227, and the commenters' support for the 
creation of a composite APC for CRT-D services. After revisiting this 
issue, we agree that while MS-DRG 227 includes less expensive ICD-only 
cases, along with CRT-D system implants, proposed APC 8009 would 
include only CRT-D cases (and not ICD-only cases), and therefore does 
not represent a comparable package of services. Therefore, because 
there are significant differences in these payment bundles, and because 
we believe a payment cap would only be appropriate for comparable 
packages of services, we agree with the commenters that a better 
approach at this time would be to refrain from implementing our CY 2012 
proposal to cap the hospital outpatient payment rate for CRT-D services 
or ICD

[[Page 74180]]

implantation procedures based on the IPPS payment rate for MS-DRG 227.
    As described in the proposed rule, we continue to believe that we 
should recognize the inherent challenges in calculating accurate median 
costs for CPT code 33225 based on single procedure claims utilized in 
the standard OPPS ratesetting methodology, and that we should address 
the commenters' past concerns regarding the fluctuations in median 
costs for the APC to which this service has been assigned. We also 
continue to believe that it is important to ensure that we do not 
create an inappropriate payment incentive to provide services in one 
setting of care as opposed to another, also as stated in the proposal. 
In light of these goals, and taking into consideration the commenters' 
observations that the hospital inpatient and outpatient payment bundles 
for CRT-D services are different, we are modifying our proposal to 
create composite APC 8009 for CRT-D services. Under this final rule 
with comment period, we will treat CPT codes 33225 and 33249 as a 
single, composite service when they are performed on the same day as 
proposed, but rather than assigning them to composite APC 8009, we are 
assigning them to existing APC 0108 for CY 2012. We believe that this 
APC assignment is appropriate because the CRT-D procedure described by 
the combination of CPT codes 33225 and 33249 is clinically similar to 
the basic (nonresynchronization) ICD insertion procedure described by 
CPT code 33249 when it is performed by itself and assigned to APC 0108. 
Both procedures involve the insertion of one or more electrodes into 
the heart with subsequent connection to a cardiac pacing and 
defibrillation device. The difference between CRT-D and ICD insertion 
is the use of an additional pacing wire, but we note that APC 0108, in 
general, and CPT code 33249, specifically, already reflect a range of 
numbers of electrodes. We also note that the CRT-D procedure and the 
ICD-only procedure have similar final CY 2012 median costs of 
approximately $38,468 (based on 3,145 single claims) and $26,988 (based 
on 7,910 single claims), respectively, and that the placement of these 
procedures in the same APC does not violate the 2 times rule. We also 
are finalizing our proposal to change the title of APC 0108 to 
``Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes'' because this APC will provide payment for ICD procedures, 
including CRT-D services.
    In calculating the median costs upon which the payment rate for APC 
0108 is based for CY 2012, for this final rule with comment period, we 
included single procedure claims for the individual services assigned 
to APC 0108, as well as single procedure claims that contain the 
composite CRT-D service, defined as the combination of CPT codes 33225 
and 33249 with the same date of service. We were able to use 11,055 
single bills from the CY 2012 final rule claims data (3,145 composite 
CRT-D service claims and 7,910 claims for other services assigned to 
APC 0108) to calculate a median cost of approximately $29,839. We note 
that under this policy, hospitals will continue to use the same CPT 
codes to report CRT-D procedures, and the I/OCE will determine when 
combinations of procedures qualify for composite service payment or map 
to standard (sole service) APCs for payment. We will make a single 
payment for those procedures that qualify for composite service 
payment, as well as any packaged services furnished on the same date of 
service. Because CPT codes 33225 and 33249 may be treated as a 
composite service for payment purposes, we are assigning them status 
indicator ``Q3'' (Codes that may be paid through a composite APC) in 
Addendum B to this final rule with comment period. The assignment of 
CPT codes 33225 and 33249 to APC 0108 when treated as a composite 
service also will be reflected in Addendum M to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
    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 and, therefore, to address the inherent ratesetting 
challenges associated with CPT code 33225 and stabilize payment for 
this service. We also note that this policy is consistent with the 
principles of a prospective payment system, specifically to place 
similar services that utilize technologies with varying costs in the 
same APC in order to promote efficiency and decisionmaking based on 
individual patient's clinical needs rather than financial 
considerations. By calculating the median cost for APC 0108 using 
claims from both ICD-only cases and CRT-D cases, we allow the costs of 
each to influence the overall median cost for the APC, which will rise 
or fall in the future depending on hospitals' utilization patterns. As 
indicated earlier, this methodology allows us to accept the APC Panel's 
recommendation to calculate payment for these services using only 
hospital outpatient claims data.
    Comment: A few commenters questioned CMS' authority under section 
1833(t)(2)(E) of the Act to cap the payment rate for an OPPS composite 
APC at a comparable MS-DRG payment rate established under the IPPS, 
arguing that they believe this provision of the Act applies only to 
adjustments made within the OPPS, and does not give CMS authority to 
make equitable adjustments across payment systems.
    Many commenters pointed out that CMS has held strongly to the 
principle of setting OPPS payment rates based only on hospital 
outpatient claims and cost report data since the beginning of the OPPS, 
often refusing stakeholders' requests to use external data or make 
cross-system payment comparisons as the basis for setting payment 
rates. The commenters stated that for CMS to cross payment systems and 
deviate from this longstanding policy would introduce a significant 
level of uncertainty and unpredictability. Other commenters stated that 
crossing payment systems for the first time under the OPPS represents a 
significant departure from the standard OPPS ratesetting methodology, 
undermines the integrity of the OPPS, discourages hospitals from 
providing care in the most appropriate setting, and adversely affects 
investment in new technologies.
    Some commenters also argued that CMS should not assume the hospital 
inpatient cost data for CRT-D services is more valid than hospital 
outpatient cost data. To the contrary, commenters noted that there are 
various mechanisms in place for hospital outpatient claims, such as the 
procedure-to-device edits, to ensure that hospitals report the full 
costs of devices provided in hospital outpatient departments, while 
there are no similar mechanisms in place for devices provided in 
hospital inpatient settings of care. The commenters pointed out that 
the OPPS and the IPPS have been designed to be internally consistent 
but not comparable to each other, noting that the methods used to 
establish relative weights in each system are independent and 
unrelated.
    Commenters also stated that if CMS were to set a precedent for 
looking across payment systems in this circumstance, then CMS should be 
consistent and make cross-system payment comparisons for all items and 
services, such as separately payable drugs and biologicals, which are 
paid at a lower per drug payment rate when they are provided in 
hospital outpatient settings compared to physician office settings.

[[Page 74181]]

    Response: Although we are not finalizing our proposal to institute 
a payment cap for composite APC 8009 and APC 0108, we believe we have 
broad authority under the statute to implement a cap on the payment 
rate for an OPPS APC at a comparable MS-DRG payment rate established 
under the IPPS. We also disagree that we cannot explore this policy 
option because it would be unprecedented and involve data other than 
data obtained from hospital outpatient claims. It is not unprecedented 
for CMS to use data from one payment system in the calculations for 
another in specific circumstances. For example, as described in detail 
in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72033) 
and in section XIII.C.1.b. of this CY 2012 OPPS/ASC final rule with 
comment period, we use physician claims data in determining which 
procedures will be designated as ``office-based'' for the ASC list of 
covered surgical procedures, and in setting the ASC payment rate, we 
use the lower of the MPFS nonfacility PE RVU -based amount or the 
amount calculated using the ASC standard ratesetting methodology for 
the procedure. Even if the use of such data were unprecedented, we do 
not believe that we should neglect to pursue innovations and 
refinements to Medicare payment policy because any such innovations and 
refinements would be new. We also disagree that a payment policy to 
create payment parity between the IPPS and OPPS in one clinical area 
would necessitate the creation of parity across payment systems for all 
items and services. We note that there could be many different payment 
approaches that could be chosen for comparison purposes for any given 
item or service, giving rise to implementation issues. That is, 
comparisons could be made between the OPPS and the payment 
methodologies for services furnished in the physician's office setting 
such as the MPFS for physicians' services or ASP for certain covered 
Part B drugs, as the commenter suggested, or comparisons could be made 
between the OPPS and the IPPS or other payment systems, and the 
``payment parity'' resulting from those comparisons would be vastly 
different. For example, while the commenters' suggested approach to 
achieve payment parity between the hospital outpatient setting and the 
physician office setting for drugs and biologicals would usually result 
in higher hospital outpatient payment rates of ASP+ 6 percent, an 
approach that would achieve payment parity between the hospital 
outpatient setting and the hospital inpatient setting would result in 
payment for most drugs and biologicals being packaged into the 
associated APC procedure payment, because payment for most drugs and 
biologicals under the IPPS is included in the MS-DRG payment. In 
addition, immediately applying such a policy across all items and 
services (rather than incrementally for items and services in one 
clinical area or a handful of clinical areas through notice-and-comment 
rulemaking) may result in payment instability as payments would 
potentially increase and decrease for thousands of services.
    We note that we may consider examining the issue of payment parity 
with respect to other payment systems, even when the data upon which 
the cost of a service is calculated are from a different source, 
because such an approach may deter inappropriate migration of services 
to a setting of care based on financial consideration rather than 
clinical needs.
    Although we are not implementing our proposal to cap payment for 
CRT-D services in CY 2012, we will continue to explore methods to 
ensure our payment systems do not provide inappropriate payment 
incentives to provide services in one setting of care as opposed to 
another setting of care.
    Comment: Some commenters contested the statement in the CY 2012 
OPPS/ASC proposed rule that hospital outpatients are generally less 
sick than hospital inpatients, arguing that not all patients with 
comorbidities are admitted as inpatients. Several commenters stated 
that CMS has not provided evidence to support the claim that CRT-D 
services on an outpatient basis would include fewer items and services 
than on an inpatient basis.
    Response: As indicated previously, we are not implementing our 
proposal to cap payment for CRT-D services at the IPPS payment rate for 
MS-DRG 227. We continue to believe, however, that the Medicare 
beneficiaries who receive a service on an outpatient basis would 
generally not be expected to be as sick as those who are admitted to 
the hospital to receive the same service. The Medicare Benefit Policy 
Manual (100-02), Chapter 1, Section 10 (available on the CMS Web site 
at: http://www.cms.gov/manuals/Downloads/bp102c01.pdf) defines an 
inpatient as a person who has been admitted to a hospital for bed 
occupancy for purposes of receiving inpatient hospital services. As 
stated in the manual, factors to be considered when making the decision 
to admit include such things as the severity of the signs and symptoms 
exhibited by the patient and the medical predictability of something 
adverse happening to the patient. We believe this supports our 
statement that, generally, patients who can receive a service on an 
outpatient basis rather than be admitted as inpatients are not as sick 
as patients who would need to be admitted as inpatients to receive 
those same services.
    We also continue to believe that the costs of providing a service 
to a hospital inpatient, in general, may exceed the costs for providing 
the same service on an outpatient basis. In general, payment for 
outpatient care through an APC consists only of the cost of the 
procedure, certain packaged ancillary services, and the cost of nursing 
and other staff care during the immediate recovery period. Patients are 
able to go home quickly (and if they are not able to go home quickly, 
they would typically be admitted). In general, the payment for 
operating costs of inpatient hospital services under the IPPS includes 
similar services that would be paid under the OPPS through an APC, plus 
associated diagnostic testing, drugs, laboratory tests, and the cost of 
an extended recovery over several days. Inpatient care is typically 
associated with longer periods of recovery, which may be triggered by 
increased complications, increased comorbidity, or increased risk. 
Although an individual outpatient case may be more expensive than an 
individual inpatient case, inpatients, on the average, will be sicker 
and more costly than outpatients receiving similar services.
    Comment: A few commenters disagreed with the proposed reassignment 
of CPT code 33224 to APC 0655, and the proposed reassignment of CPT 
code 33225 to APC 0108. According to the commenters, the claims data 
upon which CMS calculated the proposed median cost of CPT code 33225 
was flawed because it included many claims that should have been 
rejected if CMS applied its device-to-procedure edits. The commenters 
provided data analysis indicating that there were only 13 single bills 
that met the criteria of the device-dependent APC ratesetting 
methodology, and that the median cost calculated from those 13 single 
bills is approximately $8,149 rather than the median cost of 
approximately $34,018 calculated by CMS using 458 single bills from the 
data available for the CY 2012 proposed rule. The commenters requested 
that CMS maintain APC 0418, and continue to assign to it CPT codes 
33224 and 33225, based on their estimated median cost of approximately 
$8,149 for CPT code 33225 and CMS' estimated median cost of 
approximately $12,418 for CPT code 33224. The commenters expressed

[[Page 74182]]

general concern that the device-to-procedure edits were not being 
applied correctly to hospital outpatient claims.
    Response: We appreciate the commenters bringing to our attention 
potential problems with the claims used to calculate the proposed CY 
2012 median cost for CPT code 33225. We are investigating the 
possibility that erroneous claims may have made it pass the claims 
processing logic in place to enforce the device-to-procedure and 
procedure-to-device edits, and how they may have been present in the 
set of claims we used in ratesetting for the proposed rule. We note 
that we used a total of 28 single bills for CPT code 33225 to calculate 
a median cost of approximately $18,855 for this final rule with comment 
period, which is consistent with the much lower number of single bills 
identified by the commenters in the proposed rule data set and 
consistent with the number of single bills for this service in prior 
years' hospital outpatient claims data. We will continue to examine 
this issue in order to ensure that the claims we use to calculate 
median costs for these CPT codes, as well as all CPT codes assigned to 
device-dependent APCs, conform with the device-dependent APC 
ratesetting methodology outlined in section II.A.2.d.(1) of this final 
rule with comment period.
    We do not agree with the commenters that we should maintain APC 
0418 for CPT codes 33224 and 33225. Based on the hospital outpatient 
claims and cost report data available for this final rule with comment 
period, we calculated a final median cost of approximately $12,418 
using 198 single bills (out of 831 total bills) for CPT code 33224, and 
a final median cost of approximately $18,855 using 28 single bills (out 
of 10,424 total bills) for CPT code 33225. We continue to believe that 
CPT code 33224 appropriately aligns, both in terms of clinical 
characteristics and resource utilization, with other procedures 
assigned to APC 0655, which has a final CY 2012 median cost of 
approximately $9,638, because the median cost of CPT code 33224 is 
relatively close to the overall APC median cost and APC 0655 includes 
pacemaker insertion procedures. Therefore, we are finalizing our 
proposal, without modification, to assign CPT code 33224 to APC 0655.
    In addition, we agree with commenters that CPT code 33225 should 
not be assigned to APC 0108. We believe that CPT code 33225 should be 
assigned to APC 0655, rather than APC 0108 or APC 0418, when it is not 
performed on the same day as the service described by CPT code 33249, 
based upon the median cost calculated for CPT code 33225 using data 
available for this final rule with comment period and based upon the 
commenters' estimates presented in their analysis of this CPT code's 
cost. While we acknowledge that the final rule median cost of 
approximately $18,855 is higher than the median costs of the other 
procedures assigned to APC 0655, we believe this is an appropriate 
assignment for this CPT code from a clinical perspective because the 
procedure described by CPT code 33225 differs from the procedure 
described by CPT code 33224 (which is in APC 0655) only in the position 
of the end of the electrode within the heart. In addition, CPT code 
33225 is also similar to other procedures assigned to APC 0655, such as 
CPT code 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), which describes the 
upgrade of a pacemaker which generally includes new hardware and 
placement of a new electrodes. We also note that this assignment does 
not violate the 2 times rule. Therefore, for CY 2012, we are modifying 
our proposal to reassign CPT code 33225 to APC 0108 when it is 
performed without CPT code 33249. Instead, CPT code 33225 is reassigned 
to APC 0655 when it is performed without CPT code 33249. We also are 
finalizing our proposals to change the title of APC 0655 to 
``Insertion/Replacement/Conversion of a Permanent Dual Chamber 
Pacemaker or Pacing Electrode'' and to delete APC 0418.
    Comment: Many commenters supported the proposal to implement claims 
processing edits that would return claims to providers unless CPT code 
33225 is billed in conjunction with one of the clinically appropriate 
CPT codes specified by the AMA in the CPT code book.
    Response: We appreciate the commenters' support. We are 
implementing our CY 2012 proposal, without modification, to create 
claims processing edits for CPT code 33225 that would return claims to 
providers if CPT code 33225 is not correctly billed on the claim in 
conjunction with one of the clinically appropriate CPT codes specified 
by the AMA in the CPT code book, as described previously in this 
section.
    In summary, after consideration of the public comments we received 
and the APC Panel recommendation, we are not finalizing our proposal to 
implement a payment cap for CRT-D services and ICD implantation 
procedures based upon the payment rate for IPPS MS-DRG 227 as proposed. 
Instead, we will recognize CPT codes 33225 and 33249 as a single, 
composite service when they are performed on the same day as proposed. 
However, for CY 2012, rather than assigning the procedures described by 
CPT codes 33225 and 33249 when they are performed on the same day to 
composite APC 8009, we are assigning them to existing APC 0108. We are 
implementing our proposal to change the title of APC 0108 to 
``Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes'' because this APC will provide payment for ICD procedures 
including CRT-D services. Hospitals will continue to use the same CPT 
codes to report CRT-D procedures and ICD-only procedures, 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 will make a single 
composite payment for such cases. When not performed on the same day as 
the service described by CPT code 33225, the service described by CPT 
code 33249 will continue to be assigned to APC 0108. When not performed 
on the same day as the service described by CPT code 33249, the service 
described by CPT code 33225 will be assigned to APC 0655 (we note that 
this is a modification from our proposal to assign CPT code 33225 when 
it does not appear with CPT code 33249 to APC 0108). We also are 
finalizing our proposals to reassign CPT code 33224 to APC 0655 for CY 
2012, to change the title of APC 0655 from ``Insertion/Replacement/
Conversion of a Permanent Dual Chamber Pacemaker'' to ``Insertion/
Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing 
Electrode,'' and to delete APC 0418.
    In addition, we are finalizing our proposed policy 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 a procedure to insert an ICD or 
pacemaker.
3. Changes to Packaged Services
a. Background
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated cost of providing a service or bundle of services for a 
particular patient, but with the exception of outlier cases, the 
payment is adequate to ensure access to appropriate care. Packaging 
payment for

[[Page 74183]]

multiple interrelated services into a single payment creates incentives 
for providers to furnish services in the most efficient way by enabling 
hospitals to manage their resources with maximum flexibility, thereby 
encouraging long-term cost containment. For example, where there are a 
variety of supplies that could be used to furnish a service, some of 
which are more expensive than others, packaging encourages hospitals to 
use the least expensive item that meets the patient's needs, rather 
than to routinely use a more expensive item. Packaging also encourages 
hospitals to negotiate carefully with manufacturers and suppliers to 
reduce the purchase price of items and services or to explore 
alternative group purchasing arrangements, thereby encouraging the most 
economical health care. Similarly, packaging encourages hospitals to 
establish protocols that ensure that necessary services are furnished, 
while carefully scrutinizing the services ordered by practitioners to 
maximize the efficient use of hospital resources. Packaging payments 
into larger payment bundles promotes the stability of payment for 
services over time. Finally, packaging also may reduce the importance 
of refining service specific payment because there is more opportunity 
for hospitals to average payment across higher cost cases requiring 
many ancillary services and lower cost cases requiring fewer ancillary 
services. For these reasons, packaging payment for services that are 
typically ancillary and supportive to a primary service has been a 
fundamental part of the OPPS since its implementation in August 2000.
    We assign status indicator ``N'' to those HCPCS codes that we 
believe are always integral to the performance of the primary modality; 
therefore, we always package their costs into the costs of the 
separately paid primary services with which they are billed. Services 
assigned status indicator ``N'' are unconditionally packaged.
    We assign status indicator ``Q1'' (``STVX-Packaged Codes''), ``Q2'' 
(``T-Packaged Codes''), or ``Q3'' (Codes that may be paid through a 
composite APC) to each conditionally packaged HCPCS code. An ``STVX-
packaged code'' describes a HCPCS code whose payment is packaged when 
one or more separately paid primary services with the status indicator 
of ``S,'' ``T,'' ``V,'' or ``X'' are furnished in the hospital 
outpatient encounter. A ``T-packaged code'' describes a code whose 
payment is packaged when one or more separately paid surgical 
procedures with the status indicator of ``T'' are provided during the 
hospital outpatient encounter. ``STVX-packaged codes'' and ``T-packaged 
codes'' are paid separately in those uncommon cases when they do not 
meet their respective criteria for packaged payment. ``STVX-packaged 
codes'' and ``T-packaged codes'' are conditionally packaged. We refer 
readers to section XI.A.1. of this final rule with comment period and 
Addenda D1 (which is referenced in section XVII. of this final rule 
with comment period and available via the Internet on the CMS Web site) 
with other Addenda, for a complete listing of status indicators and the 
meaning of each.
    We use the term ``dependent service'' to refer to the HCPCS codes 
that represent services that are typically ancillary and supportive to 
a primary diagnostic or therapeutic modality. We use the term 
``independent service'' to refer to the HCPCS codes that represent the 
primary therapeutic or diagnostic modality into which we package 
payment for the dependent service. In future years, as we consider the 
development of larger payment groups that more broadly reflect services 
provided in an encounter or episode of-care, it is possible that we 
might propose to bundle payment for a service that we now refer to as 
``independent.''
    Hospitals include HCPCS codes and charges for packaged services on 
their claims, and the estimated costs associated with those packaged 
services are then added to the costs of separately payable procedures 
on the same claims in establishing payment rates for the separately 
payable services. We encourage hospitals to report all HCPCS codes that 
describe packaged services that were provided, unless the CPT Editorial 
Panel or CMS provide other guidance. The appropriateness of the OPPS 
payment rates depends on the quality and completeness of the claims 
data that hospitals submit for the services they furnish to our 
Medicare beneficiaries.
    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 into the payment for the primary 
diagnostic or therapeutic modality to which we believe these items and 
services are typically ancillary and supportive. The seven categories 
are: (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 2008 OPPS/ASC final rule with comment period 
(72 FR 66650 through 66659), we finalized additional packaging for the 
CY 2008 OPPS, which included the establishment of new composite APCs 
for CY 2008, specifically APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation Composite), APC 8001 (LDR Prostate 
Brachytherapy Composite), APC 8002 (Level I Extended Assessment & 
Management Composite), and APC 8003 (Level II Extended Assessment & 
Management Composite). In the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68559 through 68569), we expanded the composite APC model 
to one new clinical area--multiple imaging services. We created five 
multiple imaging composite APCs for payment in CY 2009 that incorporate 
statutory requirements to differentiate between imaging services 
provided with contrast and without contrast as required by section 
1833(t)(2)(G) of the Act. The multiple imaging composite APCs are: (1) 
APC 8004 (Ultrasound Composite); (2) APC 8005 (CT and CTA without 
Contrast Composite); (3) APC 8006 (CT and CTA with Contrast Composite); 
(4) APC 8007 (MRI and MRA without Contrast Composite); and (5) APC 8008 
(MRI and MRA with Contrast Composite). We discuss composite APCs in 
more detail in section II.A.2.e. of this final rule with comment 
period.
    We recognize that decisions about packaging and bundling payment 
involve a balance between ensuring that payment is adequate to enable 
the hospital to provide quality care and establishing incentives for 
efficiency through larger units of payment. Therefore, in the CY 2012 
OPPS/ASC proposed rule (76 FR 42206), we invited public comments 
regarding our packaging proposals for the CY 2012 OPPS.
b. Packaging Issues
(1) CMS Presentation of Findings Regarding Expanded Packaging at the 
February 28-March 1, 2011 and August 10-11, 2011 APC Panel Meetings
    In deciding whether to package a service or pay for a code 
separately, we have historically considered a variety of factors, 
including whether the service is normally provided separately or in 
conjunction with other services; how likely it is for the costs of the 
packaged code to be appropriately mapped to the

[[Page 74184]]

separately payable codes with which it was performed; and whether the 
expected cost of the service is relatively low.
    As discussed in section I.D. of the proposed rule and this final 
rule with comment period, the APC Panel advises CMS on the clinical 
integrity of payment groups and their weights, and the APC Panel has 
had a Packaging Subcommittee that is now renamed the Subcommittee for 
APC Groups and Status Indicator (SI) Assignments to reflect that its 
function has expanded to include assisting CMS with assignment of HCPCS 
codes to APCs. As part of its function, the APC Panel studies and makes 
recommendations on issues pertaining to services that are not 
separately payable under the OPPS, but whose payments are bundled or 
packaged into APC payments. The APC Panel has considered packaging 
issues at several earlier meetings. For discussions of earlier APC 
Panel meetings and recommendations, we refer readers to previously 
published hospital OPPS/ASC proposed and final rules on the CMS Web 
site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/list.asp.
(2) Packaging Recommendations of the APC Panel at its February 28-March 
1, 2011 Meeting
    During the February 28-March 1, 2011 APC Panel meeting, the APC 
Panel accepted the report of the Subcommittee for APC Groups and Status 
Indicator (SI) Assignment, heard several public presentations related 
to packaged services, discussed the deliberations of the subcommittee, 
and made five recommendations related to packaging and to the function 
of the subcommittee. The Report of the February 28-March 1, 2011 
meeting of the APC Panel may be found at the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    To summarize, the APC Panel made five recommendations regarding the 
packaging of payment under the CY 2012 OPPS. Below we present each of 
these five packaging recommendations and our responses to those 
recommendations. The first APC Panel recommendation that relates to 
packaging and that we discuss in this section is APC Panel 
Recommendation 4. Two other recommendations, Recommendations 12 and 13, 
which evolved from the discussions of the APC Groups and Status 
Indicator Subcommittee, are related specifically to HCPCS codes, were 
discussed in section III.D. of the proposed rule, and are addressed in 
section III.D. of this final rule with comment period. Recommendation 
12 was that CMS reassign HCPCS code 65778 (Placement of amniotic 
membrane on the ocular surface for wound healing; self-retaining) and 
HCPCS code 65779 (Placement of amniotic membrane on the ocular surface 
for wound healing; single layer, sutured) to APC 0233 (Level III 
Anterior Segment Eye Procedures) and that CMS furnish data when data 
become available for these two codes. Recommendation 13 was that CMS 
create an intermediate-level upper gastrointestinal procedures APC.
    APC Panel Recommendation 4: That HCPCS code 31627 (Bronchoscopy, 
rigid or flexible, including fluoroscopic guidance, when performed; 
with computer-assisted, image-guided navigation (List separately in 
addition to code for primary procedure[s])) should continue to be 
assigned a status indicator of ``N.'' The Panel further recommended 
that CMS continue to collect claims data for HCPCS code 31627.
    CMS Response to Recommendation 4: HCPCS code 31627 was new for CY 
2010, and we assigned a new interim status indicator of ``N'' in our CY 
2010 OPPS/ASC final rule with comment period based on our policy of 
packaging guidance and intraoperative services that are ancillary and 
dependent upon an independent separately paid procedure. At the APC 
Panel's February 2010 meeting, the manufacturer of the electromagnetic 
navigation bronchoscopy (ENB) technology, one of several technologies 
that can be used to perform the service described by HCPCS code 31627, 
asserted that use of the ENB technology during a bronchoscopy procedure 
enables access to distal lesions that are otherwise not accessible 
without use of the ENB technology. The manufacturer also stated that 
without separate payment for the ENB technology, hospitals would likely 
not adopt the technology and the population that would likely benefit 
from the ENB technology would not have access to this technology. In 
response to the manufacturer's presentation at the February 2010 Panel 
meeting, the APC Panel asked CMS to consider whether HCPCS code 31627 
should be packaged or paid separately; and if it should be paid 
separately, the APC Panel asked CMS to investigate the appropriate APC 
assignment. The report of the February 2010 APC Panel meeting is 
available at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    We stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46223) that 
we considered and analyzed the information available to us for HCPCS 
code 31627 and believed that the code described a procedure that is 
supportive of and ancillary to the primary diagnostic or therapeutic 
modality. Therefore, we proposed to package payment for HCPCS code 
31627. We stated that, by proposing to package payment for this 
procedure, we would be treating it in the same manner as similar 
computer assisted, navigational diagnostic procedures that are 
supportive of and ancillary to a primary diagnostic or therapeutic 
modality.
    At its August 23-24, 2010 meeting, the APC Panel listened to 
discussions regarding whether HCPCS code 31627 should remain packaged 
for CY 2011. After hearing presentations from the public, the APC Panel 
recommended that CMS continue to package payment for HCPCS code 31627 
into payment for the major separately paid procedure with which it is 
performed and asked that CMS bring claims data on the cost of HCPCS 
code 31627 to the APC Panel's winter 2011 meeting for review. After 
consideration of all of the information provided by commenters on this 
issue, and hearing the discussion of the issue by the APC Panel at its 
August 23-24, 2010 meeting, we accepted the APC Panel's recommendation 
to continue to package payment for HCPCS code 31627 into the payment 
for the major separately paid procedure with which it is reported for 
CY 2011. In addition, we also accepted the APC Panel's recommendation 
that CMS bring claims data for HCPCS code 31627 to the winter 2011 APC 
Panel meeting. The report of the August 2010 APC Panel meeting is 
available at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    At its meeting on February 28-March 1, 2011, the APC Panel listened 
to a public presentation in which the manufacturer of the ENB 
technology requested that HCPCS code 31627 be paid separately on the 
basis that the cost of the technology is substantially higher than the 
OPPS payment for APC 0076 (Level I Endoscopy Lower Airway), the APC to 
which most bronchoscopy codes are assigned and into which payment for 
HCPCS code 31627 is packaged. The manufacturer stated that if CMS does 
not pay HCPCS code 31627 separately, hospitals will not furnish the 
procedure to hospital outpatients.
    In response to the request of the APC Panel at its August 2010 
meeting, we presented the available data on HCPCS code 31627 that could 
be derived from the hospital outpatient claims that were paid under the 
OPPS for services on and after January 1, 2010 through and

[[Page 74185]]

including September 30, 2010, as processed through the CMS common 
working file by December 31, 2010. Specifically, using the limited set 
of APC Panel data, CMS found that 119 hospitals billed for 573 units of 
HCPCS code 31627, and that HCPCS code 31627 had a median cost of 
approximately $329 per unit. We also found that HCPCS code 31627 is 
reported on 0 to 4 percent of the claims for bronchoscopy codes with 
which CPT guidance states that it is permissible to report HCPCS code 
31627, with the exception of HCPCS code 31626 (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with 
placement of fiducial markers, single or multiple). HCPCS code 31627 
was reported on approximately 52 percent of claims for HCPCS code 31626 
in the APC Panel data. The APC Panel considered this information in its 
formulation of Recommendation 4 that CMS continue to package payment 
for HCPCS code 31627 into the payment for the bronchoscopy code with 
which HCPCS code 31627 is reported. Subsequent to the APC Panel 
meeting, examination and analysis of the CY 2012 proposed rule data 
found that 149 hospitals reported 867 units of HCPCS code 31627, and 
that HCPCS code 31627 had a proposed rule median cost of approximately 
$344 per unit.
    After considering the public presentation and the information 
presented by CMS staff, the APC Panel recommended that HCPCS code 31627 
continue to be assigned a status indicator of ``N.'' The Panel further 
recommended that CMS continue to collect claims data for HCPCS code 
31627. In the CY 2012 OPPS/ASC proposed rule (76 FR 42208), we proposed 
to accept both of the APC Panel's recommendations for the CY 2012 OPPS. 
Specifically, we proposed to assign HCPCS code 31627 to status 
indicator ``N'' for the CY 2012 OPPS and, therefore, proposed to 
package payment for the procedure into payment for the bronchoscopy to 
which we believe that it is ancillary and supportive. As with all 
packaged items and services, we propose that the cost we calculate for 
CPT code 31627 would be added to the costs on the single bill for the 
bronchoscopy code with which the service reported by CPT code 31627 is 
furnished, and therefore, the cost of CPT code 31627 would be 
incorporated into the payment for the APC to which that bronchoscopy 
code is assigned. We stated in the proposed rule that we continue to 
believe that HCPCS code 31627, for which there are several different 
technologies, describes a service that is supportive and ancillary to 
the primary bronchoscopy procedure with which it must be reported, as 
defined by CPT. HCPCS code 31627 describes a computer assisted image 
guided navigation service that is not furnished without a bronchoscopy. 
As defined by CPT, HCPCS code 31627 may only be furnished in addition 
to a bronchoscopy service and, therefore, we believe that it is 
ancillary and supportive to the bronchoscopy service with which it must 
be reported. We agreed to provide further claims information on HCPCS 
code 31627 to the APC Panel when it becomes available.
    Comment: One commenter supported the APC Panel recommendation at 
its February 2011 meeting that CMS provide further claims information 
on HCPCS code 31627 to the APC Panel when it becomes available.
    Response: We appreciate the commenter's support and will furnish 
further information on HCPCS code 31627 to the APC Panel at a future 
meeting.
    For CY 2012, we are continuing to package payment for HCPCS code 
31627 into payment for the separately paid procedure with which it is 
furnished because we continue to believe that it is ancillary and 
supportive to the bronchoscopy with which it is performed, as set forth 
in the CY 2012 proposed rule (76 FR 42207 through 42208). Therefore, we 
have assigned HCPCS code 31627 a status indicator of ``N'' for CY 2012.
    APC Panel Recommendation 5: That CMS consider a more appropriate 
APC assignment for HCPCS code 31626 (Bronchoscopy, rigid or flexible, 
including fluoroscopic guidance, when performed; with placement of 
fiducial markers), the most common code with which HCPCS code 31627 was 
billed in 2010.
    CMS Response to Recommendation 5: In the CY 2012 OPPS/ASC proposed 
rule, we accepted this recommendation and, therefore, proposed to 
reassign HCPCS code 31626 (which had a proposed CY 2012 APC median cost 
of approximately $2,708) from APC 0076 (which had a proposed CY 2012 
APC median cost of approximately $751) to APC 0415 (Level II Endoscopy 
Lower Airway), which had a proposed CY 2012 APC median cost of 
approximately $2,007. We agreed with the APC Panel that it appears that 
the proposed APC median cost of HCPCS code 31626 of $2,708 justified 
placement in an APC that has a median cost that is more similar to the 
APC median cost for this code. We stated that we believe that APC 0415 
is the most appropriate clinically similar APC because the proposed CY 
2012 median cost for APC 0415 of $2,007 is more similar in clinical 
resource for HCPCS code 31626 than the proposed CY 2012 median cost for 
APC 0076 of $715.
    Comment: Commenters supported our proposal to move HCPCS code 31626 
to APC 0415 for CY 2012.
    Response: We appreciate the commenters' support and are finalizing 
our proposal for the reasons set forth above.
    For CY 2012, we are moving HCPCS code 31626 from APC 0076 to APC 
0415, which has a final median cost of approximately $2,024.
    APC Panel Recommendation 6: That Judith Kelly, R.H.I.T., R.H.I.A., 
C.C.S., continue to chair the APC Groups and Status Indicator (SI) 
Assignments Subcommittee for 2011.
    CMS Response to Recommendation 6: In the CY 2012 OPPS/ASC proposed 
rule, we indicated that we accepted the APC Panel's recommendation that 
Judith Kelly, R.H.I.T., R.H.I.A., C.C.S. continue to chair the APC 
Groups and Status Indicator Assignments Subcommittee for 2011.
    We did not receive any public comments on this recommendation. We 
appreciate the services of Ms. Kelly as chair of the Subcommittee for 
CY 2011.
    APC Panel Recommendation 7: That CMS furnish the results of its 
investigation of claims that contain the following unconditionally 
packaged codes without separately paid procedures:
     HCPCS code G0177 (Training and educational services 
related to the care and treatment of patient's disabling mental health 
problems per session (45 minutes or more));
     HCPCS code G0378 (Hospital observation service, per hour);
     HCPCS code 75940 (Percutaneous placement of IVC filter, 
radiological supervision and interpretation); and
     HCPCS code 76937 (Ultrasound guidance for vascular access 
requiring ultrasound evaluation of potential access sites, 
documentation of selected vessel patency, concurrent realtime 
ultrasound visualization of vascular needle entry, with permanent 
recording and reporting (List separately in addition to code for 
primary procedure)).
    CMS Response to Recommendation 7: In the CY 2012 OPPS/ASC proposed 
rule, we indicated that we accepted the APC Panel's recommendation that 
CMS furnish the results of its investigation of claims that contain the 
unconditionally packaged codes, HCPCS code G0177, HCPCS code G0378, 
HCPCS code 75940,

[[Page 74186]]

and HCPCS code 76937, at a future APC Panel meeting.
    Comment: One commenter supported the APC Panel recommendation that 
CMS furnish the results of its investigation of claims that contain the 
following unconditionally packaged codes without separately paid 
procedures: HCPCS code 75940 and HCPCS code 76937.
    Response: As we indicated in the proposed rule (76 FR 42208), we 
will furnish this information to the APC Panel at a future meeting.
    APC Panel Recommendation 8: That the work of the APC Groups and 
Status Indicator (SI) Assignments Subcommittee continue.
    CMS Response to Recommendation 8: In the CY 2012 OPPS/ASC proposed 
rule, we indicated that we accepted the APC Panel's recommendation that 
the work of the APC Groups and Status Indicator Assignments 
Subcommittee continue.
    We did not receive any public comments on this recommendation.
(3) Packaging Recommendations of the APC Panel at Its August 2011 
Meeting
    During the August 10-11, 2011 APC Panel meeting, the APC Panel 
accepted the report of the Subcommittee for APC Groups and Status 
Indicator (SI) Assignments, heard several public presentations related 
to packaged services, discussed the deliberations of the subcommittee, 
and made three recommendations related to packaging and to the function 
of the subcommittee. The subcommittee also made recommendations with 
regard to APC placement of specific services that are discussed in 
section III.D of this final rule with comment period. The Report of the 
August 10-11, 2011 meeting of the APC Panel may be found at the CMS Web 
site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present each of the three recommendations related to 
packaging and our responses to those recommendations. Recommendations 
that evolved from the discussions of the Subcommittee on APC Groups and 
Status Indicator Assignments that are specific to the APC assignment of 
HCPCS codes and removal of HCPCS codes from the inpatient only list are 
discussed in sections III and IX, respectively, of this final rule with 
comment period.
    APC Panel Recommendation 9: That CMS give HCPCS code 65778 
(Placement of amniotic membrane on the ocular surface for wound 
healing; self-retaining) a status indicator of ``T'' and provide the 
Panel with correlating claims data when available.
    CMS Response to Recommendation 9: We refer readers section 
III.D.5.a of this final rule with comment period for discussion of this 
recommendation.
    APC Panel Recommendation 11: The Panel recommends that Judith 
Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair of the APC Groups 
and SI Assignments Subcommittee.
    CMS Response to Recommendation 11: We accept the recommendation 
that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair of the 
APC Groups and SI Assignments Subcommittee. We appreciate Ms. Kelly's 
continuing service in this position.
    APC Panel Recommendation 12: The Panel recommends that the work of 
the APC Groups and SI Assignments Subcommittee continue.
    CMS Response to Recommendation 12: We are accepting the APC Panel's 
recommendation that the work of the APC Groups and SI Assignments 
Subcommittee continue.
(4) Other Packaging Proposals and Policies for CY 2012
    The HCPCS codes that we proposed be packaged either unconditionally 
(for which we continue to assign status indicator ``N''), or 
conditionally (for which we continue to assign status indicators 
``Q1,'' ``Q2,'' or ``Q3''), were displayed in Addendum B of the CY 2012 
OPPS/ASC proposed rule (76 FR 42208). The supporting documents for the 
CY 2012 OPPS/ASC proposed rule, including but not limited to Addendum 
B, are available at the CMS Web site at: www.cms.hhs.gov/HospitalOutpatientPPS/HORD. To view the proposed status indicators by 
HCPCS code in Addendum B, select ``CMS 1525-P'' and then select the 
folder labeled ``2012 OPPS Proposed Rule Addenda'' or ``2012 OPPS Final 
Rule with Comment Period Addenda'' from the list of supporting files. 
Open the zipped file and select Addendum B, which is available as both 
an Excel file and a text file.
    Comment: Commenters stated that CMS' packaging policies would 
likely lead to less efficient use of resources, limited access to 
innovative treatment options, and greater instability in payments 
because the policies are based on several flawed assumptions. 
Commenters believed that, to the extent that hospitals control the 
array of services they provide, CMS' packaging policies assume that the 
same incentives apply to services furnished in hospital outpatient 
departments as to inpatient services. One commenter stated that under 
the hospital inpatient prospective payment system (IPPS), hospitals 
have an incentive to provide care, including advanced technologies, in 
an efficient manner to ensure the lowest cost for the patient's 
diagnosis. In contrast, in hospital outpatient departments, because 
Medicare payment is based on procedures rather than diagnoses, the 
commenter believed that hospitals have an incentive to provide the 
lowest cost item or service included in an APC. The commenter further 
believed that if that service does not fully address the patient's 
needs, the hospital would receive better payment by bringing the 
patient back for a second visit or admitting the patient for inpatient 
care than by providing a more costly option within the same APC.
    Moreover, the commenters believed that when an APC's payment rate 
is significantly less than the cost of a technology, hospitals have a 
strong disincentive to use that technology, even if it could reduce the 
costs of care at a later date. The commenters believed that CMS' use of 
expanded packaging has the risk of encouraging hospitals to forego 
performing needed services and using new technologies that may be more 
resource intensive during one visit, but could save the patient future 
outpatient department visits or inpatient care.
    Response: Packaging payment for items and services that are 
ancillary to and dependent on the major procedure for which a payment 
rate is established is a fundamental concept of the OPPS, based in 
regulation in the definition of costs that are included in the national 
payment rate for a service (42 CFR 419.2(b)) and in place since the 
inception of the OPPS (65 FR 18447). We continue to believe that 
packaging creates incentives for hospitals and their physician partners 
to work together to establish appropriate protocols that eliminate 
unnecessary services where they exist and institutionalize approaches 
to providing necessary services more efficiently. With respect to new 
services or new applications of existing technology, we believe that 
packaging payment for ancillary and dependent services creates 
appropriate incentives for hospitals to seriously consider whether a 
new service or a new technology offers a benefit that is sufficient to 
justify the cost of the new service or new technology. Where this 
review results in reductions in services that are only marginally 
beneficial or influences hospitals' choices to not utilize certain 
technologies, we believe that these changes could improve, rather than 
harm, the quality of care for Medicare beneficiaries because every 
service furnished in a hospital carries

[[Page 74187]]

some level of risk to the patient and the beneficiary would be spared 
the risk associated with the additional service or different 
technology. Moreover, we believe that hospitals strive to provide the 
best care they can to the patients they serve so that when new 
technologies are proven to improve the quality of care, their 
utilization will increase appropriately, whether the payment for them 
is packaged or not. While we believe hospitals are committed to provide 
optimal care to their patients, we are aware that there are financial 
pressures on hospitals that might motivate some providers to split 
services among different hospital encounters in such a way as to 
maximize payments. While we do not expect that hospitals would 
routinely change the way they furnish services or the way they bill for 
services in order to maximize payment, we recognize that it would be 
possible and we consider that possibility as we annually review 
hospital claims data. We will continue to examine claims data for 
patterns of fragmented care, and if we find a pattern in which a 
hospital appears to be dividing care across multiple days, we will 
refer it for investigation to the QIO or to the Program Safeguard 
Contractor, as appropriate to the circumstances we find.
    Comment: Commenters asked that CMS make underlying payment rates 
for packaged services, including utilization rates, estimated median 
costs, and numbers of hospitals furnishing various services, available 
to the public. In addition, commenters asked that CMS study and report 
annually to the APC Panel and to the public on the impact of packaged 
payment on beneficiary access to care. One commenter believed that the 
APC Panel recommended that CMS report annually on the impact of 
packaging on net payments for patient care.
    Response: 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, as we discuss in 
detail in section II.A.2. of this final rule with comment period, we 
make available the public use files of claims, including, for CY 2008 
and later, supplemental line item cost data for every HCPCS code under 
the OPPS, and a detailed narrative description of our data process for 
the annual OPPS/ASC proposed and final rules that the public can use to 
perform any desired analyses. Therefore, 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 public requests for changes to 
payments under the OPPS, whether with regard to separate payment for a 
packaged service or other issues. We understand that the OPPS is a 
complex payment system and that it may be difficult to determine the 
quantitative amount of packaged cost included in the median 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 current and prior proposed and final rules. The APC Panel did not 
recommend at either the February 2011 or August 2011 meetings that CMS 
should report annually on the impact of packaging on net payments for 
patient care.
    Comment: Commenters stated that CMS assumes that its packaging 
policies will allow it to continue to collect the data it needs to set 
appropriate, stable payment rates in the future, but that this 
assumption is flawed. Commenters stated that CMS' past experience with 
packaging payment for ancillary items indicates that hospitals do not 
submit codes for services that do not directly affect their payment and 
see no reason to believe that this will change. The commenters asked 
that CMS require complete and correct coding for packaged services so 
that all items and services that are not individually paid must be 
included on the claim to provide CMS with essential data for future 
OPPS updates. Commenters expressed concern about what they believed to 
be decreases in the number of hospitals reporting services as a result 
of packaging and bundling. They believed that the decline could be due 
to one or both of two reasons: Hospitals may no longer be providing 
these services; or hospitals could be providing these services but not 
reporting codes and charges for them, denying CMS accurate data for use 
in rate setting. The commenters were concerned that decreased reporting 
of services will result in the costs of packaged services not being 
included in the payment for the independent service with which they are 
furnished.
    Response: We do not believe that there has been or will be a 
significant change in what hospitals report and charge for the 
outpatient services they furnish to Medicare beneficiaries and other 
patients as a result of our current packaging methodology. Medicare 
cost reporting standards specify that hospitals must impose the same 
charges for Medicare patients as for other patients. We are often told 
by hospitals that many private payers pay based on a percentage of 
charges and that, in accordance with Medicare cost reporting rules and 
generally accepted accounting principles, hospital chargemasters do not 
differentiate between the charges to Medicare patients and other 
patients. Therefore, we have no reason to believe that hospitals will 
stop reporting HCPCS codes and charges for packaged services they 
provide to Medicare beneficiaries. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (74 FR 68575), we strongly encourage 
hospitals to report a charge for each packaged service they furnish, 
either by billing the packaged HCPCS code and a charge for that service 
if separate reporting is consistent with CPT and CMS instructions, by 
increasing the charge for the separately paid associated service to 
include the charge for the packaged service, or by reporting the charge 
for the packaged service with an appropriate revenue code but without a 
HCPCS code. Any of these means of charging for the packaged service 
will result in the cost of the packaged service being incorporated into 
the cost we estimate for the separately paid service. If a HCPCS code 
is not reported when a packaged service is provided, we acknowledge 
that it can be challenging to specifically track the utilization 
patterns and resource cost of the packaged service itself. However, we 
have no reason to believe that hospitals have not considered the cost 
of the packaged service in reporting charges for the independent, 
separately paid service. We expect that hospitals, as other prudent 
businesses, have a quality review process that ensures that they 
accurately and completely report the services they furnish, with 
appropriate charges for those services to Medicare and all other 
payers. We encourage hospitals to report on their claim for payment all 
HCPCS codes that describe packaged services that were furnished, unless 
the CPT Editorial Panel or CMS provides other guidance. To the extent 
that hospitals include separate charges for packaged services on their 
claims, the estimated costs of those packaged services are then added 
to the costs of separately paid procedures on the same claims and used 
in establishing

[[Page 74188]]

payment rates for the separately paid services. It is impossible to 
know with any certainty whether hospitals are failing to report HCPCS 
codes and charges for services for which the payment is packaged into 
payment for the independent service with which the packaged service is 
furnished. Moreover, if a hospital fails to report the HCPCS codes and 
charges for packaged services, the reason may be that the hospital has 
chosen to package the charge for the ancillary and dependent service 
into the charge for the service with which it is furnished. Although we 
prefer that hospitals report HCPCS codes and charges for all services 
they furnish, if the hospital's charge for the independent service also 
reflects the charge for all ancillary and supportive services it 
typically provides, the absence of HCPCS codes and separate charges 
would not result in inappropriately low median cost for the independent 
service, although CMS would not know which specific ancillary and 
supportive services were being furnished. If a hospital is no longer 
providing a service, there may be many reasons that a hospital chooses 
not to provide a particular service or chooses to cease providing a 
particular service, including, but not limited to, because the hospital 
has determined that it is no longer cost effective for the hospital to 
furnish the service and that there may be other hospitals in the 
community that can furnish the service more efficiently.
    Comment: One commenter asked that CMS reinstate separate payment 
for radiation oncology guidance procedures because these services are 
vital to the safe provision of radiation therapy and unconditionally 
packaging payment for them may discourage hospitals from providing 
them.
    Response: We recognize that radiation oncology guidance services, 
like most packaged services, are important to providing safe and high 
quality care to patients. However, we continue to believe that 
hospitals will invest in services that represent genuinely increased 
value to patient care, and if hospitals can furnish them efficiently. 
We will continue to pay separately for innovative technologies if a 
device meets the conditions for separate payment as a pass-through 
device or if a new procedure meets the criteria for payment as a new 
technology APC.
    After considering the public comments we received, for CY 2012, we 
are continuing to package payment for the services for which we 
proposed unconditional or conditional packaged payment in the proposed 
rule for the reasons set forth above. The HCPCS codes for which payment 
will be packaged into payment for the independent separately paid 
procedures with which the codes are reported either unconditionally 
(for which we continue to assign status indicator ``N''), or 
conditionally (for which we continue to assign status indicators 
``Q1'', ``Q2'', or ``Q3'') are displayed in Addendum B of this final 
rule with comment period (which is referenced in section XVIII. of this 
final rule with comment period and available via the Internet on the 
CMS Web site). The supporting documents for this CY 2012 OPPS/ASC final 
rule with comment period, including but not limited to Addendum B, are 
available at www.cms.gov/HospitalOutpatientPPS/HORD. To view the status 
indicators by HCPCS code in Addendum B, select ``CMS 1525-FC'' and then 
select the folder labeled ``2012 OPPS Proposed Rule Addenda'' or ``2012 
OPPS Final Rule With Comment Period Addenda'' from the list of 
supporting files. Open the zipped file and select Addendum B, which is 
available as both an Excel file and a text file.
    The continuation of our standard policy regarding packaging of 
drugs and biologicals, implantable biologicals, contrast agents and 
diagnostic radiopharmaceuticals is discussed in section V.B. of this 
final rule with comment period. We note that an implantable biological 
that is surgically inserted or implanted through a surgical incision or 
a natural orifice is commonly referred to throughout this final rule 
with comment period as an ``implantable biological.''
    The creation of a new composite APC for CY 2012 for payment of the 
insertion of cardiac resynchronization devices is discussed in section 
II.A.2.e.(6) of this final rule with comment period.
4. Calculation of OPPS Scaled Payment Weights
    As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42209), 
using the APC median costs discussed in sections II.A.1. and II.A.2. of 
this final rule with comment period, we calculated the final relative 
payment weights for each APC for CY 2012 shown in Addenda A and B to 
this final rule with comment period (which are referenced in section 
XVII. of this final rule with comment period and available via the 
Internet on the CMS Web site). In years prior to CY 2007, we 
standardized all the relative payment weights to APC 0601 (Mid Level 
Clinic Visit) because mid-level clinic visits were among the most 
frequently performed services in the hospital outpatient setting. We 
assigned APC 0601 a relative payment weight of 1.00 and divided the 
median cost for each APC by the median cost for APC 0601 to derive the 
relative payment weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights to APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
clinic visit APCs. We selected APC 0606 as the base because APC 0606 
was the mid-level clinic visit APC (that is, Level 3 of five levels). 
Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42209), for CY 
2012, to maintain consistency in using a median for calculating 
unscaled weights representing the median cost of some of the most 
frequently provided services, we proposed to continue to use the median 
cost of the mid-level clinic visit APC (APC 0606) to calculate unscaled 
weights. Following our standard methodology, but using the proposed CY 
2012 median cost for APC 0606, for CY 2012, we assigned APC 0606 a 
relative payment weight of 1.00 and divided the median cost of each APC 
by the proposed median cost for APC 0606 to derive the proposed 
unscaled relative payment weight for each APC. The choice of the APC on 
which to base the proposed relative weights for all other APCs does not 
affect the payments made under the OPPS because we scale the weights 
for budget neutrality.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that the 
estimated aggregate weight under the OPPS for CY 2012 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we proposed to compare the estimated 
aggregate weight using the CY 2011 scaled relative weights to the 
estimated aggregate weight using the proposed CY 2012 unscaled relative 
weights. For CY 2011, we multiplied the CY 2011 scaled APC relative 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2010 claims to calculate the total weight for each 
service. We then added together the total weight for each of these 
services in order to calculate an estimated aggregate weight for the 
year. For CY 2012, we performed the same process using the proposed CY 
2012 unscaled weights rather than scaled weights. We then calculated 
the weight scaler by dividing the CY 2011 estimated aggregate weight by 
the

[[Page 74189]]

proposed CY 2012 estimated aggregate weight. The service-mix is the 
same in the current and prospective years because we use the same set 
of claims for service volume in calculating the aggregate weight for 
each year. For a detailed discussion of the weight scaler calculation, 
we refer readers to the OPPS claims accounting document available on 
the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/. We 
included payments to CMHCs in our comparison of estimated unscaled 
weight in CY 2012 to estimated total weight in CY 2011 using CY 2010 
claims data, holding all other components of the payment system 
constant to isolate changes in total weight. Based on this comparison, 
we adjusted the unscaled relative weights for purposes of budget 
neutrality. The proposed CY 2012 unscaled relative payment weights were 
adjusted by multiplying them by a proposed weight scaler of 1.4647 to 
ensure that the proposed CY 2012 relative weights are budget neutral.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain ``specified covered outpatient drugs.'' That section 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 specified covered outpatient drugs (as discussed in section 
V.B.3. of the proposed rule and this final rule with comment period) 
was included in the proposed budget neutrality calculations for the CY 
2012 OPPS.
    We did not receive any public comments on the proposed methodology 
for calculating scaled weights from the median costs for the CY 2012 
OPPS. Therefore, for the reasons set forth in the proposed rule (76 FR 
42209), we are finalizing our proposed methodology without 
modification, including updating of the budget neutrality scaler for 
this final rule with comment period as we proposed. Under this 
methodology, the final unscaled payment weights were adjusted by a 
weight scaler of 1.3588 for this final rule with comment period. The 
final scaled relative payment weights listed in Addenda A and B to this 
final rule with comment period (which are referenced in section XVII. 
of this final rule with comment period and available via the Internet 
on the CMS Web site) incorporate the final recalibration adjustments 
discussed in sections II.A.1. and II.A.2. of this final rule with 
comment period.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires us to update the 
conversion factor used to determine payment rates under the OPPS on an 
annual basis 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 2012 IPPS/LTCH PPS final rule 
(76 FR 51689), consistent with current law, based on IHS Global 
Insight, Inc.'s second quarter 2011 forecast of the FY 2012 market 
basket increase, the FY 2012 IPPS market basket update is 3.0 percent. 
However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as 
added by section 3401(i) of the Public Law 111-148 and as amended by 
section 10319(g) of such law and further amended by section 1105(e) of 
Public Law 111-152, provide adjustments to the OPD fee schedule update 
for CY 2012.
    Specifically, section 1833(t)(3)(F) requires that the OPD fee 
schedule increase factor under subparagraph (C)(iv) be reduced by the 
adjustments described in section 1833(t)(3)(F) of the Act. 
Specifically, section 1833(t)(3)(F)(i) of the Act requires that 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 for 2012 and subsequent years. 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''). We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51690 through 51692) for a discussion of the calculation of the 
MFP adjustment. The final MFP adjustment for FY 2012 is 1.0 percentage 
point.
    We proposed that if more recent data are subsequently available 
after the publication of the proposed rule (for example, a more recent 
estimate of the market basket and MFP adjustment), we would use such 
data, if appropriate, to determine the CY 2012 market basket update and 
the MFP adjustment in the CY 2012 final rule. Consistent with this 
proposal, in this CY 2012 OPPS/ASC final rule with comment period, we 
reduced the OPD fee schedule increase factor for CY 2012 by the final 
MFP adjustment of 1.0 percentage point for FY 2012. Because the OPD fee 
schedule increase factor is based on the IPPS hospital inpatient market 
basket percentage increase, we believe that it is appropriate to apply 
the same MFP adjustment that is used to reduce the IPPS market basket 
increase to the OPD fee schedule increase factor. Consistent with the 
FY 2012 IPPS/LTCH PPS final rule, we applied the updated final FY 2012 
market basket percentage increase and the MFP adjustment to the OPD fee 
schedule increase factor for the CY 2012 OPPS. We believe that it is 
appropriate to apply the MFP adjustment, which is calculated on a 
fiscal year basis, to the OPD fee schedule increase factor, which is 
used to update the OPPS payment rates on a calendar year basis, because 
we believe that it is appropriate for the numbers associated with both 
components of the calculation (the underlying OPD fee schedule increase 
factor and the productivity adjustment) to be aligned so that changes 
in market conditions are aligned.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that the 
OPD fee schedule increase factor under subparagraph (C)(iv) be reduced 
by the adjustment described in subparagraph (G) for each of 2010 
through 2019. For CY 2012, section 1833(t)(3)(G)(ii) of the Act 
provides a 0.1 percentage point reduction to the OPD fee schedule 
increase factor under subparagraph (C)(iv). Therefore, as we proposed, 
we are applying a 0.1 percentage point reduction to the OPD fee 
schedule increase factor.
    We note that section 1833(t)(F) of the Act provides that 
application of this subparagraph may result in the increase factor 
under subparagraph (C)(iv) being less than 0.0 for a year, and may 
result in payment rates under the payment system under this subsection 
for a year being less than such payment rates for the preceding year. 
As described in further detail below, we are applying an OPD fee 
schedule increase factor of 1.9 percent for the CY 2012 OPPS (3.0 
percent, which is the final estimate of the hospital market basket 
increase, less the 1.0 percentage point MFP adjustment, less the 0.1 
percentage point additional adjustment).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42210), we proposed to 
revise 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (3) to 
reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, 
for CY 2012, we reduce the OPD fee schedule increase factor by the

[[Page 74190]]

multifactor productivity adjustment as determined by CMS, and to 
reflect the requirement in section 1833(t)(3)(G)(ii) of the Act, as 
required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the 
OPD fee schedule increase factor by 0.1 percentage point for CY 2012. 
We also proposed to amend Sec.  419.32(b)(1)(iv)(A) to indicate that 
the hospital inpatient market basket percentage increase applicable 
under section 1886(b)(3)(B)(iii) of the Act is further reduced by the 
adjustments necessary to satisfy the requirements in sections 
1833(t)(3)(F) and (t)(3)(G) of the Act.
    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 (3). We also did not 
receive any public comments on our proposed change to Sec.  
419.32(b)(1)(iv)(A). For the reasons discussed above, we are adjusting 
the OPD fee schedule increase factor and are making the two changes to 
Sec.  419.32 as proposed.
    To set the OPPS conversion factor for CY 2012, we increased the CY 
2011 conversion factor of $68.876 by 1.9 percent. In accordance with 
section 1833(t)(9)(B) of the Act, we further adjusted the conversion 
factor for CY 2012 to ensure that any revisions we make to the updates 
for a revised wage index and rural adjustment are made on a budget 
neutral basis. We calculated an overall budget neutrality factor of 
1.0005 for wage index changes by comparing total estimated payments 
from our simulation model using the FY 2012 IPPS final wage indices to 
those payments using the current (FY 2011) IPPS wage indices, as 
adopted on a calendar year basis for the OPPS.
    For CY 2012, we are not making a change to our rural adjustment 
policy. Therefore, the budget neutrality factor for the rural 
adjustment is 1.0000.
    For CY 2012, we are finalizing a payment adjustment policy for 
dedicated cancer hospitals, as discussed in section II.F. of this final 
rule with comment period. Consistent with the final cancer hospital 
payment adjustment policies discussed in section II.F. of this final 
rule with comment period, we calculated a CY 2012 budget neutrality 
adjustment factor of 0.9978 by comparing the estimated total payments 
under section 1833(t) of the Act, including the cancer hospital 
adjustment under section 1833(t)(18)(B) and 1833(t)(2)(E) of the Act, 
to hospitals described in section 1886(d)(1)(B)(v) of the Act to the 
estimated total payments under section 1833(t) of the Act if there were 
no cancer hospital adjustment, including TOPS that would otherwise be 
made to hospitals described in section 1886(d)(1)(B)(v) of the Act. As 
discussed in section II.F. of this final rule with comment period, in 
terms of dollars, the budget neutrality payment reduction is estimated 
to be $71 million for CY 2012; that is, we estimate that total payments 
with a cancer hospital payment adjustment would increase total payments 
by $71 million and this amount needs to be offset by adjusting other 
payments. Therefore, we applied a budget neutrality adjustment factor 
of 0.9978 to the conversion factor to make the hospital adjustment 
budget neutral.
    For this final rule with comment period, we estimate that pass-
through spending for both drugs and biologicals and devices for CY 2012 
will equal approximately $89 million, which represents 0.22 percent of 
total projected CY 2012 OPPS spending. Therefore, the conversion factor 
is also adjusted by the difference between the 0.15 percent estimate of 
pass-through spending for CY 2011 and the 0.22 percent estimate of CY 
2012 pass-through spending, resulting in an adjustment for CY 2012 of 
0.07 percent. Finally, estimated payments for outliers remain at 1.0 
percent of total OPPS payments for CY 2012.
    The OPD fee schedule increase factor of 1.9 percent for CY 2012 
(that is, the estimate of the hospital market basket increase of 3.0 
percent less the 1.0 percentage point MFP adjustment and less the 0.1 
percentage point adjustment which were necessary in order to comply 
with the requirements of the Affordable Care Act), the required wage 
index budget neutrality adjustment of approximately 1.0005, the cancer 
hospital payment adjustment of 0.9978, and the adjustment of 0.07 
percent of projected OPPS spending for the difference in the pass-
through spending result in a conversion factor for CY 2012 of $70.016. 
This conversion factor for CY 2012 of $70.016 reflects the full OPD fee 
schedule increase, after including the adjustments which were necessary 
in order to comply with the requirements of the Affordable Care Act.
    As we stated in the proposed rule, hospitals that fail to meet the 
reporting requirements of the Hospital OQR Program would continue to be 
subject to a further reduction of additional 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 made for 
their services as required by section 1833(t)(17) of the Act. For a 
complete discussion of the Hospital OQR requirements and the payment 
reduction for hospitals that fail to meet those requirements, we refer 
readers to section XIV. E. of the proposed rule and this final rule 
with comment period. To calculate the CY 2012 reduced market basket 
conversion factor for those hospitals that fail to meet the 
requirements of the Hospital OQR Program for the full CY 2012 payment 
update, we are making all other adjustments discussed above, but using 
a reduced OPD fee schedule update factor of -0.1 percent (that is, the 
OPD fee schedule increase factor of 1.9 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 
resulted in a reduced conversion factor for CY 2012 of $68.616 for 
those hospitals that fail to meet the Hospital OQR requirements (a 
difference of -$1.40 in the conversion factor relative to those 
hospitals that met the Hospital OQR requirements).
    We did not receive any public comments on our proposed methodology 
for calculating the CY 2012 conversion factor.
    In summary, for CY 2012, we are using a final conversion factor of 
$70.016 in the calculation of the national unadjusted payment rates for 
those items and services for which payment rates are calculated using 
median costs. We did not receive any public comments on this proposal. 
Therefore, for the reasons we discuss above, we are amending Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (3) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2012 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are amending Sec.  
419.32(b)(1)(iv)(A) to indicate that the hospital inpatient market 
basket percentage increase is reduced by the adjustments described in 
Sec.  419.32(b)(1)(iv)(B). We are using a reduced conversion factor of 
$68.616 in the calculation of payments for hospitals that fail to 
comply with the Hospital OQR requirements to reflect the reduction to 
the OPD fee schedule increase factor that is required by section 
1833(t)(17) of the Act for these hospitals.

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust, for geographic wage 
differences, the portion of the OPPS payment rate, which includes the 
copayment standardized amount, that is attributable to labor and labor-
related cost. This portion of the OPPS payment rate is called the OPPS

[[Page 74191]]

labor-related share. This adjustment must be made in a budget neutral 
manner and budget neutrality is discussed in section II.B. of this 
final rule with comment period.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). Therefore, in the CY 2012 OPPS/ASC 
proposed rule (76 FR42211), we did not propose to revise this policy 
for the CY 2012 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 national median APC costs, we standardize 60 
percent of estimated claims costs for geographic area wage variation 
using the same FY 2012 pre-reclassified wage index that the IPPS uses 
to standardize costs. This standardization process removes the effects 
of differences in area wage levels from the determination of a national 
unadjusted OPPS payment rate and the copayment amount.
    As published in the original OPPS April 7, 2000 final rule with 
comment period (65 FR 18545), the OPPS has consistently adopted the 
final fiscal year IPPS wage index as the calendar year wage index for 
adjusting the OPPS standard payment amounts for labor market 
differences. Thus, the wage index that applies to a particular acute 
care short-stay hospital under the IPPS also applies to that hospital 
under the OPPS. As initially explained in the September 8, 1998 OPPS 
proposed rule, 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 contains provisions that affect the final 
FY 2012 IPPS wage index values, including revisions to the 
reclassification wage comparability criteria that were finalized in the 
FY 2009 IPPS final rule (73 FR 48568 through 48570), and the 
application of rural floor budget neutrality on a national, rather than 
State-specific, basis through a uniform, national adjustment to the 
area wage index (76 FR 26021). In addition, section 10324 of the 
Affordable Care Act requires CMS to establish an adjustment to create a 
wage index floor of 1.00 for hospitals located in States determined to 
be frontier States.
    Section 10324 of the Affordable Care Act specifies that, for 
services furnished beginning CY 2011, the wage adjustment factor 
applicable to any HOPD that is located in a frontier State (as defined 
in section 1886(d)(3)(E)(iii)(II) of the Act) may not be less than 
1.00. Further, section 10324 states that this adjustment to the wage 
index for these outpatient departments should not be made in a budget 
neutral manner. As such, for the CY 2012 OPPS, as we proposed, we are 
continuing to adjust the FY 2012 IPPS wage index, as adopted on a 
calendar year basis for the OPPS, for all hospitals paid under the 
OPPS, including non-IPPS hospitals (providers that are not paid under 
the IPPS) located in a frontier State, to 1.00 in instances where the 
FY 2012 wage index (that reflects Medicare Geographic Classification 
Review Board (MGCRB) reclassifications, the application of the rural 
floor, and the rural floor budget neutrality adjustment) for these 
hospitals is less than 1.00. Similar to our current policy for HOPDs 
that are affiliated with multicampus hospital systems, we fully expect 
that the HOPD will receive a wage index based on the geographic 
location of the specific inpatient hospital with which it is 
associated. Therefore, if the associated hospital is located in a 
frontier State, the wage index adjustment applicable for the hospital 
will also apply for the affiliated HOPD. We refer readers to the FY 
2011 and FY 2012 IPPS/LTCH PPS final rules (75 FR 50160 and 76 FR 
51581, respectively) for a detailed discussion regarding this 
provision, including our methodology for identifying which areas meet 
the definition of frontier States as provided for in section 
1886(d)(3)(E)(iii)(II)) of the Act.
    In addition to the changes required by the Affordable Care Act, we 
note that the FY 2012 IPPS wage indices continue to reflect a number of 
adjustments implemented over the past few years, including, but not 
limited to, reclassification of hospitals to different geographic 
areas, the rural floor provisions, an adjustment for occupational mix, 
and an adjustment to the wage index based on commuting patterns of 
employees (the out-migration adjustment). We refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51581 through 51605) for a 
detailed discussion of all changes to the FY 2012 IPPS wage indices. In 
addition, we refer readers to the CY 2005 OPPS final rule with comment 
period (69 FR 65842 through 65844) and subsequent OPPS rules for a 
detailed discussion of the history of these wage index adjustments as 
applied under the OPPS.
    Section 3137 of the Affordable Care Act extended, through FY 2010, 
section 508 reclassifications as well as certain special exceptions. 
The most recent extension of the provision was included in section 102 
of the Medicare and Medicaid Extender Act, which extends, through FY 
2011, section 508 reclassifications as well as certain special 
exceptions. The latest extension of these provisions expired on 
September 30, 2011, and is no longer applicable effective with FY 2012. 
As we did for CY 2010, we revised wage index values for certain special 
exception hospitals from January 1, 2011 through December 31, 2011, 
under the OPPS, in order to give these hospitals the special exception 
wage indices under the OPPS for the same time period as under the IPPS. 
In addition, because the OPPS pays on a calendar year basis, the 
effective date under the OPPS for all other nonsection 508 and non-
special exception providers was July 1, 2011, instead of April 1, 2011, 
so that these providers also received a full 6 months of payment under 
the revised wage index comparable to the IPPS.
    For purposes of the OPPS, as we proposed, we are continuing our 
policy in CY 2012 of allowing non-IPPS hospitals paid under the OPPS to 
qualify for the out-migration adjustment if they are located in a 
section 505 out-migration county (section 505 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). 
We note that, because non-IPPS hospitals cannot reclassify, they are 
eligible for the out-migration wage adjustment. Table 4J listed in the 
FY 2012 IPPS/LTCH PPS final rule (and made available via the Internet 
on the CMS Web site at: http://www.cms.gov/AcuteInpatientPPS/01_overview.asp) identifies counties eligible for the out-migration 
adjustment and hospitals that will receive the adjustment for FY 2012. 
We note that, beginning with FY 2012, under the IPPS, an eligible 
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status 
and, thus, is rural for all purposes under the IPPS, including being 
considered rural for the disproportionate share hospital (DSH)

[[Page 74192]]

payment adjustment, effective for the fiscal year in which the hospital 
receives the out-migration adjustment. We refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51599) 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 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 2012 OPPS. Addendum L is referenced in section XVII. of 
this final rule with comment period and available via the Internet on 
the CMS Web site.
    As stated earlier in this section, our longstanding policy for OPPS 
has been to adopt the final wage index used in IPPS. Therefore, for 
calculating OPPS payments in CY 2012, we used the FY 2012 IPPS wage 
indices. However, section 1833(t)(2)(D) of the Act confers broad 
discretionary authority upon the Secretary in determining the wage 
adjustment factor used under the OPPS. Specifically, this provision 
provides that ``subject to paragraph (19), the Secretary shall 
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 other prospective payment systems, we do not adopt the 
adjustments applied to the IPPS wage index, such as the out-migration 
adjustment, reclassifications, and the rural floor. For the OPPS, using 
the IPPS wage index as the source of an adjustment factor for 
geographic wage differences has, in the past, been both reasonable and 
logical, given the inseparable, subordinate status of the outpatient 
department within the hospital overall.
    However, in recent years, we have become concerned that hospitals 
converting their status significantly inflate wage indices across a 
State. In the FY 2008 IPPS final rule (72 FR 47324 and 47325), we 
discussed a situation where a CAH may have converted back to IPPS 
status in order to increase the rural floor.
    The FY 2012 IPPS/LTCH PPS final rule (76 FR 51824) shows the impact 
of this CAH conversion. Hospitals in Massachusetts can expect an 
approximate 8.7percent increase in IPPS payments due to the conversion 
and the resulting increase of the rural floor. Our concern is that the 
manipulation of the rural floor is of sufficient magnitude that it 
requires all hospital wage indices to be reduced approximately 0.62 
percent as a result of nationwide budget neutrality for the rural floor 
(or more than a 0.4 percent total payment reduction to all IPPS 
hospitals).
    In addition to the CAH conversion, we recently received two 
requests from urban hospitals to convert to rural hospital status under 
section 1886(d)(8)(E) of the Act, which would inflate other States' 
rural floors, through the conversion of what would otherwise be urban 
hospitals to rural status. While we recognize that conversions from 
urban-to-rural status are permitted under section 1886(d)(8)(E) of the 
Act, we are concerned with individual urban to rural conversions 
allowing payment redistributions of this magnitude.
    We believe the above discussions demonstrate that the rural floor 
is resulting in significant disparities in wage index and, in some 
cases, resulting in situations where all hospitals in a State receive a 
wage index higher than that of the single highest wage index urban 
hospital in the State. As stated above, the statute does not require 
the Secretary to use the IPPS wage adjustment factor to wage adjust 
OPPS payments and copayments, nor to apply to OPPS payment and 
copayment calculations the same wage adjustment factor that the law 
requires be applied to IPPS payments.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42212), we stated that 
we were considering the adoption of a policy that would address 
situations where IPPS wage index adjustments, such as the rural floor, 
result in significant fluctuations in the wage index within a State. 
One option we proposed would be not to apply the rural floor wage index 
at all in the OPPS where the rural floor is set by a small number of 
hospitals in a State and results in a rural floor that benefits all 
hospitals in the State. Alternatively, we proposed that we could apply 
within-State rural budget neutrality to the OPPS wage index as we did 
for both the IPPS and OPPS wage index beginning in FY 2009. In the 
proposed rule, we sought public comment on whether to: (1) Adopt the 
IPPS wage index for the OPPS in its entirety including the rural floor, 
geographic reclassifications, and all other wage index adjustments (our 
current policy); (2) adopt the IPPS wage index for the OPPS in its 
entirety except when a small number of hospitals set the rural floor 
for the benefit of all other hospitals in the State, and, if so, then 
not apply the rural floor wage index; (3) adopt the IPPS wage index for 
the OPPS in its entirety except apply rural floor budget neutrality 
within each State instead of nationally; or (4) adopt another decision 
rule for when the rural floor should not be applied in the OPPS when we 
have concerns about disproportionate impact.
    We also requested public comments on an option that we were 
considering adopting for both the IPPS and the OPPS, where we would 
determine the applicable rural wage index floor using only data from 
those hospitals geographically rural under OMB and the Census Bureau's 
MSA designations, and without including wage data associated with 
hospitals reclassified from urban to rural status under section 
1886(d)(8)(E) of the Act. Such a policy would eliminate the incentive 
to reclassify from urban to rural status primarily to increase rural 
floors across a State, and would ensure that the rural floor is based 
upon hospitals located in rural areas.
    Comment: Commenters that were in favor of maintaining the current 
policy (option 1 listed above) of adopting the IPPS wage indices under 
the OPPS cited several different reasons for their choice. Several 
commenters believed that hospital inpatient and outpatient departments 
are ``inseparable'' because they are subject to the same labor cost 
environment, and, therefore, should have the same wage index where 
applicable. Other commenters preferred maintaining the current wage 
index policy and implementing wage index changes in the context of 
comprehensive wage index reform. These commenters believed that only 
comprehensive wage index reform can revise the wage index in such as 
way as ``to minimize volatility of the wage index and remove incentives 
to game the system.'' Commenters stated that an additional reason for 
maintaining the current policy was that different wage indices for 
inpatient and outpatient payments would add a level of administrative 
complexity that is overly burdensome and unnecessary.
    Several commenters expressed a preference for wage index policy 
option 2 included in the proposed rule (to adopt the IPPS wage index 
for the OPPS in its entirety except when a small number of hospitals 
set the rural floor for the benefit of all other hospitals in the 
State, and, if so, then not apply the rural floor wage index). These 
commenters typically viewed this option to be the best in terms of 
addressing current inequities. However, some of the commenters 
requested that CMS explicitly define a ``small number'' threshold as 
well as what is considered as a ``benefit'' for all other hospitals in 
the State. Some commenters that supported option 2 preferred option 2 
to option 3 (the adoption of the IPPS wage index policies but 
application of statewide rather than national budget

[[Page 74193]]

neutrality for the rural floor policy). Commenters that preferred 
option 2 rather than option 3 argued that a national level adjustment 
was in keeping with Congressional intent, especially given that 
Congress enacted legislation to establish national budget neutrality 
for the rural floor in the IPPS under the Affordable Care Act 
(effective in FY 2011). These commenters also were concerned about CMS 
deciding when budget neutrality adjustments should be applied at the 
State versus national levels.
    Several commenters favored option 3 because they supported the 
application of statewide level budget neutrality for the rural floor 
policy. These commenters favored basing the wage index on Bureau of 
Labor Statistics (BLS) data rather than hospital cost reports but 
believed that, in the absence of broader wage index reform, option 3 
was the most equitable policy. One commenter, although supportive of 
systematic wage index reform, stated that CMS ``should not wait for 
reform to address obvious and significant immediate problems'' and 
therefore advocated for option 3.
    Instead of recommending other policy options, for the fourth 
potential wage index policy option (adopting another decision rule), 
most commenters simply requested further detail. Several commenters did 
not exhibit any preferences for any specific wage index policy options, 
choosing instead to comment generally about issues of concern. One 
commenter believed that ``looking at one policy in isolation serves 
only to address one issue while likely creating other inequities in the 
system.'' Another commenter was concerned that any new rule could 
unnecessarily harm rural providers. Another commenter that supported 
systematic wage index reform advocated not making changes until reports 
from the Institute of Medicine are completed and the CMS report to 
Congress, which is due on December 31, 2011, are fully analyzed. 
Commenters requested further detail to formulate a policy position on 
the four options presented and urged CMS to include impact analyses for 
the final rule.
    Response: We appreciate the public comments. We acknowledge that 
there may be inequities in the current application of the wage index 
policy and its various adjustments. This is why we described various 
methods and wage index options that we might consider under the OPPS to 
address manipulation of wage index adjustment policies, and, in this 
specific case, the rural floor wage index and its national level budget 
neutrality.
    In the CY 2012 OPPS/ASC proposed rule, we referred specifically to 
the conversion of one CAH to IPPS status to increase the rural floor 
for the State, which would increase IPPS and OPPS payments to that 
State, while decreasing IPPS and OPPS payments to hospitals in other 
States, under a policy in which the rural floor wage index budget 
neutrality was applied at the national level. Similarly, we are aware 
of requests from urban hospitals to convert to rural hospital status, 
which would inflate those States' rural floors. While we recognize that 
conversions from urban-to-rural status are permitted under section 
1886(d)(8)(E) of the Act, we are concerned with individual urban-to-
rural conversions that would result in payment redistributions of this 
magnitude.
    However, we agree with the commenters that stated that maintaining 
the current policy for CY 2012 would be the best option, given the 
broader wage index reform currently under development and 
consideration. This includes the Report to Congress with a plan for 
wage index reform, which is due December 31, 2011, under the Affordable 
Care Act. We will continue to consider these policy options in future 
rulemaking, especially in the context of other significant wage index 
revisions. In response to commenters' recommendations that we provide 
more detailed impact analysis, we are providing a State level impact 
table, similar to the table provided in the FY 2012 IPPS/LTCH final 
rule (76 FR 51824 through 51825), that displays the impact of the rural 
floor and imputed floor policies with national budget neutrality on 
OPPS hospitals and their payments by State. This table is included in 
section XX. of this final rule with comment period.
    Comment: A few commenters responded to our request for comments on 
setting the applicable rural wage index floor using only data from 
hospitals that are geographically rural according to OMB and MSA 
designations, and without including wage data associated with hospitals 
reclassified from urban to rural status under section 1886(d)(8)(E) of 
the Act. One commenter opposed using data from geographically rural 
hospitals alone in setting the rural floor because reclassified 
hospitals are considered rural for all payment policies. Several 
commenters agreed that wage data associated with hospitals that are 
reclassified should be excluded from calculation of the rural floor. 
One commenter questioned why it is necessary to maintain the rural 
floor wage index policy under the OPPS.
    Response: For the reasons stated above, in this final rule with 
comment period, we are adopting the IPPS wage index and its adjustments 
for use under the OPPS. However, in the IPPS proposed rule for FY 2013, 
we may address the issue of including hospitals reclassified from urban 
to rural status under section 1886(d)(8)(E) of the Act.
    Comment: One commenter asked whether an increase similar to the 1.1 
percent increase included in the FY 2012 IPPS/LTCH final rule (76 FR 
51788) should also apply under the OPPS.
    Response: The increase cited by the commenter is limited to IPPS 
payments. Budget neutrality (including that for the rural floor) is 
calculated prospectively each year under the OPPS. While we have 
historically adopted the IPPS wage index when developing the wage 
indices for calculating payments under the OPPS, the budget neutrality 
factors that applied to the standardized amount under IPPS as a result 
of the rural floor were not applied to the OPPS conversion factor, and 
thus would not have any effect on OPPS budget neutrality.
    After consideration of the public comments we received, we are 
finalizing our policy to adopt the FY 2012 IPPS wage index for the CY 
2012 OPPS in its entirety including the rural floor, geographic 
reclassifications, and all other wage index adjustments.
    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 2012 
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/HospitalOutpatientPPS/. At this link, readers will find a link to the 
final FY 2012 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

[[Page 74194]]

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). As we proposed in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42213), we are updating the default ratios for CY 
2012 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.
    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 CY 2012 OPPS relative weights. Table 11 published in the 
proposed rule listed the proposed CY 2012 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 adjusted ratios from submitted cost reports to reflect 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 weighted each hospital's CCR by the volume of 
separately paid line-items on hospital claims corresponding to the year 
of the majority of cost reports used to calculate the overall CCRs. We 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66680 through 66682) and prior OPPS rules for a more detailed 
discussion of our established methodology for calculating the statewide 
average default CCRs, including the hospitals used in our calculations 
and our trimming criteria.
    We did not receive any public comments on our CY 2012 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 2012 OPPS relative weights. We used this methodology to 
calculate the statewide average default CCRs listed in Table 11 below.
    For this CY 2012 OPPS/ASC final rule with comment period, 
approximately 47 percent of the submitted cost reports utilized in the 
default ratio calculations represented data for cost reporting periods 
ending in CY 2010 and 53 percent were for cost reporting periods ending 
in CY 2009. For Maryland, we used an overall weighted average CCR for 
all hospitals in the Nation as a substitute for Maryland CCRs. Few 
hospitals in Maryland are eligible to receive payment under the OPPS, 
which limits the data available to calculate an accurate and 
representative CCR. The weighted CCR is used for Maryland because it 
takes into account each hospital's volume, rather than treating each 
hospital equally. We refer readers to the CY 2005 OPPS final rule with 
comment period (69 FR 65822) for further discussion and the rationale 
for our longstanding policy of using the national average CCR for 
Maryland. In general, observed changes in the statewide average default 
CCRs between CY 2011 and CY 2012 are modest and the few significant 
changes are associated with areas that have a small number of 
hospitals.
    Table 11 below lists the finalized statewide average default CCRs 
for OPPS services furnished on or after January 1, 2012.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes
    When the OPPS was implemented, every provider was eligible to 
receive an additional payment adjustment (called either transitional 
corridor payments or transitional outpatient payments (TOPs)) if the 
payments it received for covered OPD services under the OPPS were less 
than the payments it would have received for the same services under 
the prior reasonable cost-based system (referred to as the pre-BBA 
amount). Section 1833(t)(7) of the Act provides that the TOPs were 
temporary payments for most providers and intended to ease their 
transition from the prior reasonable cost-based payment system to the 
OPPS system. There are two exceptions to this temporary provision, 
cancer hospitals and children's hospitals. Such a hospital could 
receive TOPs to the extent its PPS amount was less than its pre-BBA 
amount in the applicable year. Section 1833(t)(7)(D)(i) of the Act 
originally provided for TOPs to rural hospitals with 100 or fewer beds 
for covered OPD services furnished before January 1, 2004. However, 
section 411 of Pub. L. 108-173 (the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003) amended section 
1833(t)(7)(D)(i) of the Act to extend these payments through December 
31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also 
extended the TOPs to sole community hospitals (SCHs) located in rural 
areas for services furnished during the period that began with the 
provider's first cost reporting period beginning on or after January 1, 
2004, and ending on December 31, 2005. Accordingly, the authority for 
making TOPs under section 1833(t)(7)(D)(i) of the Act, as amended by 
section 411 of Public Law 108-173, for rural hospitals having 100 or 
fewer beds and SCHs located in rural areas expired on December 31, 
2005.
    Section 5105 of Public Law 109-171 (the Deficit Reduction Act of 
2005) extended the TOPs for covered OPD services furnished on or after 
January 1, 2006, and before January 1, 2009, for rural hospitals having 
100 or fewer beds that are not SCHs. Section 5105 also reduced the TOPs 
to rural hospitals from 100 percent of the difference between the 
provider's OPPS payments and the pre-BBA amount. When the OPPS payment 
was less than the provider's pre-BBA amount, the amount of payment was 
increased by 95 percent of the amount of the difference between the two 
amounts for CY 2006, by 90 percent of the amount of that difference for 
CY 2007, and by 85 percent of the amount of that difference for CY 
2008.
    For CY 2006, we implemented section 5105 of Public Law 109-171 
through Transmittal 877, issued on February 24, 2006. In the 
Transmittal, we did not specifically address whether TOPs apply to 
essential access community hospitals (EACHs), which are considered to 
be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, 
under the statute, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010), we stated that EACHs were 
not eligible for TOPs under Public Law 109-171. However, we stated they 
were eligible for the adjustment for rural SCHs authorized under 
section 411 of Public Law 108-173. In the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68010 and 68228), we updated Sec.  419.70(d) 
of our regulations to reflect the requirements of Public Law 109-171.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated 
that, effective for services provided on or after January 1, 2009, 
rural hospitals having 100 or fewer beds that are not SCHs would no 
longer be eligible for TOPs, in accordance with section 5105 of Public 
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 
proposed rule, section 147 of Public Law 110-275 amended section 
1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural 
hospitals with 100 beds or fewer for 1 year, for services provided 
before January 1, 2010. Section 147 of Public Law 110-275 also extended 
TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD 
services provided on or after January 1, 2009, and before January 1, 
2010. In accordance with section 147 of Public Law 110-275, when the 
OPPS payment is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payment amounts for CY 2009.
    For CY 2009, we revised our regulations at Sec. Sec.  419.70(d)(2) 
and (d)(4) and added a new paragraph (d)(5) to incorporate the 
provisions of section 147 of Public Law 110-275. In addition, we made 
other technical changes to Sec.  419.70(d)(2) to more precisely capture 
our existing policy and to correct an inaccurate cross-reference. We 
also made technical corrections to the cross-references in paragraphs 
(e), (g), and (i) of Sec.  419.70.
    For CY 2010, we made a technical correction to the heading of Sec.  
419.70(d)(5) to correctly identify the policy as described in the 
subsequent regulation text. The paragraph heading now indicates that 
the adjustment applies to small SCHs, rather than to rural SCHs.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60425), we stated that, effective for services provided on or after 
January 1, 2010, rural hospitals and SCHs (including EACHs) having 100 
or fewer beds would no longer be eligible for TOPs, in accordance with 
section 147 of Public Law 110-275. However, subsequent to issuance of 
the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of 
the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the 
Act by extending the period of TOPs to rural hospitals that are not 
SCHs with 100 beds or fewer for 1 year, for services provided before 
January 1, 2011. Section 3121(a) of the Affordable Care Act amended 
section 1833(t)(7)(D)(i)(III) of the Act and extended the period of 
TOPs to SCHs (including EACHs) for 1

[[Page 74199]]

year, for services provided before January 1, 2011, and section 3121(b) 
of the Affordable Care Act removed the 100-bed limitation applicable to 
such SCHs for covered OPD services furnished on and after January 1, 
2010, and before January 1, 2011. In accordance with section 3121 of 
the Affordable Care Act, when the OPPS payment is less than the 
provider's pre-BBA amount, the amount of payment is increased by 85 
percent of the amount of the difference between the two payment amounts 
for CY 2010. Accordingly, in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71882), we updated Sec.  419.70(d) of the 
regulations to reflect the TOPs extensions and amendments described in 
section 3121 of the Affordable Care Act.
    Section 108 of the Medicare and Medicaid Extenders Act of 2010 
(MMEA) (Pub. L. 111-309) extended for 1 year the hold harmless 
provision for a rural hospital with 100 or fewer beds that is not an 
SCH (as defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, 
for such a hospital, for services furnished before January 1, 2012, 
when the PPS amount is less than the provider's pre-BBA amount, the 
amount of payment is increased by 85 percent of the amount of the 
difference between the two payments. In addition, section 108 of the 
MMEA also extended for 1 year the hold harmless provision for an SCH 
(as defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) 
and removed the 100-bed limit applicable to such SCHs for covered OPD 
services furnished on or after January 1, 2010 and before January 1, 
2012. Therefore, for such hospitals, for services furnished before 
January 1, 2012, when the PPS amount is less than the provider's pre-
BBA amount, the amount of payment is increased by 85 percent of the 
amount of the difference between the two payments. Effective for 
services provided on or after January 1, 2012, a rural hospital with 
100 or fewer beds that is not an SCH and an SCH (including EACHs) will 
no longer be eligible for TOPs, in accordance with section 108 of the 
MMEA. In the CY 2012 OPPS/ASC proposed rule (76 FR 42216), we proposed 
to revise our regulations at Sec.  419.70(d) to conform the regulation 
text to the self-implementing provisions of section 108 of the MMEA 
described above.
    We did not receive any public comments on our proposed policy to 
update the language in Sec.  419.70(d) of the regulations. For the 
reasons we specified in the CY 2012 OPPS/ASC proposed rule (76 FR 42215 
and 42216), we are finalizing our proposed revisions of Sec.  419.70(d) 
without modification.
2. Adjustment for Rural SCHs and EACHs Under Section 1833(t)(13)(B) of 
the Act
    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of Pub. L. 108-173. Section 411 gave the 
Secretary the authority to make an adjustment to OPPS payments for 
rural hospitals, effective January 1, 2006, if justified by a study of 
the difference in costs by APC between hospitals in rural areas and 
hospitals in urban areas. Our analysis showed a difference in costs for 
rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 
adjustment for rural SCHs of 7.1 percent for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of 
the Act.
    In CY 2007, we became aware that we did not specifically address 
whether the adjustment applies to EACHs, which are considered to be 
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the 
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010 and 68227), for purposes of 
receiving this rural adjustment, we revised Sec.  419.43(g) to clarify 
that EACHs are also eligible to receive the rural SCH adjustment, 
assuming these entities otherwise meet the rural adjustment criteria. 
Currently, three hospitals are classified as EACHs, and as of CY 1998, 
under section 4201(c) of Public Law 105-33, a hospital can no longer 
become newly classified as an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating outliers and copayment. As we stated in the CY 2006 OPPS 
final rule with comment period (70 FR 68560), we would not reestablish 
the adjustment amount on an annual basis, but we may review the 
adjustment in the future and, if appropriate, would revise the 
adjustment. We provided the same 7.1 percent adjustment to rural SCHs, 
including EACHs, again in CYs 2008 through 2011. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    For the CY 2012 OPPS, we proposed to continue our policy of a 
budget neutral 7.1 percent payment adjustment for rural SCHs, including 
EACHs, for all services and procedures paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs (76 
FR 46232). In the CY 2012 OPPS/ASC proposed rule, we indicated that we 
intend to reassess the 7.1 percent adjustment in the near future by 
examining differences between urban hospitals' costs and rural 
hospitals' costs using updated claims data, cost reports, and provider 
information.
    We did not receive any public comments regarding the proposed 
continuation of the 7.1 rural adjustment. We are finalizing our CY 2012 
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 2012, excluding separately payable 
drugs and biologicals, devices paid under the pass-through payment 
policy, and items paid at charges reduced to costs because we continue 
to believe that the adjustment is appropriate for application in CY 
2012.

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

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals 
identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals) 
under the OPPS for covered outpatient hospital services. There are 11 
cancer hospitals that meet the classification criteria in section 
1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted 
from payment under the IPPS. With the Medicare, Medicaid and SCHIP 
Balanced Budget Refinement Act of 1999, Congress created section 
1833(t)(7) of the Act, ``Transitional Adjustment to Limit Decline in 
Payment,'' to serve as a permanent payment floor by limiting cancer 
hospitals' potential losses under the OPPS. Through section 
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full 
amount of the difference between payments for covered outpatient 
services under the OPPS and a ``pre-BBA'' amount. That is, cancer 
hospitals

[[Page 74200]]

are permanently held harmless to their ``pre-BBA'' amount, and they 
receive transitional outpatient payments (TOPs) to ensure that they do 
not receive a payment that is lower under the OPPS than the payment 
they would have received before implementation of the OPPS, as set 
forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA'' payment 
amount is an amount equal to the product of the reasonable cost of the 
hospital for covered outpatient services for the portions of the 
hospital's cost reporting period (or periods) occurring in the current 
year and the base payment-to-cost ratio (PCR) for the hospital. The 
``pre-BBA'' amount, including the determination of the base PCR, are 
defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part 
B, of the Hospital and Hospital Health Care Complex Cost Report (Form 
CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 
1833(t)(7)(I) of the Act exempts TOPs from budget neutrality 
calculations. Almost all of the 11 cancer hospitals receive TOPs each 
year. The volume weighted average PCR for the cancer hospitals is 0.83, 
or the outpatient payment with TOPs to cancer hospitals is 83 percent 
of reasonable cost.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Social Security Act by adding a new paragraph (18), which instructs 
the Secretary to conduct a study to determine if, under the OPPS, 
outpatient costs incurred by cancer hospitals described in section 
1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the costs 
incurred by other hospitals furnishing services under section 1833(t) 
of the Act, as determined appropriate by the Secretary. In addition, 
section 3138 of the Affordable Care Act requires the Secretary to take 
into consideration the cost of drugs and biologicals incurred by such 
hospitals when studying cancer hospital costliness. Further, section 
3138 of the Affordable Care Act provides that if the Secretary 
determines that cancer hospitals' costs with respect to APC groups are 
determined to be greater than the costs of other hospitals furnishing 
services under section 1833(t) of the Act, the Secretary shall provide 
an appropriate adjustment under section 1833(t)(2)(E) of the Act to 
reflect these higher costs. Cancer hospitals described in section 
1886(d)(1)(B)(v) of the Act remain eligible for TOPs (which are not 
budget neutral) and outlier payments (which are budget neutral).
2. Study of Cancer Hospitals' Costs Relative to Other Hospitals
    It has been our standard analytical approach to use a combination 
of explanatory and payment regression models to assess the costliness 
of a class of hospitals while controlling for other legitimate 
influences of costliness, such as ability to achieve economies of 
scale, to ensure that costliness is due to the type of hospital and to 
identify appropriate payment adjustments. We used this approach in our 
CY 2006 OPPS final rule with comment period to establish the 7.1 
percent payment adjustment for rural SCHs (70 FR 68556 through 68561). 
In our discussion for the CY 2006 OPPS proposed rule, we stated that a 
simple comparison of unit costs would not be sufficient to assess the 
costliness of a class of hospitals because the costs faced by 
individual hospitals, whether urban or rural, are a function of many 
varying factors, including local labor supply and the complexity and 
volume of services provided (70 FR 42699).
    In constructing our analysis of cancer hospitals' costs with 
respect to APC groups relative to other hospitals, we considered 
whether our standard analytical approach to use a combination of 
explanatory and payment regression models would lead to valid results 
for this particular study, or whether we should develop a different or 
modified analytic approach. We note that the analyses presented in the 
CY 2006 OPPS proposed and final rules were designed to establish an 
adjustment for a large class of rural hospitals. In contrast, section 
3138 of the Affordable Care Act is specifically limited to identifying 
an adjustment for 11 cancer hospitals to the extent their costs with 
respect to APC groups exceeded those costs incurred by other hospitals 
furnishing services under section 1833(t) of the Act. With such a small 
sample size (11 out of approximately 4,000 hospitals paid under the 
OPPS), we were concerned that the standard explanatory and payment 
regression models used to establish the rural hospital adjustment would 
lead to imprecise estimates of payment adjustments for this small group 
of hospitals. Further, section 3138 of the Affordable Care Act 
specifies explicitly that cost comparisons between classes of hospitals 
must include the cost of drugs and biologicals. In our CY 2006 analysis 
of rural hospitals, we excluded the cost of drugs and biologicals in 
our model because the extreme units associated with proper billing for 
some drugs and biologicals can bias the calculation of a service mix 
index, or volume weighted average APC relative weight, for each 
hospital (70 FR 42698). Therefore, we chose not to pursue our standard 
combination of explanatory and payment regression modeling to determine 
a proposed cancer hospital adjustment.
    As discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46235), 
while we chose not to use our standard models to calculate a proposed 
cancer hospital adjustment, we determined it still would be appropriate 
to construct our usual provider-level analytical dataset consisting of 
variables related to assessing costliness with respect to APC groups, 
including average cost per unit for a hospital and the hospital's 
average APC relative weight as an indicator of the hospital's resource 
intensity, as measured by the APC relative weights. We used these 
variables to calculate univariate statistics that describe the 
costliness with respect to APC groups and related aspects of cancer 
hospitals and other hospitals paid under the OPPS. While descriptive 
statistics cannot control for the myriad factors that contribute to 
observed costs, we believed that stark differences in cost between 
cancer hospitals and other hospitals paid under the OPPS that would be 
observable by examining descriptive univariate statistics would provide 
some indication of relative costliness. We began our analysis of the 
cancer hospitals by creating an analytical dataset of hospitals billing 
under the OPPS for CY 2009 (a total of 3,933) that were included in our 
claims dataset for establishing the CY 2011 OPPS proposed APC relative 
weights. This analytical dataset included the 3,933 OPPS hospitals' 
total estimated cost (including packaged cost), total lines, total 
discounted units as modeled for CY 2011 OPPS payment, and the average 
weight of their separately payable services (total APC weight divided 
by total units) as modeled for the CY 2011 OPPS. We then summarized 
estimated utilization and payment for each hospital (``hospital-
level''). These files consist of hospital-level aggregate costs 
(including the cost of packaged items and services), total estimated 
discounted units under the modeled proposed CY 2011 OPPS, total 
estimated volume of number of occurrences of separately payable HCPCS 
codes under the modeled proposed CY 2011 OPPS, and total relative 
weight of separately payable services under the modeled proposed CY 
2011 OPPS. After summarizing modeled payment to the hospital-level, we 
removed 48 hospitals in Puerto Rico

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from our dataset because we did not believe that their cost structure 
reflected the costs of most hospitals paid under the OPPS and because 
they could bias the calculation of hospital-weighted statistics. We 
then removed an additional 66 hospitals with a cost per unit of more 
than 3 standard deviations from the geometric mean (mean of the natural 
log) because including outliers in hospital-weighted descriptive 
statistics also could bias those statistics. This resulted in a dataset 
with 11 cancer hospitals and 3,808 other hospitals.
    We included the following standard hospital-level variables that 
describe hospital costliness in our analysis file: Outpatient cost per 
discounted unit under the modeled CY 2011 OPPS (substituting a cost per 
administration, rather than a cost per unit, for drugs and 
biologicals); each hospital's proposed CY 2011 wage index as a measure 
of relative labor cost; the service-mix index, or volume-weighted 
average proposed CY 2011 APC relative weight (including a simulated 
weight for drugs and biologicals created by dividing the CY 2010 April 
ASP-based payment amount at ASP+6 percent appearing in Addendum A and B 
of the proposed rule by the proposed conversion factor of $68.267); 
outpatient volume based on number of occurrences of HCPCS codes in the 
CY 2009 claims data; and number of beds. We used these variables 
because they are key indicators of costliness with respect to APC 
groups under the modeled OPPS system, and they allowed us to assess the 
relative costliness of classes of hospitals under the proposed CY 2011 
OPPS. A hospital's service mix index is a measure of resource intensity 
of the services provided by the hospital as measured by the proposed CY 
2011 OPPS relative weights, and standardizing the cost per discounted 
unit by the service mix index creates an adjusted cost per unit 
estimate that reflects the remaining relative costliness of a hospital 
remaining after receiving the estimated payments that we proposed to 
make under the CY 2011 OPPS. In short, if a class of hospitals 
demonstrates higher cost per unit after standardization by service mix, 
it is an early indication that the class of hospitals may be 
significantly more costly in the regression models. We used these data 
to calculate the descriptive univariate statistics for cancer hospitals 
appearing in Table 12 below. We note that because drugs and biologicals 
are such a significant portion of the services that the cancer 
hospitals provide, and because section 3138 of the Affordable Care Act 
explicitly requires us to consider the cost of drugs and biologicals, 
we included the cost of these items in our total cost calculation for 
each hospital, counting each occurrence of a drug in the modeled 
proposed CY 2011 data (based on units in CY 2009 claims data). That is, 
we sought to treat each administration of a drug or biological as one 
unit.
    In reviewing these descriptive statistics, we observed that cancer 
hospitals had a standardized cost per discounted unit of $150.12 
compared to a standardized cost per discounted unit of $94.14 for all 
other hospitals. That is, cancer hospitals' average cost per discounted 
unit remained high even after accounting for payment under the modeled 
proposed CY 2011 payment system, which is not true for all other 
hospitals. Observing such differences in standardized cost per 
discounted unit led us to conclude that cancer hospitals are more 
costly with respect to APC groups than other hospitals furnishing 
services under the OPPS, even without the inferential statistical 
models that we typically employ.
[GRAPHIC] [TIFF OMITTED] TR30NO11.021

3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals
    Having reviewed the cost data from the standard analytic database 
and determined that cancer hospitals are more costly with respect to 
APC groups than other hospitals furnishing services under the OPPS 
system, we decided to examine hospital cost report data from Worksheet 
E, Part B (where TOPs are calculated on the Hospital and Hospital 
Health Care Complex Cost Report each year) in order to determine 
whether our findings were further supported by cost report data and to 
determine an appropriate proposed payment adjustment methodology for CY 
2011 based on cost report data. Analyses on

[[Page 74202]]

our standard analytic database and descriptive statistics presented in 
Table 12 above did not consider TOPs in assessing costliness of cancer 
hospitals relative to other hospitals furnishing services under section 
1833(t) of the Act. There were several reasons for this. One reason was 
that TOPs have no associated relative weight that could be included in 
an assessment of APC-based payment. TOPs are paid at cost report 
settlement on an aggregate basis, not on a per service basis, and we 
would have no way to break these payments down into a relative weight 
to incorporate these retrospective aggregate payments in the form of a 
relative weight. The cost report data we selected for the analysis were 
limited to the OPPS-specific payment and cost data available on 
Worksheet E, Part B. These data include aggregate OPPS payments, 
including outlier payments and the cost of medical and other health 
services. These aggregate measures of cost and payment also include the 
cost and payment for drugs and biologicals and other adjustments that 
we typically include in our regression modeling, including wage index 
adjustment and rural adjustment, if applicable. While these cost report 
data cannot provide an estimate of cost per unit after controlling for 
other potential factors that could influence cost per unit, we used 
this aggregate cost and payment data to examine the cancer hospitals' 
OPPS PCR and compare these to the OPPS PCR for other hospitals. PCRs 
calculated from the most recent cost report data available at the time 
of the CY 2011 OPPS/ASC proposed rule also indicated that costs 
relative to payments at cancer hospitals were higher than those at 
other hospitals paid under the OPPS (that is, cancer hospitals have 
lower PCRs). In order to calculate PCRs for hospitals paid under the 
OPPS (including cancer hospitals), we used the same extract of cost 
report data from the Hospital Cost Report Information System (HCRIS) 
that we used to calculate the CCRs that were used to estimate median 
costs for the CY 2011 OPPS. We limited the dataset to the hospitals 
with CY 2009 claims data that we used to model the CY 2011 proposed APC 
relative weights.
    We estimated that, on average, the OPPS payments to the 11 cancer 
hospitals, not including TOPs, were approximately 62 percent of 
reasonable cost (that is, we calculated a PCR of 0.615 for the cancer 
hospitals), whereas we estimated that, on average, the OPPS payments to 
other hospitals furnishing services under the OPPS were approximately 
87 percent of reasonable cost (resulting in a PCR of 0.868).
    Based on our findings that cancer hospitals, as a class, have a 
significantly lower volume weighted average PCR than the volume 
weighted PCR of other hospitals furnishing services under the OPPS and 
our findings that the cancer hospitals cost per discounted unit 
standardized for service mix remains much higher than the standardized 
cost per discounted unit of all other hospitals, we proposed an 
adjustment for cancer hospitals to reflect these higher costs, 
effective January 1, 2011. For purposes of calculating a proposed 
adjustment, we chose to rely on this straightforward assessment of 
payments and costs from the cost report data because of the concerns 
outlined above with respect to the small number of hospitals, and 
because of the challenges associated with accurately including drug and 
biological costs in our standard regression models. We believed that an 
appropriate adjustment would redistribute enough payments from other 
hospitals furnishing services under the OPPS to the cancer hospitals to 
give cancer hospitals a PCR that was comparable to the average PCR for 
other hospitals furnishing services under the OPPS. Therefore, we 
proposed a hospital-specific payment adjustment determined as the 
percentage of additional payment needed to raise each cancer hospital's 
PCR to the weighted average PCR for other hospitals furnishing services 
under the OPPS (0.868) in the CY 2011 dataset. This would be 
accomplished by adjusting each cancer hospital's OPPS APC payment by 
the percentage difference between the hospital's individual PCR 
(without TOPs) and the weighted average PCR of the other hospitals 
furnishing services under the OPPS. This cancer hospital payment 
adjustment proposed for CY 2011 would have resulted in an estimated 
aggregate increase in OPPS payments to cancer hospitals of 41.2 percent 
and a net increase in total payments, including TOPs, of 5 percent for 
CY 2011.
4. Proposed CY 2011 Cancer Hospital Payment Adjustment Was Not 
Finalized
    The public comments associated with the cancer hospital adjustment 
that we proposed for CY 2011 are detailed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71886 through 71887). Many commenters 
urged CMS to consider TOPs when calculating the cancer hospital payment 
adjustment, stating that the proposed methodology results, largely, in 
a change in the form of outpatient payments to cancer hospitals by 
shifting payment from hold harmless payment under the TOPs provision to 
APC payments. Noting that the majority of cancer care provided in the 
country is provided by the non-cancer hospitals that would experience a 
payment reduction under the CY 2011 proposal, commenters also suggested 
that the associated budget neutral payment reduction of 0.7 percent was 
not appropriate or equitable to other OPPS hospitals. Commenters also 
expressed concern that the proposed payment adjustment would increase 
beneficiary copayments. That is, they believed that the proposed cancer 
hospital adjustment would increase APC payments and, because 
beneficiary copayment is a percentage of the APC payment, Medicare 
beneficiaries seeking services at the 11 designated cancer hospitals 
would experience higher copayments due to the proposed methodology. 
These commenters encouraged CMS to implement the adjustment in a way 
that does not increase beneficiary copayments. As indicated in the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71887), because the 
many public comments we received identified a broad range of very 
important issues and concerns associated with the proposed cancer 
hospital payment adjustment, we determined that further study and 
deliberation was necessary and, therefore, we did not finalize the CY 
2011 proposed payment adjustment for certain cancer hospitals.
5. Payment Adjustment for Certain Cancer Hospitals for CY 2012
    After further review and deliberation of the issues associated with 
the cancer hospital payment adjustment, in the CY 2012 OPPS/ASC 
proposed rule, we proposed a cancer hospital payment adjustment 
reflecting the same approach as we took in the CY 2011 OPPS/ASC 
proposed rule, that is, an adjustment under which cancer hospitals 
would receive additional payments (based on estimates) so that each 
cancer hospital's PCR would be comparable to the weighted average PCR 
for other hospitals furnishing services under section 1833(t) of the 
Act. Therefore, for services furnished on and after January 1, 2012, we 
proposed that, for a cancer hospital with an individual PCR below the 
weighted average PCR for other hospitals furnishing services under the 
OPPS in the CY 2012 dataset, we would make a hospital-specific payment 
adjustment by adjusting the wage-adjusted OPPS payment for covered OPD 
services (except devices receiving pass-through status because these 
items and services are always paid at the estimated full cost and, 
therefore, a

[[Page 74203]]

payment adjustment above zero percent is unnecessary) furnished on and 
after January 1, 2012, by the percent difference between the hospital's 
individual PCR and the weighted average PCR of other hospitals 
furnishing services under the OPPS in the CY 2012 dataset. This 
methodology resulted in estimated percentage payment adjustments for 
the 11 cancer hospitals that ranged between 10.1 percent and 61.8 
percent, with an estimated aggregate increase in OPPS payment to cancer 
hospitals of 39 percent for CY 2012 and an estimated net increase in 
total payments, including TOPs, of 9 percent.
    Because section 7101 of the Affordable Care Act expanded the 340B 
drug program to include certain cancer hospitals, we also proposed that 
the cancer hospital payment adjustment be recalculated each year. The 
340B drug program allows certain hospitals to purchase certain 
outpatient drugs at reduced prices. We understand from commenters that, 
currently, two cancer hospitals participate in the 340B program. 
However, inclusion of cancer hospitals in the 340B drug program should 
lower drug costs at participating cancer hospitals going forward and, 
therefore, may cause changes in each cancer hospital's PCR compared to 
the previous year's calculation.
    Comment: Many commenters urged CMS to consider TOPs when 
calculating the cancer hospital payment adjustment. The commenters 
stated that the proposed methodology to adjust each cancer hospital's 
OPPS payment by the percentage difference between their individual PCR 
without TOPs and the weighted average PCR of the other hospitals paid 
under OPPS results, largely, in a change in the form of outpatient 
payments to cancer hospitals by shifting payment from hold harmless 
payments under the TOPs provision to APC payments. This substitution of 
TOPs for APC payments, in turn, results in savings to the Medicare 
program which, the commenters asserted, is in violation of the 
statutory requirement that the policy be budget neutral. The commenters 
suggested that because the Congressional Budget Office scoring of 
section 3138 of the Affordable Care Act estimates no Federal budgetary 
impact, Congress did not intend for savings under this provision.
    Commenters also suggested that the associated budget neutral 
payment reduction to other hospitals is not appropriate or equitable to 
other hospitals paid under the OPPS. The commenters indicated that it 
was not the intent of Congress for the provision to impact the non-
cancer hospitals in a manner that is disproportionate to the benefits 
obtained by the cancer hospitals. Many commenters noted that the 
majority of cancer care provided in the country is provided by the non-
cancer hospitals that would experience a payment reduction under the 
proposal.
    Commenters also expressed concern that the proposed payment 
adjustment would increase beneficiary copayments. That is, they 
believed that the proposed cancer hospital adjustment would increase 
APC payments and, because beneficiary copayment is a percentage of the 
APC payment, Medicare beneficiaries seeking services at the 11 
designated cancer hospitals will experience higher copayments due to 
the proposed methodology. The commenters encouraged CMS to implement 
the adjustment in a way that does not increase beneficiary copayments, 
such as providing the adjustment amount in aggregate instead of on a 
per claim basis through enhanced APC payments.
    Commenters indicated that CMS selected an inappropriate benchmark 
against which to compare each cancer hospital's PCR. Specifically, the 
commenters indicated that CMS should have taken into account the 
concentration of outpatient services at the designated cancer hospitals 
as compared to other PPS hospitals and adjust the PCR benchmark higher. 
The commenters argued that other PPS hospitals have the ability to 
improve their Medicare margins through other payment systems, but that 
cancer hospitals receive the majority of their Medicare payments 
through the OPPS. These commenters asserted that, because concentration 
of outpatient services was not considered in establishing the 
benchmark, the proposed adjustment was not valid. The commenters also 
indicated that, because outliers were included in the calculation of 
hospital PCRs, application of the payment adjustment to the APC payment 
amount will result in PCRs less than the intended target for cancer 
hospitals with relatively large outlier payments and suggested that the 
payment adjustment be applied to outlier payments as well as APC 
payments. In addition, the commenters opposed annual recalculation of 
the cancer adjustment stating that CMS should not expect significant 
cost savings at the cancer hospitals as a result of the inclusion of 
cancer hospitals in the 340B drug program and that the cancer hospitals 
require payment stability and predictability over the long term. Other 
commenters supported the proposal to annually recalculate the cancer 
hospital adjustment, stating that this will ensure more equitable 
payments. In addition, these commenters indicated that CMS must make 
the payment adjustment effective for services furnished on or after 
January 1, 2011, in order to comply with section 3138 of the Affordable 
Care Act.
    Several commenters addressed CMS' study methodology. One commenter 
suggested that the CMS analysis is inadequate to conclude that costs 
are higher in cancer hospitals and that an adjustment is warranted. 
This commenter noted that the CMS analysis did not control for the many 
factors that might explain differences in costliness or assess to what 
extent cost differences could be explained by differences in 
efficiency. This commenter also asserted that the exclusion of TOPs 
from the comparison of costliness distorts the analysis and makes the 
findings invalid. Another commenter suggested that CMS examine the 
costs of cancer patients generally for all hospitals and compare the 
costs of these 11 hospitals to all hospitals providing cancer care to 
ensure an adjustment does not reinforce high-cost characteristics of 
the 11 designated cancer hospitals. This commenter also indicated that 
additional payments to cancer hospitals should be guided by quality of 
care and, because the Affordable Care Act requires the 11 cancer 
hospitals to begin submitting quality data in fiscal year 2014, 
suggested that the additional payments to cancer hospitals be delayed 
until these quality data are available to serve as a basis for the 
payment adjustment.
    Response: We analyzed the various issues raised by commenters, and 
in this final rule with comment period, we are adopting final policies 
that reflect a number of modifications to our proposed policies. We 
believe that a number of points raised by the commenters have merit 
and, consistent with our broad authority under the statute, we are 
adopting some (but not all) of their recommendations.
    As discussed above, section 3138 of the Affordable Care Act added a 
new section 1833(t)(18) to the Social Security Act, providing for an 
adjustment under section 1833(t)(2)(E) of the Social Security Act to 
address higher costs incurred by cancer hospitals. Section 
1833(t)(2)(E) of the Act, in turn, directs the Secretary to establish, 
``in a budget neutral manner,'' payment ``adjustments as determined to 
be necessary to ensure equitable payments, such as adjustments for 
certain classes of hospitals.''

[[Page 74204]]

    Under sections 1833(t)(18) and 1833(t)(2)(E) of the Social Security 
Act, the agency's authority with respect to the cancer hospital 
adjustment is broad; similarly, under section 1833(t)(2)(E) of the Act, 
the agency's authority with respect to calculating budget neutrality is 
broad. In contrast, the provision of the statute for calculating TOPs 
is prescriptive.
    Commenters requested that CMS maintain TOPs at their current level, 
that is, calculate TOPs by ignoring the cancer hospital payment 
adjustment under sections 1833(t)(18) and 1833(t)(2)(E) of the Act. 
Under the statute, however, the calculation of TOPs is directly tied to 
what is paid under section 1833(t) of the Act. Specifically, under 
section 1833(t)(7)(D)(ii) of the Act, ``for covered OPD services for 
which the PPS amount is less than the pre-BBA amount, the amount of 
payment under this subsection [1833(t)] shall be increased by the 
amount of such difference.'' The ``PPS amount'' means, with respect to 
covered OPD services, ``the amount payable under this title [Title 18] 
for such services (determined without regard to this paragraph) * * *'' 
(section 1833(t)(7)(E) of the Act). Under this provision, the cancer 
hospital payment adjustment is included in the calculation of the ``PPS 
amount'' because it is an adjustment under sections 1833(t)(18) and 
1833(t) (2)(E) of the Act and, therefore, is the ``amount payable under 
this title.'' To the extent the PPS amount is less than the pre-BBA 
amount, a cancer hospital would qualify for a TOP.
    With respect to the issue of establishing, in a budget neutral 
manner, the cancer hospital payment adjustment, we agree with the 
commenters that it is appropriate to consider that, to some extent, the 
cancer hospital payment adjustment changes the form of payments (from 
TOPs to cancer hospital adjustment payments). The cancer hospital 
payment adjustment presents a unique circumstance insofar as the cancer 
hospital adjustment can result in lower TOPs. Consistent with section 
1833(t)(2)(E) of the Act, we agree that, in determining the baseline 
for the budget neutrality calculation, it is appropriate to consider 
TOPs that would otherwise be made if there were no cancer hospital 
payment adjustment. In determining the budget neutrality adjustment 
factor, we compare estimated CY 2012 total payments with the cancer 
hospital payment adjustment under sections 1833(t)(18) and 
1833(t)(2)(E) of the Act to estimated CY 2012 total payments without a 
cancer hospital payment adjustment, taking into account TOPs that would 
otherwise be made in the absence of a cancer hospital payment 
adjustment. The inclusion of TOPs in the baseline significantly 
increases the baseline, and accordingly decreases the amount that other 
payments need to be reduced to offset the increased payments resulting 
from the cancer hospital payment adjustment. The budget neutrality 
adjustment factor for the cancer hospital payment adjustment is 0.9978. 
In percentage terms, the budget neutrality reduction to the conversion 
factor is 0.2 percent in this final rule with comment period, as 
opposed to 0.7 percent in the proposed rule. In dollar terms, the 
budget neutral payment reduction associated with the cancer hospital 
payment adjustment is an estimated $71 million for CY 2012 based on 
updated cost report information. That is, the cancer hospital payment 
adjustment is estimated to increase total payments by $71 million over 
the baseline (which accounts for TOPs) and this amount must be offset 
by reductions in other payments (resulting in the 0.2 percent reduction 
to the conversion factor). For this final rule with comment period, we 
are adopting the above-described approach of calculating budget 
neutrality, consistent with our broad authority under the statute, for 
the reasons stated above and because we believe it will increase equity 
to hospitals paid under the OPPS that are not cancer hospitals, as 
urged by the commenters.
    In response to commenters who urged us to implement the cancer 
hospital payment adjustment in a manner that does not increase 
beneficiary copayments, such as providing the adjustment amount in 
aggregate instead of on a per claim basis through enhanced APC 
payments, we reexamined the manner in which the cancer hospital payment 
adjustment is applied. We have broad discretion in designing the cancer 
hospital payment adjustment under sections 1833(t)(18)(B) and 
1833(t)(2)(E) of the Act. Consistent with this broad authority, we 
agree that it is appropriate to make the cancer hospital payment 
adjustment through the form of an aggregate payment determined at cost 
report settlement to each cancer hospital, as opposed to an adjustment 
at the APC level, thereby avoiding the higher copayments for 
beneficiaries associated with providing the adjustment on a claims 
basis through increased APC payments. Therefore, in order to implement 
the cancer hospital payment adjustment in a way that does not increase 
beneficiary copayments as urged by commenters, and in light of the 
discretion afforded by the statute, we are providing the cancer 
hospital payment adjustment as an aggregate payment to each cancer 
hospital at cost report settlement instead of through enhanced APC 
payments as proposed. As explained further below, the aggregate 
adjustment adopted in this final rule with comment period (like the 
proposed APC-level adjustment) is based on the comparison of each 
cancer hospital's PCR to the weighted average PCR of the other 
hospitals that furnish services under the OPPS using the most recent 
submitted or settled cost report available at the time of this final 
rule with comment period.
    In addition, commenters suggested that CMS take into account the 
cancer hospitals' significant Medicare outpatient concentration (which, 
based on the comment letter, is the portion of the cancer hospitals' 
total Medicare payments that are OPPS payments) when establishing an 
appropriate PCR benchmark. In other words, the commenter argued that 
CMS should take into account the portion of the cancer hospitals' total 
Medicare payments that are OPPS payments compared to the non-cancer 
hospitals' total Medicare payments that are OPPS payments. 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), the Secretary shall provide for an appropriate 
adjustment to reflect the higher costs. We are not persuaded that 
Medicare outpatient concentration in and of itself has an impact on the 
costs incurred for providing OPD services at cancer hospitals relative 
to other OPPS hospitals that warrants an adjustment in determining the 
cancer hospital adjustment. Therefore, we are not adopting this 
suggestion of the commenters.
    With respect to commenters that indicated that because outliers 
were included in the calculation of hospital PCRs, application of the 
payment adjustment to the APC payment amount will result in PCRs less 
than the intended target for cancer hospitals with relatively large 
outlier payments, we examined this issue and believe commenters made a 
valid argument that cancer hospitals with relatively large outlier 
payments will be provided less additional payment than intended under 
the proposed methodology because the payment adjustment would be 
applied only to the APC portion of

[[Page 74205]]

the payment and not to the outlier amounts. If we were to finalize the 
implementation of the cancer hospital payment adjustment through 
increased APC payments as proposed, the PCR used to determine the 
amount of the adjustment would need to be recalculated to exclude 
outlier payments. This change would provide a larger APC adjustment to 
cancer hospitals that have large outlier payments relative to other 
OPPS hospitals. However, because we are providing the cancer hospital 
payment adjustment in aggregate at cost report settlement and not 
through adjustments to the APC payment, it is appropriate to continue 
to include outlier payments in the calculation of the PCRs used to 
determine the payment adjustment amount.
    In response to the commenters who suggested that annual 
recalculation of the PCRs for purposes of calculating the cancer 
hospital payment adjustment is not necessary because significant cost 
savings are not expected at the cancer hospitals as a result of the 
inclusion of cancer hospitals in the 340B drug program, we believe that 
annual recalculation of the cancer hospital payment adjustment will 
provide a timely assessment of the changes in OPPS payments relative to 
costs due to any reason and, therefore, will enable CMS to provide OPPS 
payments that are accurate and equitable.
    With regard to the implementation date for the cancer hospital 
payment adjustment, the agency did not finalize the proposed cancer 
hospital adjustment for CY 2011 for a variety of reasons, as explained 
in the CY 2011 OPPS/ASC final rule with comment period. Significantly, 
the majority of all commenters expressed concerns about implementation 
of the adjustment and, based on the broad range of important issues and 
concerns raised by them, we did not implement a cancer hospital 
adjustment for CY 2011. Moreover, the obligation to provide a cancer 
hospital payment adjustment is triggered only insofar as the Secretary 
determines under section 1833(t)(18)(A) of the Act that costs incurred 
by hospitals described in section 1886(d)(1)(B)(v) of the Act exceed 
those costs incurred by other hospitals furnishing services under this 
subsection. Several commenters raised concerns about the agency's study 
of costliness conducted under section 1833(t)(18)(A) of the Act; for 
example, a commenter suggested that the CMS analysis was inadequate to 
conclude that costs are higher in cancer hospitals and that an 
adjustment was warranted. Given the uncertainty surrounding these 
issues as well as public comments arguing against implementing a cancer 
hospital payment adjustment for CY 2011, we decided not to do so for CY 
2011. We note that, insofar as the cancer adjustment is budget neutral, 
the lack of a cancer hospital payment adjustment for CY 2011 also means 
that other payments were not reduced for CY 2011 to offset the 
increased payments from the adjustment.
    Regarding the commenter's concerns related to the agency's study 
conducted pursuant to section 1833(t)(18)(A) of the Act, as detailed 
above and in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71883), we determined that we could not use our standard analytical 
approach, which uses a combination of explanatory and payment 
regression models while controlling for other legitimate influences of 
costliness, to assess the costliness of cancer hospitals relative to 
other OPPS hospitals. Although this kind of analysis would allow us to 
control for the many factors that might explain differences in 
costliness, as suggested by the commenter, we believe that this 
approach would lead to imprecise estimates of costliness due to the 
small sample size (11 hospitals).
    With respect to commenters who suggested that it would be more 
appropriate for the CMS study on costliness to compare the costs of 
providing OPD services at the 11 cancer hospitals to the costs of 
providing services related to cancer care at other hospitals furnishing 
services under section 1833(t) of the Act, we believe such an approach 
is not appropriate because section 3138 of the Affordable Care Act does 
not specify that the comparison be made with regard to particular APC 
groups related to cancer services.
    In addition, with respect to the commenter who believed that the 
amount of additional payments to cancer hospitals should be guided by 
quality of care information and, therefore, be delayed until 2014 when 
the cancer hospitals begin to submit quality data to CMS, we note that 
section 1833(t)(18) of the Act did not include such a requirement nor 
did it include quality measures as a requirement for the additional 
payments to cancer hospitals. Therefore, we do not believe it is 
appropriate to delay implementation of the cancer hospital payment 
adjustment until cancer hospitals have submitted quality data to CMS.
    After consideration of the public comments we received, we are 
adopting in this final rule with comment period a number of the 
commenters' suggestions and a number of changes to our proposed CY 2012 
policies regarding the cancer hospital payment adjustment including 
modifications to our CY 2012 proposal with regard to the calculation of 
the budget neutrality adjustment associated with the cancer hospital 
payment adjustment. The budget neutral payment reduction that is 
associated with the cancer hospital payment adjustment for CY 2012 is 
calculated as the difference in estimated CY 2012 total payments to 
cancer hospitals, including the cancer hospital payment adjustment, and 
estimated CY 2012 total payments to cancer hospitals without the cancer 
adjustment, including TOPs. Therefore, based on updated cost report 
data, the budget neutrality adjustment to the OPPS conversion factor is 
0.9978, a reduction of 0.2 percent (as opposed to a reduction of 0.7 
percent in the proposed rule). In addition, we are providing the CY 
2012 cancer hospital payment adjustment to cancer hospitals in the form 
of an aggregate payment at cost report settlement instead of through an 
increased adjustment to APC payments on a claims basis, as was 
proposed.
    Consistent with the approach in the proposed rule, the CY 2012 
cancer hospital payment adjustment adopted in this final rule with 
comment period is intended to provide additional payments to cancer 
hospitals so that the hospital's PCR with the payment adjustment is 
equal to the weighted average PCR for other hospitals, which we refer 
to as the ``target PCR.'' In contrast to the approach in the proposed 
rule, however, in this final rule with comment period, we are adopting 
a policy under which the amount of the payment adjustment will be made 
on an aggregate basis at cost report settlement. Under this final rule 
with comment period, we will examine each cancer hospital's data at 
cost report settlement, determine the cancer hospital's PCR (before the 
cancer hospital payment adjustment), and in turn determine the lump sum 
amount necessary (if any) to make the cancer hospital's PCR equal to 
the target PCR. To the extent at cost report settlement a cancer 
hospital's PCR (before the cancer hospital payment adjustment) is above 
the target PCR, a cancer hospital payment adjustment of zero is given. 
This is because we believe that this would indicate that the cancer 
hospital's costs do not exceed the costs incurred by other hospitals 
furnishing services under the OPPS, and therefore a payment adjustment 
above zero would not be necessary. We are amending are regulations at 
Sec.  419.43 to capture the above-described final policy.

[[Page 74206]]

    Consistent with the approach in the proposed rule, the target PCR 
is set in advance and is calculated using the most recent submitted or 
settled cost report data that are available at the time of this final 
rule with comment period. For CY 2012, the target PCR for purposes of 
the cancer hospital payment adjustment is 0.91. To calculate the 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 median costs for the CY 2012 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 2010 claims data that we use to model the impact of the CY 2012 
final APC relative weights (4,018 hospitals) because it is appropriate 
to use the same set of hospitals that we are using to calibrate the 
modeled CY 2012 OPPS. The cancer hospitals in this dataset largely had 
cost report data from cost reporting periods ending in FY 2010. The 
cost report data for the other hospitals were from cost report periods 
with fiscal year ends ranging from 2009 to 2010. We then removed the 
cost report data of the 47 hospitals located in Puerto Rico from our 
data set 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 223 hospitals with cost report data that were not complete 
(missing aggregate OPPS payments (which include outliers), missing 
aggregate cost data, or missing both), so that all cost reports in the 
study would have both the payment and cost data necessary to calculate 
a PCR for each hospital, leading to a final analytic file of 3,748 
hospitals with cost report data. We believe that the costs and PPS 
payments reported on Worksheet E, Part B, for the hospitals included in 
our CY 2012 modeling is sufficiently accurate for assessing hospital's 
relative costliness because all of the key elements that we believe are 
necessary for the analysis (payment and cost) are contained on this 
worksheet.

    Using this smaller dataset of cost report data, we estimated that, 
on average, the OPPS payments to the 11 cancer hospitals, not including 
TOPs, are approximately 67 percent of reasonable cost (that is, we 
calculated a PCR of 0.674 for the cancer hospitals), whereas, we 
estimated that, on average, the OPPS payments to other hospitals 
furnishing services under the OPPS are approximately 91 percent of 
reasonable cost (weighted average PCR of 0.91). Individual cancer 
hospital's OPPS PCRs range from approximately 0.63 to approximately 
0.78. Based on these data, a target PCR of 0.91 will be used to 
determine the CY 2012 cancer hospital payment adjustment to be paid at 
cost report settlement. Therefore, the payment amount associated with 
the cancer hospital adjustment to be determined at cost report 
settlement will be the additional payment needed to result in a PCR 
equal to 0.91 for each cancer hospital.
    Using the same data described above, we calculated estimates of the 
percentage difference between each cancer hospital's PCR and the target 
PCR. Table 13 below indicates estimates in percentage terms of the CY 
2012 payment adjustment for each cancer hospital. The actual amount of 
the CY 2012 cancer hospital payment adjustment for each cancer hospital 
will be determined at cost report settlement and will depend on each 
hospital's CY 2012 payments and costs. Under the policies in this final 
rule with comment period, the payment adjustments for cancer hospitals 
are estimated to result in an aggregate increase in OPPS payments to 
cancer hospitals of 34.5 percent for CY 2012 and a net increase in 
total payment, including TOPs, of 9.5 percent. We note that the changes 
made by section 1833(t)(18) of the Act do not affect the existing 
statutory provisions that provide for TOPs for cancer hospitals. The 
TOPs will be assessed as usual after all payments, including the cancer 
hospital payment adjustment, have been made for a cost reporting 
period.

[[Page 74207]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.022

G. Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. For CY 2011, the outlier threshold is met when the cost 
of furnishing a service or procedure by a hospital exceeds 1.75 times 
the APC payment amount and exceeds the APC payment rate plus a $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 outliers to those high cost and complex procedures where 
a very costly service could present a hospital with significant 
financial loss. If the cost of a service meets both of these 
conditions, the multiple threshold and the fixed-dollar threshold, the 
outlier payment is calculated as 50 percent of the amount by which the 
cost of furnishing the service exceeds 1.75 times the APC payment rate. 
Before CY 2009, this outlier payment had historically been considered a 
final payment by longstanding OPPS policy. We implemented a 
reconciliation process similar to the IPPS outlier reconciliation 
process for cost reports with cost reporting periods beginning on or 
after January 1, 2009 (73 FR 68594 through 68599).
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. Our current estimate of 
total outlier payments as a percent of total CY 2010 OPPS payment, 
using available CY 2010 claims and the revised OPPS expenditure 
estimate for the 2011 Trustee's Report, is approximately 1.13 percent 
of the total aggregated OPPS payments. Therefore, for CY 2010, we 
estimate that we paid at 0.13 percent above the CY 2010 outlier target 
of 1.0 percent of total aggregated OPPS payments.
    As explained in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71887 through 71889), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2011. The outlier thresholds were set so 
that estimated CY 2011 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2010 claims data and CY 2011 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2011 will be approximately 
1.06 percent of the total CY 2011 OPPS payments. The difference between 
1.0 percent and 1.06 percent is reflected in the regulatory impact 
analysis in section XX. of this final rule with comment period. We note 
that we provide estimated CY 2012 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/HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42222), we proposed 
for CY 2012 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, 
specifically 0.14 percent, would be allocated to CMHCs for PHP outlier 
payments. This is the amount of estimated outlier payments that would 
result from the proposed CMHC outlier threshold as a proportion of 
total estimated outlier payments. As

[[Page 74208]]

discussed in section VIII.C. of the proposed rule, for CMHCs, we 
proposed to continue our longstanding policy that if a CMHC's cost for 
partial hospitalization services, paid under either APC 0172 (Level I 
Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II 
Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 
times the payment for APC 0173, the outlier payment would be calculated 
as 50 percent of the amount by which the cost exceeds 3.40 times the 
APC 0173 payment rate. For further discussion of CMHC outlier payments, 
we refer readers to section VIII.C. of this final rule with comment 
period.
    To ensure that the estimated CY 2012 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 $2,100 fixed-dollar 
threshold. This proposed threshold reflected the methodology discussed 
below in this section, as well as the proposed APC recalibration for CY 
2012.
    We calculated the proposed fixed-dollar threshold for the proposed 
rule using largely the same methodology as we did in CY 2011 (75 FR 
71887 through 71889). For purposes of estimating outlier payments for 
the proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2011 update to the Outpatient Provider-Specific 
File (OPSF). The OPSF contains provider-specific data, such as the most 
current CCR, which are maintained by the Medicare contractors and used 
by the OPPS Pricer to pay claims. The claims that we use to model each 
OPPS update lag by 2 years. For the proposed rule, we used CY 2010 
claims to model the CY 2012 OPPS. In order to estimate the proposed CY 
2012 hospital outlier payments for the proposed rule, we inflated the 
charges on the CY 2010 claims using the same inflation factor of 1.0908 
that we used to estimate the IPPS fixed-dollar outlier threshold for 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024). We used an 
inflation factor of 1.0444 to estimate CY 2011 charges from the CY 2010 
charges reported on CY 2010 claims. The methodology for determining 
this charge inflation factor is discussed in the FY 2012 IPPS/LTCH PPS 
proposed rule and final rule (76 FR 26024 and 51792, respectively). 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 2012 OPPS/ASC proposed rule, we 
proposed to apply the same CCR inflation adjustment factor that we 
proposed to apply for the FY 2012 IPPS outlier calculation to the CCRs 
used to simulate the proposed CY 2012 OPPS outlier payments that 
determine the fixed-dollar threshold. Specifically, for CY 2012, we 
proposed to apply an adjustment of 0.9850 to the CCRs that were in the 
April 2011 OPSF to trend them forward from CY 2011 to CY 2012. The 
methodology for calculating this proposed adjustment was discussed in 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024 through 26025).
    Therefore, to model hospital outlier payments for the CY 2012 OPPS/
ASC proposed rule, we applied the overall CCRs from the April 2011 OPSF 
file after adjustment (using the proposed CCR inflation adjustment 
factor of 0.9850 to approximate CY 2012 CCRs) to charges on CY 2010 
claims that were adjusted (using the proposed charge inflation factor 
of 1.0908 to approximate CY 2012 charges). We simulated aggregated CY 
2012 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 2012 OPPS 
payments. We estimated that a proposed fixed-dollar threshold of 
$2,100, 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 $2,100 are 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 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 requirements. For hospitals that fail to meet the 
Hospital OQR requirements, we proposed to continue our policy that we 
implemented in CY 2010 that the hospitals' costs would 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 XIV. of this final rule with comment period.
    Comment: One commenter opposed the proposed increase to the fixed-
dollar threshold, stating that it would reduce the number of cases 
eligible for outlier payments across the industry. Another commenter 
supported the proposed policy of estimating outlier payments to be 1.0 
percent of the estimated aggregate total payments under the OPPS for 
outlier payments and of increasing the fixed-dollar outlier threshold 
to $2,100.
    Response: As indicated above, we introduced a fixed-dollar 
threshold in order to better target outliers to those high cost and 
complex procedures where a very costly service could present a hospital 
with significant financial loss. We maintain the target outlier 
percentage of 1.0 percent of estimated aggregate total payment under 
the OPPS and have a fixed-dollar threshold so that OPPS outlier 
payments are made only when the hospital would experience a significant 
loss for supplying a particular service. For CY 2012, based on updated 
data, we have established a fixed-dollar threshold of $1,900 which, 
together with a multiple threshold of 1.75, will enable us to meet

[[Page 74209]]

our target outlier payment of 1 percent of total OPPS spending.
3. Final Outlier Calculation
    Consistent with historical practice, we used updated data for this 
final rule with comment period for our outlier calculation. For CY 
2012, we are applying the overall CCRs from the July 2011 Outpatient 
Provider-Specific File with a CCR adjustment factor of 0.9903 to 
approximate CY 2012 CCRs to charges on the final CY 2010 claims that 
were adjusted to approximate CY 2012 charges (using the final 2-year 
charge inflation factor of 1.0794). These are the same CCR adjustment 
and charge inflation factors that were used to set the IPPS fixed-
dollar threshold for the FY 2012 IPPS/LTCH PPS final rule (76 FR 51792 
through 51795). We simulated aggregated CY 2012 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 2011 OPPS payments. We 
estimate that a fixed-dollar threshold of $1,900, 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 2012, 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 $1,900 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 for APC 0173, the outlier payment is 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the APC 0173 payment rate. We estimate that this threshold will 
allocate 0.12 percent of outlier payments to CMHCs for PHP outlier 
payments.
4. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 
68599), we adopted as final policy a process to reconcile hospital or 
CMHC outlier payments at cost report settlement for services furnished 
during cost reporting periods beginning in CY 2009. OPPS outlier 
reconciliation more fully ensures accurate outlier payments for those 
facilities that have CCRs that fluctuate significantly relative to the 
CCRs of other facilities, and that receive a significant amount of 
outlier payments (73 FR 68598). As under the IPPS, we do not adjust the 
fixed-dollar threshold or the amount of total OPPS payments set aside 
for outlier payments for reconciliation activity because such action 
would be contrary to the prospective nature of the system. Our outlier 
threshold calculation assumes that overall ancillary CCRs accurately 
estimate hospital costs based on the information available to us at the 
time we set the prospective fixed-dollar outlier threshold. For these 
reasons, as we have previously discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68596) and as we proposed for CY 2012, 
we did not incorporate any assumptions about the effects of 
reconciliation into our calculation of the OPPS fixed-dollar outlier 
threshold.

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. As proposed, for this final rule with 
comment period, the payment rate for most services and procedures for 
which payment is made under the OPPS is the product of the conversion 
factor calculated in accordance with section II.B. of this final rule 
with comment period and the relative weight determined under section 
II.A. of this final rule with comment period. Therefore, as proposed, 
for this final rule with comment period, the national unadjusted 
payment rate for most APCs contained in Addendum A to this final rule 
with comment period (which is referenced in section XVII. of this final 
rule with comment period and 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 referenced in section XVII. of this final rule with comment 
period and available via the Internet on the CMS Web site) was 
calculated by multiplying the CY 2012 scaled weight for the APC by the 
CY 2012 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 Outpatient Quality Reporting (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 XVI.D. 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, 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.
    Individual providers interested in calculating the payment amount 
that they would 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 referenced in section XVII. of this 
final rule with comment period and 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

[[Page 74210]]

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 2012 OPPS fee schedule 
increase factor of 1.90 percent.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
national unadjusted payment rate. Since the initial implementation of 
the OPPS, we have used 60 percent to represent our estimate of that 
portion of costs attributable, on average, to labor. We refer readers 
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 
through 18497) for a detailed discussion of how we derived this 
percentage. We confirmed that this labor-related share for hospital 
outpatient services is appropriate during our regression analysis for 
the payment adjustment for rural hospitals in the CY 2006 OPPS final 
rule with comment period (70 FR 68553).
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.
    X is the labor-related portion of the national unadjusted payment 
rate.

X = .60 * (national unadjusted payment rate)

    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. The wage index values assigned to each area reflect the 
geographic statistical areas (which are based upon OMB standards) to 
which hospitals are assigned for FY 2012 under the IPPS, 
reclassifications through the MGCRB, section 1886(d)(8)(B) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in Sec.  412.103 of the regulations, and hospitals designated 
as urban under section 601(g) of Public Law 98-21. We note that the 
reclassifications of hospitals under section 508 of Public Law 108-173, 
as extended by sections 3137 and 10317 of the Affordable Care Act, 
expired on September 30, 2010. Section 102 of the Medicare and Medicaid 
Extenders Act of 2010 extends Section 508 and certain additional 
special exception hospital reclassifications from October 1, 2010 
through September 30, 2011. Therefore, these reclassifications will not 
apply to the CY 2012 OPPS. (For further discussion of the changes to 
the FY 2012 IPPS wage indices, as applied to the CY 2012 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.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this final rule with comment period (which is 
referenced in section XVII. of this final rule with comment period and 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2012 IPPS and listed as Table 4J in the FY 2012 IPPS/LTCH PPS final 
rule and available via the Internet on the CMS Web site at: http://www.cms.gov/AcuteInpatientPPS/01_overview.asp. 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 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 a SCH, set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be a SCH under section 
1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as 
defined in 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 use 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 2012 full national unadjusted payment rate for 
APC 0019 is $307.74. The reduced national unadjusted payment rate for a 
hospital that fails to meet the Hospital OQR Program requirements is 
$301.59. This reduced rate is calculated by multiplying the reporting 
ratio of 0.980 by the full unadjusted payment rate for APC 0019.
    The FY 2012 wage index for a provider located in CBSA 35644 in New 
York is 1.3142. The labor-related portion of the full national 
unadjusted payment is $242.66 (.60 * $307.74 * 1.3142). The labor-
related portion of the reduced national unadjusted payment is $237.81 
(.60 * $301.59 * 1.3142). The nonlabor-related portion of the full 
national unadjusted payment is $123.10 (.40 * $307.74). The nonlabor-
related portion of the reduced national unadjusted payment is 
$120.63(.40 * $301.59). The sum of the labor-related and nonlabor-
related portions of the full national adjusted payment is $365.76 
($242.66 + $123.10). The sum of the reduced national adjusted payment 
is $358.44 ($237.81 + $120.63).

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

[[Page 74211]]

unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services 
paid under the OPPS in CY 2010, and in calendar years thereafter, the 
percentage is 40 percent of the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected to 
the amount of the inpatient deductible, which for CY 2012 is $1,156.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011 that meet certain requirements, including flexible sigmoidoscopies 
and screening colonscopies, and waived the Part B deductible for 
screening colonoscopies that become diagnostic during the procedure. 
Our discussion of the changes made by the Affordable Care Act with 
regard to copayments for preventive services furnished on and after 
January 1, 2011 may be found in section XII.B. of the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2012 OPPS/ASC proposed rule (76 FR42224), 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, 2012, were shown in 
Addenda A and B to the proposed rule (which were available via the 
Internet on the CMS Web site). As discussed in section XIV.E. of the 
proposed rule and this final rule with comment period, for CY 2012, the 
Medicare beneficiary's minimum unadjusted copayment and national 
unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.
    We did not receive any public comments regarding the proposed 
methodology for calculating copayments for CY 2012. Therefore, for the 
reasons set forth in the proposed rule (76 FR 42225), we are finalizing 
our CY 2012 copayment amounts without modification. We note that we 
received public comments on the copayments that would apply to 
beneficiaries who receive services from dedicated cancer hospitals 
under our proposal to provide an adjustment to payments to these 
hospitals. Those copayment-related public comments are discussed in 
section II.F. of this final rule with comment period.
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, $61.55 is 20 percent of the full national 
unadjusted payment rate of $307.74. For APCs with only a minimum 
unadjusted copayment in Addenda A and B of this final rule with comment 
period (which are available via the Internet on the CMS Web site), the 
beneficiary payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates national copayment as a percentage of national payment for a 
given service.
    B is the beneficiary payment percentage.

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

    Step 2. Calculate the appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in Steps 2 through 4 
under section II.H. of this final rule with comment period. Calculate 
the rural adjustment for eligible providers as indicated in Step 6 
under section II.H. of this final rule with comment period.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary percentage to the adjusted payment rate for a 
service calculated under section II.H. of this final rule with comment 
period, with and without the rural adjustment, to calculate the 
adjusted beneficiary copayment for a given service.

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2012, are shown in Addenda A and B to this 
final rule with comment period (which are referenced in section XVII. 
of this final rule with comment period and 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 2012 OPD fee schedule increase 
factor discussed in section XIV.E. of this final rule with comment 
period.
    Also as noted above, section 1833(t)(8)(C)(i) of the Act limits the 
amount of beneficiary copayment that may be collected to the amount of 
the inpatient deductible, which for CY 2012 is $1,156.

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 medical services and 
procedures;
     Category III CPT codes, which describe new and emerging

[[Page 74212]]

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 comments on these new codes and finalize our 
proposals related to these codes through our annual rulemaking process. 
As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42225 
through 42226), in Table 14 below (also Table 14 of the proposed rule), 
we summarize our process for updating codes through our OPPS quarterly 
update CRs, seeking public comments, and finalizing their treatment 
under the OPPS. We note that because of the timing of the publication 
of the proposed rule, the codes that were implemented through the July 
2011 OPPS quarterly update 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 2011 OPPS quarterly 
update were included in Addendum B.
[GRAPHIC] [TIFF OMITTED] TR30NO11.023


[[Page 74213]]


    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 2012 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this CY 2012 OPPS/ASC final rule with 
comment period. In the CY 2012 OPPS/ASC proposed rule, we noted that we 
sought public comment in the CY 2011 OPPS/ASC final rule with comment 
period on the new CPT and Level II HCPCS codes that were effective 
January 1, 2011. We also sought public comments in the CY 2011 OPPS/ASC 
final rule with comment period on the new Level II HCPCS codes 
effective October 1, 2010. These new codes, with an effective date of 
October 1, 2010, or January 1, 2011, 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 2011 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 2011 OPPS/ASC final rule with comment period. We 
are responding to public comments and finalizing our proposed OPPS 
treatment of these codes in this CY 2012 OPPS/ASC final rule with 
comment period.
    We received comments on several new codes that were assigned to 
comment indicator ``NI'' in Addendum B of the CY 2011 OPPS/ASC final 
rule with comment period. We respond to those comments in sections 
II.A. and III.D. of this final rule with comment period. Table 15 lists 
the long descriptors for the CPT codes that were assigned to comment 
indicator ``NI'' for which we received public comments to the CY 2011 
OPPS/ASC final rule with comment period and the specific sections where 
the comments are addressed.
BILLING CODE 4120-01-P

[[Page 74214]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.024


[[Page 74215]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.025

BILLING CODE 4120-01-C
1. Treatment of New Level II HCPCS Codes and Category I CPT Vaccine 
Codes and Category III CPT Codes for Which We Solicited Public Comments 
in the CY 2012 Proposed Rule
    Through the April 2011 OPPS quarterly update CR (Transmittal 2174, 
Change Request 7342, dated March 18, 2011) and the July 2011 OPPS 
quarterly update CR (Transmittal 2234, Change Request 7443, dated May 
27, 2011), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2011, we made 
effective a total of 22 new Level II HCPCS codes and 14 Category III 
CPT codes. Specifically, 5 new Level II HCPCS codes were effective for 
the April 2011 update and another 17 new Level II HCPCS codes were 
effective for the July 2011 update for a total of 22. Fourteen new 
Category III CPT codes were effective for the July 2011 update. Of the 
22 new Level II HCPCS codes, we recognized for separate payment 16 of 
these codes, and of the 14 new Category III CPT codes, we recognized 
for separate payment 12 of these codes, for a total of 28 new HCPCS 
codes that are recognized for separate payment for CY 2012.
    Through the April 2011 OPPS quarterly update CR, we allowed 
separate payment for each of the five new Level II HCPCS codes. 
Specifically, as displayed in Table 16 below (Table 15 of the proposed 
rule), we provided separate payment for the following HCPCS codes:

     HCPCS code C9280 (Injection, eribulin mesylate, 1 mg)
     HCPCS code C9281 (Injection, pegloticase, 1 mg)
     HCPCS code C9282 (Injection, ceftaroline fosamil, 10 mg)
     HCPCS code Q2040 (Injection, incobotulinumtoxin A, 1 unit)
     HCPCS code C9729 (Percutaneous laminotomy/laminectomy 
(intralaminar approach) for decompression of neural elements, (with 
ligamentous resection, discectomy, facetectomy and/or foraminotomy, 
when performed) any method under indirect image guidance, with the use 
of an endoscope when performed, single or multiple levels, unilateral 
or bilateral; lumbar)

    We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, 
incobotulinumtoxin A, 1 unit) beginning April 1, 2010. HCPCS code C9278 
was effective January 1, 2011, and deleted March 30, 2011, because it 
was replaced with HCPCS code Q2040. HCPCS code C9278 was assigned to 
pass-through status beginning January 1, 2011, when the code was 
implemented. Because HCPCS code Q2040 describes the same drug as HCPCS 
code C9278, we are continuing its pass-through status and assigning the 
HCPCS Q-code to the same APC and status indicator as its predecessor 
HCPCS C-code, as shown in Table 16 below. Specifically, HCPCS code 
Q2040 is assigned to APC 9278 and status indicator ``G.''
    In the CY 2012 OPPS/ASC proposed rule, we solicited public comments 
on the proposed status indicators and APC assignments of HCPCS codes 
C9280, C9281, C9282, C9729, and Q2040, which were listed in Table 15 of 
that proposed rule (76 FR 42226) and now

[[Page 74216]]

appear in Table 16 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 C9280, C9281, C9282, C9729, and Q2040. 
However, for CY 2012, the HCPCS Workgroup replaced HCPCS C9280, C9281, 
C9282, and Q2040 with permanent HCPCS J-codes. Specifically, C9280 was 
replaced with J9179 (Injection, eribulin mesylate, 0.1 mg), C9281 with 
J2507 (Injection, pegloticase, 1 mg), C9282 with J0712 (Injection, 
ceftaroline fosamil, 10 mg), and Q2040 with J0588 (Injection, 
incobotulinumtoxin A, 1 unit). Consistent with our general policy of 
using permanent HCPCS codes if appropriate 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 effective 
January 1, 2012 in Table 16 that replaced HCPCS C9280, C9281, C9282, 
and Q2040.
    Similarly, for CY 2012, we deleted HCPCS code C9729 on June 30, 
2011 because it was replaced with CPT code 0275T. Further discussion of 
CPT code 0275T can be found below.
    Because HCPCS codes J2507, J0712, and J0588 describe the same drugs 
and the same dosages currently designated by HCPCS codes C9281, C9282, 
and Q2040, respectively, these drugs will continue their pass-through 
status in CY 2012. Therefore, we are assigning HCPCS codes J2507, 
J0712, and J0588 to the same status indicators and APCs as their 
predecessor HCPCS codes, as shown in Table 16.
    However, we note that the replacement code for HCPCS code C9280 
does not describe the same dosage descriptor, and consequently, the 
replacement HCPCS code will be assigned a new APC number. Specifically, 
C9280 has a dosage descriptor of 1 mg; however, its replacement HCPCS 
code J9179 has a dosage descriptor of 0.1 mg. Therefore, effective 
January 1, 2012, HCPCS codes J9179 will be assigned to APC 1426 to 
maintain data consistency for future rulemaking. Because the 
predecessor HCPCS code C9280 was assigned to pass-through status, HCPCS 
code J9179 will continue to be assigned status indicator ``G'' for CY 
2012.
    We did not receive any public comments on the new Level II HCPCS 
codes that were implemented in April 2011. We are adopting as final, 
without modification, our proposal to assign the Level II HCPCS codes 
listed in Table 16 to the APCs and status indicators as proposed for CY 
2012, with the exception of HCPCS code J9179, which will be assigned to 
APC 1426. Table 16 shows the final APC and status indicator assignments 
for all five Level II HCPCS codes.
[GRAPHIC] [TIFF OMITTED] TR30NO11.026

    Through the July 2011 OPPS quarterly update CR, which included 
HCPCS codes that were made effective July 1, 2011, we allowed separate 
payment for 11 of the 17 new Level II HCPCS codes. Specifically, as 
displayed in Table 16 of

[[Page 74217]]

the proposed rule (Table 17 of this final rule with comment period), we 
provided separate payment for the following HCPCS codes:
     HCPCS code C9283 (Injection, acetaminophen, 10 mg)
     HCPCS code C9284 (Injection, ipilimumab, 10 mg)
     HCPCS code C9285 (Lidocaine 70 mg/tetracaine 70 mg, per 
patch)
     HCPCS code C9365 (Oasis Ultra Tri-Layer Matrix, per square 
centimeter)
     HCPCS code C9406 (Iodine I-123 ioflupane, diagnostic, per 
study dose, up to 5 millicuries)
     HCPCS code C9730 (Bronchoscopic bronchial thermoplasty 
with imaging guidance (if performed), radiofrequency ablation of airway 
smooth muscle, 1 lobe)
     HCPCS code C9731 (Bronchoscopic bronchial thermoplasty 
with imaging guidance (if performed), radiofrequency ablation of airway 
smooth muscle, 2 or more lobes)
     HCPCS code Q2041 (Injection, von willebrand factor complex 
(human), Wilate, 1 i.u. vwf:rco)
     HCPCS code Q2042 (Injection, hydroxyprogesterone caproate, 
1 mg)
     HCPCS code Q2043 (Sipuleucel-t, minimum of 50 million 
autologous cd54+ cells activated with pap-gm-csf, including 
leukapheresis and all other preparatory procedures, per infusion)
     HCPCS code Q2044 (Injection, belimumab, 10 mg)
    We note that two of the Level II HCPCS Q-codes that were made 
effective July 1, 2011, were previously described by a HCPCS J-code and 
a C-code that were assigned to pass-through status under the hospital 
OPPS. Specifically, HCPCS code Q2041 replaced HCPCS code J7184 
(Injection, von willebrand factor complex (human), Wilate, per 100 iu 
vwf:rco) beginning July 1, 2011. HCPCS code J7184 was assigned to pass-
through status when it was made effective January 1, 2011; however, the 
code is ``Not Payable by Medicare'' because HCPCS code J7184 is 
replaced with HCPCS code Q2041 effective July 1, 2011. Therefore, HCPCS 
code J7184 was reassigned to status indicator ``E'' effective July 1, 
2011. Because HCPCS code J7184 describes the same drug as HCPCS code 
Q2041, we continued its pass-through status and assigned HCPCS code 
Q2041 to status indicator ``G'' effective July 1, 2011. However, 
because the dosage descriptor for HCPCS code Q2041 is not the same as 
HCPCS code J7184, we reassigned HCPCS code Q2041 to a new APC to 
maintain data consistency for future rulemaking. Specifically, HCPCS 
code Q2041 was assigned to APC 1352 effective July 1, 2011. In 
addition, HCPCS code Q2043 replaced HCPCS code C9273 (Sipuleucel-t, 
minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, 
including leukapheresis and all other preparatory procedures, per 
infusion) beginning July 1, 2011. HCPCS code C9273 was assigned to 
pass-through status when it was made effective October 1, 2010. Because 
HCPCS code Q2043 describes the same product as HCPCS code C9273, we 
continued its pass-through status and assigned HCPCS code Q2043 to 
status indicator ``G'' as well as assigned it to the same APC, 
specifically APC 9273, effective July 1, 2011.
    Of the 17 HCPCS codes that were made effective July 1, 2011, we did 
not recognize for separate payment six HCPCS codes that describe 
durable medical equipment (DME) because DME is paid under the Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Fee 
Schedule and not the OPPS. These codes were listed in Table 16 of the 
proposed rule, and were assigned to either status indicator ``Y'' or 
``A'' effective July 1, 2011.
    In the CY 2012 OPPS/ASC proposed rule, we solicited public comments 
on the status indicators and APC assignments where applicable for the 
17 HCPCS codes that were listed in Table 16 of that proposed rule (76 
FR 42227 through 42228) and now appear in Table 17 of this final rule 
with comment period. We received a comment on the APC assignments for 
HCPCS codes C9730 and C9731. A summary of the comments and our 
responses can be found in section III.D.8.b. (Bronchial Thermoplasty) 
of this final rule with comment period. In addition, we received some 
comments on the long descriptor for HCPCS code Q2043. A summary of the 
comments and our responses can be found in section V.A.3. of this final 
rule with comment period.
    With the exception of HCPCS codes C9730, C9731, and Q2043, we 
received no other public comments on the 14 other Level II HCPCS codes 
listed in Table 16 of the CY 2011 OPPS/ASC proposed rule. However, for 
CY 2012, the HCPCS Workgroup replaced several HCPCS C-codes with an A-
code, J-code, or Q-code. Specifically, C9283 was replaced with J0131 
(Injection, acetaminophen, 10 mg), C9284 with J9228 (Injection, 
ipilimumab, 1 mg), C9365 with Q4124 (Oasis Ultra Tri-Layer Matrix, per 
square centimeter), C9406 with A9584 (Iodine I-123 ioflupane, 
diagnostic, per study dose, up to 5 millicuries), Q2041 with J7183 
(Injection, von willebrand factor complex (human), Wilate, 1 i.u. 
vwf:rco), Q2042 with J1725 (Injection, hydroxyprogesterone caproate, 1 
mg), and Q2044 with J0490 (Injection, belimumab, 10 mg).
    Because HCPCS codes J0131, J9228, Q4124, A9584, J7183 and J0490 
describe the same drugs and the same dosages currently designated by 
HCPCS codes C9283,C9284, C9365, C9406, Q2041, and Q2044, respectively, 
these drugs will continue their pass-through status in CY 2012. 
Therefore, we are assigning HCPCS codes J0131, J9228, Q4124, A9584, 
J7183 and J0490 to the same status indicators and APCs as their 
predecessor HCPCS codes, as shown in Table 17. We note that since HCPCS 
code Q2042 is assigned to status indicator ``K'' (Nonpass-Through 
Drugs; Paid under OPPS; Separate APC payment), its replacement HCPCS 
code J1725 will also continue its nonpass-through status in CY 2012.
    Further, for CY 2012, the CPT Editorial Panel made effective 
Category III CPT codes 0276T and 0277T on January 1, 2012. Because 
Category III CPT codes 0276T and 0277T describe the same procedures as 
HCPCS code C9730 and C9731, we are deleting HCPCS codes C9730 and C9731 
on December 31, 2011, and assigning both CPT codes to the same status 
indicator and APC assignment as its predecessor HCPCS code, as shown in 
Table 17.
    As stated previously, we did not receive any other public comments 
on the new Level II HCPCS codes that were implemented in July 2011, 
other than HCPCS codes C9730, C9731, and Q2043, which are discussed in 
sections III.D.8.b. and V.A.3., respectively, of this final rule with 
comment period. We are adopting as final, without modification, our 
proposal to assign the 17 Level II HCPCS codes listed in Table 12 to 
the APCs and status indicators as proposed for CY 2012.
    Table 17 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2011, with their final status 
indicators, APC assignments, and payment rates for CY 2012.
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BILLING CODE 4120-01-C
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42228), for CY 2012, 
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 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. Through the July 2011 OPPS 
quarterly update CR, we allowed separate payment for 12 of the 14 new 
Category III CPT codes effective July 1, 2011. Specifically, as 
displayed in Table 17 of the proposed rule, we allow separate payment 
for the following Category III CPT codes:
     CPT code 0263T (Intramuscular autologous bone marrow cell 
therapy, with preparation of harvested cells, multiple injections, one 
leg, including ultrasound guidance, if performed; complete procedure 
including unilateral or bilateral bone marrow harvest)
     CPT code 0264T (Intramuscular autologous bone marrow cell 
therapy, with preparation of harvested cells, multiple injections, one 
leg, including ultrasound guidance, if performed; complete procedure 
excluding bone marrow harvest)
     CPT code 0265T (Intramuscular autologous bone marrow cell 
therapy, with preparation of harvested cells, multiple injections, one 
leg, including ultrasound guidance, if performed; unilateral or 
bilateral bone marrow harvest only for intramuscular autologous bone 
marrow cell therapy)
     CPT code 0267T (Implantation or replacement of carotid 
sinus baroreflex activation device; lead only, unilateral (includes 
intra-operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0268T (Implantation or replacement of carotid 
sinus baroreflex activation device; pulse generator only (includes 
intra-operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0269T (Revision or removal of carotid sinus 
baroreflex activation device; total system (includes generator 
placement, unilateral or bilateral lead placement, intra-operative 
interrogation, programming, and repositioning, when performed))
     CPT code 0270T (Revision or removal of carotid sinus 
baroreflex activation device; lead only, unilateral (includes intra-
operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0271T (Revision or removal of carotid sinus 
baroreflex activation device; pulse generator only (includes intra-
operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0272T (Interrogation device evaluation (in 
person), carotid sinus baroreflex activation system, including 
telemetric iterative communication with the implantable device to 
monitor device diagnostics and programmed therapy values, with 
interpretation and report (eg, battery status, lead impedance, pulse 
amplitude, pulse width, therapy frequency, pathway mode, burst mode, 
therapy start/stop times each day))
     CPT code 0273T (Interrogation device evaluation (in 
person), carotid sinus baroreflex activation system, including 
telemetric iterative communication with the implantable device to 
monitor device diagnostics and programmed therapy values, with 
interpretation and report (eg, battery status, lead impedance, pulse 
amplitude, pulse width, therapy frequency, pathway mode, burst mode, 
therapy start/stop times each day); with programming)
     CPT 0274T (Percutaneous laminotomy/laminectomy 
(intralaminar approach) for decompression of neural elements, (with or 
without ligamentous resection, discectomy, facetectomy and/or 
foraminotomy) any method under indirect image guidance (eg, 
fluoroscopic, CT), with or without the use of an endoscope, single or 
multiple levels, unilateral or bilateral; cervical or thoracic)
     CPT 0275T (Percutaneous laminotomy/laminectomy 
(intralaminar approach) for decompression of neural

[[Page 74220]]

elements, (with or without ligamentous resection, discectomy, 
facetectomy and/or foraminotomy) any method under indirect image 
guidance (eg, fluoroscopic, CT), with or without the use of an 
endoscope, single or multiple levels, unilateral or bilateral; lumbar) 
(As published in the July 2011 OPPS quarterly update CR, CPT code 0275T 
replaced Level II HCPCS code C9729 effective July 1, 2011.)
    We note that Category III CPT codes 0262T (Implantation of 
catheter-delivered prosthetic pulmonary valve, endovascular approach) 
and 0266T (Implantation or replacement of carotid sinus baroreflex 
activation device; total system (includes generator placement, 
unilateral or bilateral lead placement, intra-operative interrogation, 
programming, and repositioning, when performed)) were assigned to 
status indicator ``C'' (Inpatient Procedures) under the hospital OPPS 
beginning July 1, 2011. As we stated in the proposed rule (76 FR 
42229), we believe these procedures should only be paid when provided 
in the inpatient setting because of the clinical circumstances under 
which these procedures are performed. There are no new Category I 
Vaccine CPT codes for the July 2011 update.
    Furthermore, for CY 2012, the CPT Editorial Panel made effective 
Category III CPT code 0275T on July 1, 2011. Because Category III CPT 
code 0275T describes the same procedure as HCPCS code C9729, we deleted 
HCPCS code C9729 on June 30, 2011. Through the July 2011 OPPS quarterly 
update CR, we also instructed hospitals to report the procedure 
previously described by HCPCS code C9729 with Category III CPT code 
0275T effective July 1, 2011. Because Category III CPT code 0275T 
describes the same procedure designated by HCPCS code C9729, we 
assigned Category III CPT code 0275T to the same status indicator and 
APC assignment as its predecessor HCPCS code, as shown in Table 16 and 
Table 18.
    We received a comment on the APC assignment and long descriptor for 
Category III CPT code 0275T. A summary of the comment and our response 
can be found in section III.D.6.a. (Percutaneous Laminotomy/
Laminectomy) of this final rule with comment period. Table 18 lists the 
Category III CPT codes that were implemented in July 2011, along with 
their final status indicators, final APC assignments where applicable, 
and final payment rates for CY 2012.
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[[Page 74222]]


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[GRAPHIC] [TIFF OMITTED] TR30NO11.031

BILLING CODE 4120-01-C
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42227 through 42229), 
we solicited public comments on the CY 2012 proposed status indicators 
and the proposed APC assignments and payment rates, if applicable, for 
the Level II HCPCS codes and the Category III CPT codes that are newly 
recognized in April or July 2011 through the respective OPPS quarterly 
update CRs. These codes were listed in Tables 15, 16, and 17 of the 
proposed rule. We proposed to finalize their status indicators and 
their APC assignments and payment rates, if applicable, in this CY 2012 
OPPS/ASC final rule with comment period. Because the July 2011 OPPS 
quarterly update CR was issued close to the publication of the proposed 
rule, the Level II HCPCS codes and the Category III CPT codes 
implemented through the July 2011 OPPS quarterly update CR could not be 
included in Addendum B to the proposed rule, but these codes were 
listed in Tables 16 and 17, respectively. We proposed to incorporate 
these codes into Addendum B to this CY 2012 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 2011 
OPPS update CR and displayed in Table 15 were included in Addendum B to 
the proposed rule (which is available via the Internet on the CMS Web 
site), where their proposed CY 2012 payment rates were also shown. We 
did not receive any additional 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 are 
newly recognized in April or July 2011 through the respective OPPS 
quarterly update CRs are found in Addendum B to this CY 2012 OPPS/ASC 
final rule with comment period (which is available via the Internet on 
the CMS Web site).
2. Process for New Level II HCPCS Codes and Category I and Category III 
CPT Codes for Which We Are Soliciting Public Comments on This CY 2012 
OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and III CPT codes and new Level II HCPCS codes that are 
effective January 1 in the final rule with comment period updating the 
OPPS for the following calendar year. These codes are released to the 
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites 
(for CPT codes), and also through the January OPPS quarterly update 
CRs. In the past, we also have released new Level II HCPCS codes that 
are effective October 1 through the October OPPS quarterly update CRs 
and incorporated these new codes in the final rule with comment period 
updating the OPPS for the following calendar year. All of these codes 
are flagged with comment indicator ``NI'' in Addendum B to the OPPS/ASC 
final rule with comment period to indicate that we are assigning them 
an interim payment status which is subject to public comment. 
Specifically, the status indicator and the APC assignment and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the final rule with comment 
period, and we respond to these comments in the OPPS/ASC final rule 
with comment period for the next calendar year's OPPS/ASC update. In 
the CY 2012 OPPS/ASC proposed rule (76 FR 42230), we proposed to 
continue this process for CY 2012. Specifically, for CY 2012, we 
proposed to include in Addendum B to this CY 2012 OPPS/ASC final rule 
with comment period (which is available via the Internet on the CMS Web 
site) the new Category I and III CPT codes effective January 1, 2012 
(including the Category III CPT codes that were released by the AMA in 
July 2011) that would be incorporated in the January 2012 OPPS 
quarterly update CR and the new Level II HCPCS codes, effective October 
1, 2011, or January 1, 2012, that would be released by CMS in its 
October 2011 and January 2012 OPPS quarterly update CRs. As proposed, 
in this final rule with comment period, these codes are flagged with 
comment indicator ``NI'' in Addendum B to this CY 2012 OPPS/ASC final 
rule with comment period to indicate that we have assigned them an 
interim OPPS payment status for CY 2012. As

[[Page 74224]]

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 2013 OPPS/
ASC final rule with comment period. We note that the CPT codes that 
were released by the AMA in July 2011 that were subject to comment in 
the CY 2012 OPPS/ASC proposed rule, and were listed in Table 17, will 
not be assigned to comment indicator ``NI'' in Addendum B because 
comments about these codes will be addressed in this CY 2012 OPPS/ASC 
final rule with comment period.
    Comment: One commenter recommended that, through a Web posting, CMS 
request public input on the APC assignments of the Category I CPT 
vaccine codes, Category III CPT codes, and Level II HCPCS codes that 
are made effective on October 1 or January 1 of subsequent years but 
are made available to the public by the completion of each year's OPPS 
proposed rule. The commenter indicated that some of these codes have 
already been released to the public, either through the CMS or AMA CPT 
Web site, by July 1 of any given year. This same commenter suggested 
that the lack of stakeholder input on the interim APC assignments may 
negatively impact Medicare beneficiaries. In particular, the commenter 
stated that interim payment assignments have been influential in 
determining whether hospitals provide services to Medicare 
beneficiaries or not, and further suggested that if the payment for a 
procedure or service does not adequately reflect the true costs of 
furnishing the service, then hospitals may decide not to offer the 
service to Medicare beneficiaries.
    Response: The commenter is correct that Category I Vaccine and 
Category III CPT codes that are effective January 1 of a subsequent 
year are released on the AMA CPT Web site on or about July 1. However, 
some Level II HCPCS codes are not released on the CMS Web site until 
much later. For the October update, the Level II HCPCS C-codes that are 
effective October 1 are usually released and posted on the CMS Web site 
in August or September, depending on the number of OPPS new technology 
service and pass-through drug and device applications that are 
evaluated. Therefore, we do not have sufficient time to evaluate the 
new codes, determine proposed APC assignments, post those proposed 
assignments to the CMS Web site, accept and consider public comments, 
and respond to public comments between the time that the new codes 
become available and the time that we must meet our systems deadlines 
for our claims processing and payment files for the upcoming quarter. 
Given the challenges and time constraints in meeting the quarterly CPT 
and Level II HCPCS systems deadlines, we will continue to assign the 
new codes that are effective October 1 and January 1 of subsequent year 
to interim APC assignments. If we were to wait for comments on the 
interim APC assignments for the new codes before making them effective 
on October 1 or January 1, this may result in services and items not 
being paid for separately for a whole year, which would ultimately 
disadvantage both the hospital outpatient facilities and Medicare 
beneficiaries.
    The OPPS is a prospective payment system that provides payment for 
groups of services that share clinical and resource use 
characteristics. It should be noted that, with all new codes, our 
policy has been to assign the service to an APC based on input from a 
variety of sources, including but not limited to review of the clinical 
similarity of the service to existing procedures; input from CMS 
medical advisors; information from interested specialty societies; and 
review of all other information available to us, including information 
provided to us by the public, whether through meetings with 
stakeholders or additional information that is mailed or otherwise 
communicated to us.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, to assign the new 
CPT and Level II HCPCS codes that are effective October 1 and January 1 
of subsequent years to interim APC assignments and request comments on 
the codes in the annual OPPS/ASC final rule with comment period, as 
described above.
    Comment: Some commenters requested that CMS implement a 1 to 2 year 
dampening period to minimize significant fluctuations in payments from 
year to year for newly bundled or packaged procedure codes. One 
commenter specifically stated that limiting the payment reduction to 10 
percent would prevent hospitals from experiencing substantial payment 
reductions and would allow hospitals reasonable time to appropriately 
update their chargemasters to reflect the newly packaged codes.
    Response: We do not believe it is necessary or appropriate to limit 
payment reductions for any individual service in order to prevent 
hospitals from experiencing substantial payment reductions as the 
commenter indicates. While payment rates for individual services may 
decrease from year to year, the total estimated payments made to 
hospitals remains the same because the OPPS is, by statute, a budget 
neutral payment system. In order to accurately report charges on their 
claims, hospitals must be cognizant of HCPCS coding changes, 
specifically with respect to Category I and III CPT codes and Level II 
HCPCS codes that occur throughout the year, including the quarterly 
updates (April 1, July 1, and October 1) as well as the annual updates 
(January 1). In recent years, the CMS and the AMA's CPT Editorial Panel 
have increasingly created new codes that use a single HCPCS code to 
report combinations of services that were previously reported by 
multiple HCPCS codes or multiple units of a single HCPS code. For 
example, effective January 1, 2010, CMS created HCPCS code G0424 
(Pulmonary rehabilitation, including exercise (includes monitoring), 
per hour, per session) to represent a comprehensive program of 
pulmonary therapy and the CPT Editorial Panel created CPT code 77338 
(Multi-leaf collimator (MLC) device(s) for intensity modulated 
radiation therapy (IMRT), design and construction per IMRT plan) to 
report all devices furnished under a single IMRT treatment plan. As we 
have stated before, we expect hospitals to carefully review each new 
HCPCS code when setting charges for the forthcoming year. However, in 
particular, hospitals should be especially careful to thoughtfully 
establish charges for new codes that use a single code to report 
multiple services that were previously reported by multiple codes. It 
is vital in these cases that hospitals carefully establish charges that 
fully include all of the charges for all of the predecessor services 
that are reported by the new code. To fail to carefully construct the 
charge for a new code that reports a combination of services that were 
previously reported separately, particularly in the first year of the 
new code, under-represents the cost of providing the service describing 
by the new code and can have significant adverse impact on future 
payments under the OPPS for the individual service described by the new 
code.

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

[[Page 74225]]

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 services. Therefore, we do not make 
separate payment for these packaged items or services. For example, 
packaged items and services include:
    (1) Use of an operating, treatment, or procedure room;
    (2) Use of a recovery room;
    (3) Observation services;
    (4) Anesthesia;
    (5) Medical/surgical supplies;
    (6) Pharmaceuticals (other than those for which separate payment 
may be allowed under the provisions discussed in section V. of the 
proposed rule and this final rule with comment period);
    (7) Incidental services such as venipuncture;
    (8) Guidance services, image processing services, intraoperative 
services, imaging, supervision and interpretation services, diagnostic 
radiopharmaceuticals, and contrast media.
    Further discussion of packaged services is included in section 
II.A.3. of this final rule with comment period.
    In CY 2008, we implemented composite APCs to provide a single 
payment for groups of services that are typically performed together 
during a single clinical encounter and that result in the provision of 
a complete service (72 FR 66650 through 66652). Under CY 2011 OPPS 
policy, we provide composite APC payment for certain extended 
assessment and management services, low dose rate (LDR) prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation, 
mental health services, and multiple imaging services. Further 
discussion of composite APCs is included in section II.A.2.e. of this 
final rule with comment period.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. Each 
APC weight represents the hospital median cost of the services included 
in that APC, relative to the hospital median cost of the services 
included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights 
are scaled to APC 0606 because it is the middle level hospital clinic 
visit APC (the Level 3 hospital clinic visit CPT code out of five 
levels), and because middle level hospital clinic visits are among the 
most frequently furnished services in the hospital outpatient setting.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
on a recurring basis occurring no less than annually, and revise the 
groups, the relative payment weights, and the wage and other 
adjustments to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review (and advise the Secretary concerning) the clinical integrity of 
the APC groups and the relative payment weights (the APC Panel 
recommendations for specific services for the CY 2012 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 median cost (or mean cost as elected by the Secretary) for an 
item or service in the group is more than 2 times greater than the 
lowest median cost (or mean cost, if so elected) for an item or service 
within the same group (referred to as the ``2 times rule''). We use the 
median cost of the item or service in implementing this provision. 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 median cost of the highest cost item or service 
within an APC group is more than 2 times greater than the median of the 
lowest cost item or service within that same group. In making this 
determination, we consider only those HCPCS codes that are significant 
based on the number of claims. We note that, for purposes of 
identifying significant HCPCS codes for examination in the 2 times 
rule, we consider codes that have more than 1,000 single major claims 
or codes that have both greater than 99 single major claims and 
contribute at least 2 percent of the single major claims used to 
establish the APC median cost to be significant (75 FR 71832). This 
longstanding definition of when a HCPCS code is significant for 
purposes of the 2 times rule was selected because we believe that a 
subset of 1,000 claims is negligible within the set of approximately 
100 million single procedure or single session claims we use for 
establishing median 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 median. In the CY 2012 OPPS/ASC proposed rule (76 FR 42231), 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 2012.
    During the APC Panel's February 2011 meeting, we presented median 
cost and utilization data for services furnished during the period of 
January 1, 2010, through September 30, 2010, about which we had 
concerns or about which the public had raised concerns regarding their 
APC assignments, status indicator assignments, or payment rates. The 
discussions of most service-specific issues, the APC Panel 
recommendations, if any, and our proposals and final policies for CY 
2012 are contained mainly in sections III.C. and III.D. of this final 
rule with comment period.
    In addition to the assignment of specific services to APCs that we 
discussed with the APC Panel, we also identified APCs with 2 times 
violations that were not specifically discussed

[[Page 74226]]

with the APC Panel but for which we proposed changes to their HCPCS 
codes' APC assignments in Addendum B to the proposed rule. We note that 
Addendum B did not appear in the printed version of the Federal 
Register as part of the CY 2012 OPPS/ASC proposed rule. Rather, it was 
published and made available only via the Internet on the CMS Web site 
at: http://www.cms.gov/. In these cases, to eliminate a 2 times 
violation or to improve clinical and resource homogeneity, we proposed 
to reassign the codes to APCs that contain services that are similar 
with regard to both their clinical and resource characteristics. We 
also proposed to rename existing APCs or create new clinical APCs to 
complement proposed HCPCS code reassignments. In many cases, the 
proposed HCPCS code reassignments and associated APC reconfigurations 
for CY 2012 included in the proposed rule were related to changes in 
median costs of services that were observed in the CY 2010 claims data 
newly available for CY 2012 ratesetting. We also proposed changes to 
the status indicators for some codes that were not specifically and 
separately discussed in the proposed rule. In these cases, we proposed 
to change the status indicators for some codes because we believe that 
another status indicator would more accurately describe their payment 
status from an OPPS perspective based on the policies that we proposed 
for CY 2012. Addendum B of the CY 2012 OPPS/ASC proposed rule 
identified with a comment indicator ``CH'' those HCPCS codes for which 
we proposed a change to the APC assignment or status indicator as 
assigned in the April 2011 Addendum B Update (available via the 
Internet on the CMS Web site at: http://www.cms.gov/). In contrast, 
Addendum B of this final rule with comment period identifies with the 
``CH'' comment indicator the final CY 2012 changes compared to the 
codes' status as reflected in the October 2011 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 2012 based on the APC Panel recommendations 
that were discussed mainly in sections III.C. and III.D. of the 
proposed rule, the other proposed changes to status indicators and APC 
assignments as identified in Addendum B to the proposed rule (which was 
available via the Internet on the CMS Web site), and the use of CY 2010 
claims data to calculate the median costs of procedures classified in 
the APCs, we reviewed all the APCs to determine which APCs would not 
satisfy the 2 times rule. We used the following criteria to decide 
whether to propose exceptions to the 2 times rule for affected APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    For a detailed discussion of these criteria, we refer readers to 
the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 
18458).
    Table 18 of the CY 2012 OPPS/ASC proposed rule (76 FR 42232) listed 
17 APCs that we proposed to exempt from the 2 times rule for CY 2012 
based on the criteria cited above.
    For cases in which a recommendation by the APC Panel appeared to 
result in or allow a violation of the 2 times rule, we generally 
accepted the APC Panel's recommendation because those recommendations 
were based on explicit consideration of resource use, clinical 
homogeneity, site of service, and the quality of the CY 2010 claims 
data used to determine the APC payment rates that we proposed for CY 
2012. The median costs for hospital outpatient services for these and 
all other APCs that were used in the development of the CY 2012 OPPS/
ASC proposed rule and this final rule with comment period can be found 
on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp.
    For the CY 2012 OPPS/ASC proposed rule, we based the listed 
exceptions to the 2 times rule on claims data for dates of service 
between January 1, 2010, and December 31, 2010, that were processed 
before January 1, 2011. For this final rule with comment period, we 
used claims data for dates of service between January 1, 2010, and 
December 31, 2010, that were processed on or before June 30, 2011 and 
updated CCRs, if available. Although we stated in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42232) that the list of APC exemptions that 
appeared in Table 18 were based on claims data processed from January 
1, 2010, through September 30, 2010, we are clarifying that the listed 
exceptions were based on claims data processed between January 1, 2010, 
and December 31, 2010, consistent with past practice of using claims 
data processed between January 1 and December 31 of an applicable year 
to determine APCs that are exempted from the 2 times rule. Thus, after 
considering the public comments we received on the CY 2012 OPPS/ASC 
proposed rule and making changes to APC assignments based on those 
comments, we analyzed the CY 2010 claims data used for this final rule 
with comment period to identify the APCs with 2 times violations. Based 
on the final CY 2010 claims data, we found that there are 23 APCs with 
2 times rule violations, a cumulative increase of 6 APCs from the 
proposed rule. We applied the criteria as described earlier to identify 
the APCs that are exceptions to the 2 times rule for CY 2012, and 
identified additional APCs that meet the criteria for exception to the 
2 times rule for this final rule with comment period:
     APC 0076 (Level I Endoscopy Lower Airway)
     APC 0135 (Level III Skin Repair)
     APC 0148 (Level I Anal/Rectal Procedures)
     APC 0262 (Plain Film of Teeth)
     APC 0317 (Level II Miscellaneous Radiology Procedures)
     0330 (Dental Procedures)
     APC 0341 (Skin Tests)
     APC 0403 (Level I Nervous System Imaging)
     APC 0409 (Red Blood Cell Tests)
     APC 0607 (Level 4 Hospital Clinic Visits)
    In addition, we also determined that there are five APCs that no 
longer violate the 2 times rule:
     APC 0016 (Level IV Debridement & Destruction)
     APC 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or 
Vascular Devices)
     APC 0245 (Level I Cataract Procedures without IOL)
     APC 0263 (Level I Miscellaneous Radiology)
     APC 0432 (Health and Behavior Services)
    We have not included in this count those APCs where a 2 times 
violation is not a relevant concept, such as APC 0375 (Ancillary 
Outpatient Services when Patient Expires), with an APC median cost set 
based on multiple procedure claims; therefore, we have identified only 
final APCs, including those with criteria-based median costs, such as 
device-dependent APCs, with 2 times rule violations.
    Comment: One commenter supported CMS' proposal to exempt APCs 0016 
and 0058 from the 2 times rule. According to the commenter, because the 
procedures included in both APCs are similar based on clinical 
homogeneity and resource costs, there is little opportunity to upcode, 
and therefore, it is appropriate to exempt APCs 0016 and 0058 from the 
2 times rule.
    Response: We appreciate the commenter's support. Based on our

[[Page 74227]]

analysis of the CY 2010 claims used for the final rule with comment 
period, we found that APC 0016 no longer violated the 2 times rule. 
However, APC 0058 continued to violate the 2 times rule. The range in 
median costs for the procedures with significant claims data in APC 
0058 is between $49 and $116. Currently, there are only two levels of 
APCs for services that describe strapping and cast application, which 
include APC 0058 and APC 0426 (Level II Strapping and Cast 
Application). In contrast to APC 0058, our claims data show that the 
range in median costs for the procedures with significant claims data 
in APC 0426 is between $150 and $197. Because of the range in median 
costs in APC 0426, we believe that the procedures in APC 0058 should 
continue to be placed in APC 0058. Therefore, we are finalizing our 
proposal to continue to exempt APC 0058 from the 2 times rule.
    After consideration of the public comment that we received and our 
review of the CY 2010 costs from claims available for this final rule 
with comment period, we are finalizing our proposal to exempt 12 
original APCs (that appeared in Table 18 of the CY 2012 OPPS/ASC 
proposed rule with comment period and also appears in Table 19 below) 
from the 2 times rule for CY 2012, with modification. Specifically, we 
removed five APCs that no longer violated the 2 times rule and 
increased the number of APC exceptions from 17 to 23 APCs, as described 
previously in this section. Our final list of 23 APCs exempted from the 
2 times rule is displayed in Table 19 below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.032


[[Page 74228]]



C. New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period a service was eligible for payment under a 
New Technology APC. Beginning in CY 2002, we retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to an appropriate clinical APC. This policy 
allows us to move a service from a New Technology APC in less than 2 
years if sufficient data are available. It also allows us to retain a 
service in a New Technology APC for more than 2 years if sufficient 
data upon which to base a decision for reassignment have not been 
collected.
    We note that the cost bands for New Technology APCs range from $0 
to $50 in increments of $10, from $50 to $100 in increments of $50, 
from $100 to $2,000 in increments of $100, and from $2,000 to $10,000 
in increments of $500. These cost bands identify the APCs to which new 
technology procedures and services with estimated service costs that 
fall within those cost bands are assigned under the OPPS. Payment for 
each APC is made at the mid-point of the APC's assigned cost band. For 
example, payment for New Technology APC 1507 (New Technology--Level VII 
($500-$600)) is made at $550. Currently, there are 82 New Technology 
APCs, ranging from the lowest cost band assigned to APC 1491 (New 
Technology--Level IA ($0-$10)) through the highest cost band assigned 
to APC 1574 (New Technology--Level XXXVII ($9,500-$10,000). In CY 2004 
(68 FR 63416), we last restructured the New Technology APCs to make the 
cost intervals more consistent across payment levels and refined the 
cost bands for these APCs to retain two parallel sets of New Technology 
APCs, one set with a status indicator of ``S''' (Significant 
Procedures, Not Discounted when Multiple; Paid under OPPS; separate APC 
payment) and the other set with a status indicator of ``T'' 
(Significant Procedure, Multiple Reduction Applies; Paid under OPPS; 
separate APC payment). These current New Technology APC configurations 
allow us to price new technology services more appropriately and 
consistently.
    Every year we receive many requests for higher payment amounts 
under our New Technology APCs for specific procedures under the OPPS 
because they require the use of expensive equipment. We are taking this 
opportunity to reiterate our response in general to the issue of 
hospitals' capital expenditures as they relate to the OPPS and 
Medicare.
    Under the OPPS, one of our goals is to make payments that are 
appropriate for the services that are necessary for the treatment of 
Medicare beneficiaries. The OPPS, like other Medicare payment systems, 
is budget neutral and increases are limited to the annual hospital 
inpatient market basket increase. We believe that our payment rates 
generally reflect the costs that are associated with providing care to 
Medicare beneficiaries in cost-efficient settings, and we believe that 
our rates are adequate to ensure access to services.
    For many emerging technologies, there is a transitional period 
during which utilization may be low, often because providers are first 
learning about the techniques and their clinical utility. Quite often, 
parties request that Medicare make higher payment amounts under our New 
Technology APCs for new procedures in that transitional phase. These 
requests, and their accompanying estimates for expected total patient 
utilization, often reflect very low rates of patient use of expensive 
equipment, resulting in high per use costs for which requesters believe 
Medicare should make full payment. Medicare does not, and we believe 
should not, assume responsibility for more than its share of the costs 
of procedures based on Medicare beneficiary projected utilization and 
does not set its payment rates based on initial projections of low 
utilization for services that require expensive capital equipment. For 
the OPPS, we rely on hospitals to make informed business decisions 
regarding the acquisition of high cost capital equipment, taking into 
consideration their knowledge about their entire patient base (Medicare 
beneficiaries included) and an understanding of Medicare's and other 
payers' payment policies.
    We note that, in a budget neutral environment, payments may not 
fully cover hospitals' costs in a particular circumstance, including 
those for the purchase and maintenance of capital equipment. We rely on 
hospitals to make their decisions regarding the acquisition of high 
cost equipment with the understanding that the Medicare program must be 
careful to establish its initial payment rates, including those made 
through New Technology APCs, for new services that lack hospital claims 
data based on realistic utilization projections for all such services 
delivered in cost-efficient hospital outpatient settings. As the OPPS 
acquires claims data regarding hospital costs associated with new 
procedures, we regularly examine the claims data and any available new 
information regarding the clinical aspects of new procedures to confirm 
that our OPPS payments remain appropriate for procedures as they 
transition into mainstream medical practice.
2. Movement of Procedures From New Technology APCs to Clinical APCs
    As we explained in the November 30, 2001 final rule (66 FR 59902), 
we generally keep a procedure in the New Technology APC to which it is 
initially assigned until we have collected sufficient data to enable us 
to move the procedure to a clinically appropriate APC. However, in 
cases where we find that our original New Technology APC assignment was 
based on inaccurate or inadequate information (although it was the best 
information available at the time), or where the New Technology APCs 
are restructured, we may, based on more recent resource utilization 
information (including claims data) or the availability of refined New 
Technology APC cost bands, reassign the procedure or service to a 
different New Technology APC that most appropriately reflects its cost.
    Consistent with our current policy, in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42233), we proposed for CY 2012 to retain services 
within New Technology APC groups until we gather sufficient claims data 
to enable us to assign the service to a clinically appropriate APC. The 
flexibility associated with this policy allows us to move a service 
from a New Technology APC in less than 2 years if sufficient claims 
data are available. It also allows us to retain a service in a New 
Technology APC for more than 2 years if sufficient claims data upon 
which to base a decision for reassignment have not been collected. 
Table 19 of the proposed rule listed the HCPCS codes and associated 
status indicators that we proposed to reassign from a New Technology 
APC to a clinically appropriate APC or to a different New Technology 
APC for CY 2012.
    Currently, in CY 2011, there are three procedures described by a 
HCPCS G-code receiving payment through a New Technology APC. 
Specifically, HCPCS code G0417 (Surgical pathology, gross and 
microscopic examination for prostate needle saturation biopsy sampling, 
21-40 specimens) is assigned to New Technology APC 1506 (New 
Technology--Level VI ($400--$500)); HCPCS code G0418 (Surgical 
pathology, gross and microscopic examination for prostate needle 
saturation biopsy sampling, 41-60 specimens) is assigned to New 
Technology APC 1511 (New

[[Page 74229]]

Technology--Level XI ($900-$1,000)); and HCPCS code G0419 (Surgical 
pathology, gross and microscopic examination for prostate needle 
saturation biopsy sampling, greater than 60 specimens) is assigned to 
New Technology APC 1513 (New Technology--Level XIII ($1,100-$1,200)).
    Analysis of our hospital outpatient data for claims submitted for 
CY 2010 indicates that prostate saturation biopsy procedures are rarely 
performed on Medicare patients. For OPPS claims submitted from CY 2009 
through CY 2010, our claims data show that there were only five claims 
submitted for HCPCS code G0417 in CY 2009 and only one in CY 2010 with 
a proposed median cost of approximately $532. Our claims data did not 
show any hospital outpatient claims for HCPCS codes G0418 and G0419 
from either CY 2009 or CY 2010.
    While we believe that these procedures will always be low volume, 
given the number of specimens being collected, we believe that we 
should continue their New Technology payments for another year for 
HCPCS codes G0417, G0418, and G0419 to see if more claims data become 
available. For CY 2012, we proposed to revise the APC assignments for 
these procedures and continue the New Technology APC payments for HCPCS 
G-codes G0417, G0418, and G0419. Specifically, we proposed to reassign 
HCPCS code G0417 from APC 1506 to APC 1505 (New Technology-Level V 
($300-$400)), HCPCS code G0418 from APC 1511 to APC 1506 (New 
Technology-Level VI ($400-$500)), and HCPCS G0419 code from APC 1513 to 
APC 1508 (New Technology-Level VIII ($600-$700)). We stated in the 
proposed rule that we believe that the proposed revised APC assignments 
would more appropriately reflect the procedures described by these 
three HCPCS G-codes, based on clinical and resource considerations. 
These procedures and their proposed APC assignments are displayed in 
Table 19 of the proposed rule.
    We did not receive any public comments on the APC reassignments for 
HCPCS codes G0417, G0418, and G0419. Therefore, for the reasons set 
forth above, we are finalizing our proposal, without modification, to 
assign HCPCS code G0417 to APC 1505, HCPCS code G0418 to APC 1506, and 
to assign HCPCS code G0419 to APC 1508. The final CY 2012 payment rates 
for HCPCS codes G0417, G0418, and G0419 can be found in Addendum B of 
this final rule with comment period (which is available via the 
Internet on the CMS Web site). Table 20 below lists the HCPCS codes and 
associated status indicators that we are reassigning from a New 
Technology APC to a different New Technology APC for CY 2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.033

D. OPPS APC-Specific Policies

1. Cardiovascular Services
a. Cardiovascular Computed Tomography (CCT) (APC 0340 and 0383)
    The CPT Editorial Panel created the following new codes for 
cardiovascular computed tomography (CCT) services effective January 1, 
2010: CPT codes 75571 (Computed tomography, heart, without contrast 
material, with quantitative evaluation of coronary calcium), 75572 
(Computed tomography, heart, with contrast material, for evaluation of 
cardiac structure and morphology (including 3D image postprocessing, 
assessment of cardiac function, and evaluation of venous structures, if 
performed)), 75573 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3D image postprocessing, assessment 
of LV cardiac function, RV structure and function and evaluation of 
venous structures, if performed)), and 75574 (Computed tomographic 
angiography, heart, coronary arteries and bypass grafts (when present), 
with contrast material, including 3D image postprocessing (including 
evaluation of cardiac structure and morphology, assessment of cardiac 
function, and evaluation of venous structures, if performed)). These 
Category I CPT codes replaced eight Category III CPT codes that had 
been in effect through December 31, 2009. For CY 2010, we assigned CPT 
code 75571 to APC 0340 (Minor Ancillary Procedures), and we assigned 
CPT codes 75572, 75573, and 75574 to APC 0383 (Cardiac Computed 
Tomographic Imaging). For CY 2011, we maintained these APC assignments, 
with final payment rates for APC 0340 and 0383 of $46.23 and $256.86, 
respectively. For CY 2012, we proposed to maintain the assignments of 
CPT code 75571 to APC 0340 and CPT codes 75572, 75573, and 75574 to APC 
0383. APCs 0340 and 0383 have final CY 2012 median costs of 
approximately $46 and $262, respectively.
    Comment: One commenter was concerned that hospitals may be failing 
to report the services in APC 0383 with CPT codes 75572, 75573, and 
75574, which were effective January 1, 2010, and are continuing to 
report the related services using the expired Category III CPT codes 
previously used through December 31, 2009. The commenter requested that 
CMS analyze the CY 2010 claims data to determine whether the expired 
CCT codes are being used to report CCT services and, if so, to use 
those claims in calculating the APC 0383 final median cost. The 
commenter

[[Page 74230]]

also urged CMS to reassign CPT code 75571 from APC 0340 to APC 0282 
(Miscellaneous Computed Axial Tomography) for reasons of clinical 
coherence and resource use similarity to procedures in APC 0282. The 
commenter contended that APC 0340 contains several procedures that do 
not require the same equipment or clinical staff as CPT code 75571, 
while APC 0282 contains services that do have similar clinical and 
resource characteristics to CPT code 75571.
    In addition, the commenter expressed concerns that hospitals do not 
report their costs in a consistent and accurate way and do not update 
their chargemasters regularly with charges that reflect appropriate 
relativity, and offered to work with CMS to develop a standard 
methodology to address these issues. The commenter also recommended 
that CMS promote the need to accurately and completely report all 
services provided.
    Response: We believe that the CY 2012 median costs we have 
calculated for CPT codes 75572, 75573, and 75574 and APC 0383 
appropriately reflect valid estimates of the cost of these services. We 
compared the median costs and single procedure claims based on CY 2009 
claims (used for final CY 2011 payment rates) with median costs and 
single procedure claims based on CY 2010 claims (which we are using for 
the final CY 2012 payment rates). The final CY 2011 APC 0383 median 
cost of approximately $254 used 11,323 single bills based on 6 of the 
category III CPT codes used prior to CPT codes 75572, 75573, and 75574. 
The final CY 2012 APC 0383 median cost of approximately $262 used 
15,253 single bills based on CPT codes 75572, 75573, and 75574. This 
shows consistency across years in median costs and an increase in the 
number of single bills used. Therefore, we have no reason to believe 
that the median costs we have calculated do not reflect valid estimates 
of the costs of CPT codes 75572, 75573, and 75574, which went into 
effect on January 1, 2010.
    We believe that CPT code 75571 is a minor ancillary procedure and 
is appropriately assigned to APC 0340, in terms of resources and 
clinical similarity. CPT code 75571 has a final median cost of 
approximately $31, and APC 0340 has a final median cost of 
approximately $46. In contrast, APC 0282 has a final median cost of 
approximately $107, driven largely by a single major procedure CPT 
code, that is, CPT code 76380 (Computed tomography, limited or 
localized follow-up study), with a final median cost of approximately 
$107. Therefore, CPT code 75571, with a final median cost of 
approximately $31, would not be an appropriate resource similarity for 
APC 0282, while CPT code 75571 is similar to other codes in APC 0340 
with respect to resource use. Therefore, we believe it is appropriately 
assigned to APC 0340. We agree with the commenter that accurate 
reporting of charges for all services will help to ensure that these 
items are appropriately accounted for in future years' OPPS payment 
rates. As we often state (73 FR 68535 through 68536; 74 FR 60367; and 
75 FR 71835), we encourage stakeholders to carefully review HCPCS code 
descriptors, as well as any guidance CMS may have provided for specific 
HCPCS codes. We note that the definition of charges in the regulations 
at 42 CFR 413.53(b) states that implicit in the use of charges as the 
basis of apportionment is the objective that charges for services be 
related to the cost of the services. As new HCPCS codes are developed 
or existing HCPCS code descriptors are revised from year to year (for 
example, by redefining units of service), we expect that hospitals' 
submitted Medicare charges relate appropriately to the costs of those 
services. Therefore, we do not share the commenter's belief that we 
should modify our standard ratesetting methodology (for example, by 
using claims data for deleted codes) in order to calculate the median 
costs for the services described by CPT codes 75572, 75573, and 75574. 
We refer readers to the Provider Reimbursement Manual (Pub. 15-2, Part 
2, Chapter 40 Hospital and Hospital Health Care, Form CMS 2552-10) for 
CMS' instructions for reporting costs.
    After considering the public comments we received and reviewing our 
claims data, we are maintaining the assignment of CPT code 75571 to APC 
0340, for which we have calculated a final rule median cost of 
approximately $46 for CY 2012, and we are maintaining the assignment of 
CPT codes 75572, 75573, and 75574 to APC 0383, for which we have 
calculated a final rule median cost of approximately $262 for CY 2012.
b. Cardiac Imaging (APC 0377)
    For CY 2012, we proposed to assign the following CPT codes to APC 
0377 (Level II Cardiac Imaging): 78451(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); single study, at 
rest or stress (exercise or pharmacologic)); 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); 78453 
(Myocardial perfusion imaging, planar (including qualitative or 
quantitative wall motion, ejection fraction by first pass or gated 
technique, additional quantification, when performed); single study, at 
rest or stress (exercise or pharmacologic)); and 78454 (Myocardial 
perfusion imaging, planar (including 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). APC 0377 had a proposed national unadjusted payment rate 
of approximately $677.
    The national unadjusted payment for APC 0377 for CY 2011 is 
approximately $760. However, it is important to note that the national 
unadjusted payment rate for APC 0377 for CY 2011 was based on CY 2009 
claims data and CPT codes 78451, 78452, 78453 and 78454 had not been 
created in CY 2009. In CY 2009, APC 0377 was populated with CPT codes 
78460 (Myocardial perfusion imaging (planar) single study, at rest of 
stress (exercise and/or pharmacologic), with or without 
quantification); 78461 (Myocardial perfusion imaging (planar) single 
study, at rest or stress (exercise and/or pharmacologic), with or 
without quantification; multiple studies (planar), at rest and/or 
stress (exercise and/or pharmacologic), and redistribution and/or rest 
injection, with or without quantification); 78464 (Myocardial perfusion 
imaging (planar) single study, at rest or stress (exercise and/or 
pharmacologic), with or without quantification; tomographic (SPECT) 
single study (including attenuation correction when performed), at rest 
or stress (exercise and/or pharmacologic), with or without 
quantification); and 78465 (Myocardial perfusion imaging (planar) 
single study, at rest or stress (exercise and/or pharmacologic), with 
or without quantification; tomographic (SPECT) multiple studies 
(including attenuation correction when performed), at rest or stress 
(exercise and/or pharmacologic), with or without quantification), which 
were also cardiac imaging services. Therefore, CY 2009 is the first 
year in which hospitals established charges for the new CPT codes for 
CY 2010 on which the CY

[[Page 74231]]

2012 proposed rule and final rule medians are based.
    Comment: Several commenters expressed concern over the proposed 11 
percent payment reduction to APC 0377. Commenters believed that there 
were irregularities in the hospital cost data that suggest inaccurate 
reporting of costs associated with procedures in APC 0377, rather than 
an actual decline in resource use. Commenters particularly pointed out 
that CPT code 78453 (Myocardial perfusion imaging, planar, single 
study) has a higher mean and median cost than CPT code 78454 
(Myocardial perfusion imaging, planar, multiple studies), according to 
CMS data. The commenters stated that it is illogical to expect 
hospitals to use fewer resources for furnishing multiple studies than 
for furnishing a single study. In light of these irregularities, and 
the continued decline in the proposed payment, the commenters 
recommended that CMS reevaluate the data used to set the payment rate 
for APC 0337, to ensure that the data indeed capture the entire 
universe of claims for these APCs and reflect all procedure and 
radiopharmaceutical costs. The commenters further recommended that CMS 
recalculate median costs for these procedures after additional 
refinement of the data, including eliminating hospital claims with CCRs 
of 0.2 or less and, if subsequent review still warrants a payment 
reduction for either APC, such a reduction should be phased in over 
several years. Commenters suggested a 1- to 2-year ``dampening period'' 
beginning with the first year that CMS could utilize claims for 
ratesetting, given that APC 0377 contains four CPT codes that were new 
for CY 2010 and replaced previously existing services that were 
assigned to APC 0377. Commenters stated that hospitals are often slow 
to update their charge masters following coding changes. Additionally, 
the commenters recommended that CMS establish a threshold change of 10 
percent that triggers an enhanced CMS validation process for all APCs, 
including accounting for all packaged costs and review of excluded/
included claims. The commenters also recommended that CMS limit year-
to-year changes in payment rates to a maximum of 5 to 10 percent for a 
single year, unless CMS or public commenters identify factors 
responsible for significant fluctuations in cost data, such as the 
introduction of new technologies or changes in the composition of an 
APC.
    Response: In accordance with sections 1833(t)(2)(B) and 
1833(t)(9)(A) of the Act and Sec. Sec.  419.31 and 419.50 of the 
regulations, we annually review the items and services within an APC 
group with respect to comparability of the use of resources and 
clinical homogeneity. The payment rates, including the relative 
weights, set annually for these services are based on the claims and 
cost report data used for ratesetting. For the CY 2012 update, the 
payment rates for APCs 0337 are based on data from claims submitted 
during CY 2010 according to the standard OPPS ratesetting methodology. 
Specifically, we used 502,757 single claims (out of 584,855 total 
claims) from CY 2012 proposed rule claims data to calculate the 
proposed rule median cost of approximately $701, and we used 539,100 
single claims (out of 640,458 total claims) from CY 2012 final rule 
claims data to calculate the median cost for APC 0337 of approximately 
$672, on which we based the CY 2012 national unadjusted payment rate.
    We note that the final CY 2012 median cost represents a slight 
decline from the median cost of approximately $701, upon which the CY 
2012 proposed payment rate for this APC was based and the median cost 
of approximately $752, upon which the final CY 2011 payment rate was 
based. As we have in the past (75 FR 71916), we note that our cost-
finding methodology is based on reducing each hospital's charge for its 
services to an estimated cost by applying the most discrete hospital-
specific CCR available for the hospital that submitted the claim. 
Therefore, it is the hospital's claims and cost reports that determine 
the estimated costs that are used to calculate the median cost for each 
service and, when aggregated into APC groups, the hospital data are 
used to calculate the median cost for the APC on which the APC payment 
rate is based. As we have previously, we note that, as part of our 
standard ratesetting process, we already engage in a standard review 
process for all APCs that experience significant changes in median 
costs (74 FR 60365).
    We examined our claims data for APC 0377 for the CY 2011 OPPS final 
rule with comment period, the CY 2012 proposed rule, and this CY 2012 
final rule with comment period. Specifically we looked at the following 
data elements for all single and pseudo single procedure bills for the 
four CPT codes that are assigned to APC 0377 and that, therefore, are 
the data points on which the median cost for the APC is based: median 
CCR; median charge; median line item cost (that is, without packaging); 
and median amount of packaging (shown in Table 21). We also show in 
Table 21 the count of single and pseudo single procedure claims for the 
APC and the total frequency for the APC.

[[Page 74232]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.034

    We observe from this information that the median charge for 
services that are assigned to APC 0377 has increased from the CY 2011 
final rule data (CY 2009 claims containing charges for the deleted 
codes) to the CY 2012 proposed and final rule data sets (based on 
charges for the codes that were effective January 1, 2010). The CCRs 
that are applied to the codes remained the same from the CY 2011 final 
rule data to the CY 2012 proposed rule data but declined slightly in 
the CY 2012 final rule data, with the updating of the data with more 
current cost reports. Therefore, the line item median costs increased 
between the CY 2011 final rule data and the CY 2012 proposed rule data 
but declined in the CY 2012 final rule data due to the decrease in the 
CCRs. We also observe that the packaged cost for codes in APC 0377 
declined 61 percent from the CY 2011 final rule data to the CY 2012 
proposed rule data and further declined another 3 percent in the CY 
2012 final rule data. Therefore, we believe that the reduction in the 
payment rate for APC 0377 is attributable to the slight decline in the 
CCRs and the significant decline in the packaged cost.
    We acknowledge that some hospitals may charge at different markups 
over cost for different services. However, as long as the cost report 
is correctly completed and the charges are mapped to the cost center in 
which the costs for the service are recorded, the CCRs will represent a 
valid reflection of the relationship between the costs and the charges. 
The OPPS, like all other prospective payment systems, assumes that 
hospitals complete the cost report properly, including mapping the 
charges for a service to the cost center in which the costs for that 
service are captured.
    We recognize that there is considerable variability in the charges 
that hospitals established for the four CPT codes that were new for CY 
2010 and replaced deleted codes for reporting these services that had 
been assigned to APC 0377, but it is not uncommon for a high level of 
variability in the charges for a service to occur. In addition, it is 
normal that such variability would be carried through to the 
calculation of estimated costs for the service. Hospitals charges are a 
reflection of the monetary value that the hospital places on the 
service, and we do not advise hospitals with regard to what they should 
charge for a service other than to require that the charges be 
reasonably related to their cost for the service, and that they must 
charge all payers the same amount for the same service. (We refer 
readers to the definition of ``charges'' at 42 CFR 413.53(b).) However, 
our use of the median charge to establish payment levels was 
specifically designed to address wide variances in hospital cost 
accounting systems and billing patterns, and also has consistently been 
a reliable mechanism for promoting increased consistency without 
introducing additional regulations.
    We recognize that it appears peculiar that the estimated cost for 
CPT code 78453, which represents the cost of a single myocardial 
perfusion imaging (MPI) study, would be greater than the estimated cost 
for CPT code 78454, which represents the cost of multiple myocardial 
perfusion imaging studies done in a single session. However, our costs 
are based on the amount of the charge that the hospital established for 
the service and the hospital's CCR from its Medicare cost report. It is 
not unusual for hospitals to establish charges that do not comport with 
our expectation of the charges they would establish based on the 
definition of the code for the service for which they are establishing 
charges and on which we based simulated medians. Moreover, because the 
median cost is the 50th percentile of the array of costs from different 
hospitals, case-mix and volume differences between different hospitals 
can also result in seemingly peculiar relativity between median costs.
    Based on our review of the claims data and cost report data, we 
believe our estimated median cost for APC 0377 is a valid estimate of 
the relative cost of the services under the APC and, therefore, see no 
reason to adopt an alternative methodology that would eliminate claims 
from hospitals with CCRs below 0.2 or limit the decline in the median 
cost to 5 to 10 percent. In addition, based on the significant volume 
of single bills used to calculate the median cost (539,100 single 
procedure bills of 640,458 total frequency or 84 percent of the total 
frequency for the services in the APC), we have no reason to believe 
that the median cost we have calculated should not be used to establish 
the payment for APC 0377 and, therefore, will not implement a 1- to 2-
year ``dampening period,'' as suggested by the commenters. To the 
extent that hospitals determine that their charges should be revised to 
better reflect the resources required to furnish the services currently 
assigned to APC 0377, the revised charges would be reflected in future 
years' OPPS payment rates.
    Comment: Commenters asked that CMS post to the CMS Web site the 
data analysis that was made available to the

[[Page 74233]]

APC Panel for all APCs for which the APC Panel median costs fluctuated 
by more than 10 percent compared to the CY 2011 OPPS final rule median 
costs to allow all interested stakeholders to review and comment on the 
data.
    Response: During the August 10-11, 2011 meeting of the APC Panel, 
we presented a list of all APCs whose median costs fluctuated by 
greater than 10 percent when comparing the CY 2011 final rule median 
costs to CY 2012 proposed rule median costs. While the proposed payment 
for APC 0377 represented a reduction in payment of 11 percent, the 
decline in median cost was less than 10 percent; therefore, it was not 
included on the list presented to the APC Panel during its August 10-
11, 2011 meeting. The comparisons of APCs with median costs fluctuating 
by more than 10 percent is based on median cost data available on the 
CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS. 
Additionally, the OPPS Limited Data Set (LDS), which contain claims 
used to establish median cost for use in ratesetting, is available for 
purchase on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS. Therefore, interested stakeholders have access 
to the same data that we examined and presented to the APC Panel.
    After considering the public comments we received and examining the 
reasons for the decline in the median cost for APC 0377, we are 
declining to make any of the adjustments to the median cost that 
commenters requested because we believe that the data on which the 
median cost for APC 0377 is calculated are valid and that the median 
cost is an appropriate reflection of the 50th percentile of the array 
of the estimated costs of services assigned to APC 0377. Therefore, we 
are finalizing our CY 2012 proposal, without modification, to continue 
to assign CPT codes 78451, 78452, 78453, and 78454 to APC 0377. We are 
finalizing a payment rate for APC 0377 for CY 2012 based on the CY 2012 
OPPS final rule median cost of approximately $672.
c. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes (APC 0108)
    We refer readers to section II.A.2.E.(6) of this final rule with 
comment period for a detailed discussion of this issue.
d. Implantable Loop Recorder Monitoring (APC 0690)
    For CY 2012, we proposed to reassign CPT code 93299 (Interrogation 
device evaluation(s), (remote) up to 30 days; implantable 
cardiovascular monitor system or implantable loop recorder system, 
remote data acquisition(s), receipt of transmissions and technician 
review, technical support and distribution of results) from APC 0691 
(Level III Electronic Analysis of Devices) to APC 0690 (Level I 
Electronic Analysis of Devices), with a proposed payment rate of 
approximately $35.
    Comment: Some commenters objected to the reassignment of CPT code 
93299 from APC 0691 to APC 0690. They believed that the reassignment 
will result in inadequate payment to hospitals for the resources 
required to provide the service and may be a disincentive to hospitals 
to provide this service.
    Response: The calculated median cost for CPT code 93299 based on CY 
2010 hospital claims and cost report data available for this final rule 
with comment period is approximately $38. We are confident that the 
observed costs in the claims data are representative of the costs of 
providing this service in CY 2010 because almost all of the claims are 
single claims (2,249 out of 2,253) that can be used for ratesetting. 
The calculated median cost of approximately $38 for CPT code 93299 is 
similar to that of most of the CPT codes in APC 0690, and very close to 
the overall APC median cost of approximately $35. In contrast, the 
overall APC median cost for APC 0691 is approximately $168, more than 
four times the median cost of CPT code 93299. Therefore, we do not 
agree with commenters that the placement of CPT code 93299 in APC 0690 
does not meet the APC recalibration standards of clinical and resource 
homogeneity and would result in inadequate payment to hospitals. Thus, 
we are finalizing our proposal, without modification, to reassign CPT 
code 93299 to APC 0690 for CY 2012.
e. Echocardiography (APCs 0128, 0269, 0270, and 0697)
    Under the OPPS, echocardiography services are reported using a 
combination of CPT codes and HCPCS C-codes. Hospitals report the 
echocardiography CPT codes when performing echocardiography procedures 
without contrast. Alternatively, hospitals report the HCPCS C-codes 
when performing echocardiography procedures with contrast, or without 
contrast followed by with contrast. In addition to the HCPCS C-codes, 
hospitals should also report the appropriate units of the HCPCS codes 
for the contrast agents used in the performance of the echocardiograms.
    Currently, there are four APCs that describe echocardiography 
services
     APC 0128 (Echocardiogram With Contrast)
     APC 0697 (Level I Echocardiogram Without Contrast)
     APC 0269 (Level II Echocardiogram Without Contrast)
     APC 0270 (Level III Echocardiogram Without Contrast)
    For CY 2012, we proposed payment rates for these APCs of 
approximately $564, $219, $384, and $567, respectively.
    Comment: Some commenters expressed concern with the proposed 
payment rate of approximately $384 for CPT code 93306 
(Echocardiography, transthoracic real-time with image documentation 
(2D), includes M-mode recording, when performed, complete, with 
spectral Doppler echocardiography, and with color flow Doppler 
echocardiography), stating that the 5-percent decrease in the payment 
rate could be the result of miscoding. The commenters suggested that 
hospitals were continuing to bill CPT code 93307 (Echocardiography, 
transthoracic, real-time with image documentation (2D), includes M-mode 
recording, when performed, complete, without spectral or color Doppler 
echocardiography) in conjunction with CPT codes 93320 (Doppler 
echocardiography, pulsed wave and/or continuous wave with spectral 
display (List separately in addition to codes for echocardiographic 
imaging); complete) and 93325 (Doppler echocardiography color flow 
velocity mapping), rather than using CPT code 93306 because they were 
still adjusting to billing with CPT code 93306. The commenters 
requested that CMS confirm that the calculation of the median cost for 
APC 0269, which is the APC that CMS proposed to continue to assign to 
CPT code 93306, is based on correct coding.
    Response: CPT code 93306 was made effective on January 1, 2009. 
Consistent with our statement in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71947), we find no evidence that would suggest 
that the fluctuations in cost data for echocardiography APCs are due to 
incorrect hospital billing practices. For this CY 2012 OPPS/ASC final 
rule with comment period, which is based on the CY 2010 hospital 
outpatient claims for ratesetting, our claims show a significant volume 
of data for CPT code 93306. Specifically, our analysis reveals a CPT 
median cost of approximately $394 based on 975,213 single claims (out 
of 990,809 total claims) for CPT code 93306, which represents 90 
percent of the claims in APC 0269. Given the significant volume of 
claims and its CPT median cost of

[[Page 74234]]

approximately $394, we believe that CPT code 93306 is appropriately 
placed in APC 0269, which has a final APC median cost of approximately 
$393 for CY 2012.
    Therefore, after consideration of the public comments that we 
received, we are finalizing our CY 2012 proposal, without modification, 
to continue to assign CPT code 93306 to APC 0269. 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 again reevaluate the status 
indicator and APC assignment for CPT code 93306 for the CY 2013 OPPS 
rulemaking cycle.
    Comment: Several commenters requested that CMS reassign CPT codes 
76825 (Echocardiography, fetal, cardiovascular system, real time with 
image documentation (2d), with or without m-mode recording) and 76826 
(Echocardiography, fetal, cardiovascular system, real time with image 
documentation (2d), with or without m-mode recording; follow-up or 
repeat study) from the proposed APC 0697 to APC 0269. The commenters 
believed that fetal echocardiography is just as resource intensive as 
adult echocardiography. Another commenter stated that the low median 
cost for these services is the result of low frequency for these 
services, and suggested that some of the charges reported may be the 
result of miscoding.
    Response: In Addendum B of the CY 2012 OPPS/ASC proposed rule, we 
flagged CPT codes 76825 and 76826 with comment indicator ``CH'' to 
indicate that we are reassigning the APC assignments for these codes. 
Specifically, we proposed to reassign CPT code 76825 from APC 0270 to 
APC 0697, and reassign CPT code 76826 from APC 0269 to APC 0697. 
Because these codes have been in existence for almost 20 years, and 
have been reportable under the hospital OPPS since it was implemented 
in 2000, we believe that the low frequency of these services is the 
result of infrequent use of this procedure on Medicare patients. 
Analysis of our claims data from the past 3 years, specifically from CY 
2008, CY 2009, and CY 2010, reveal that these procedures are relatively 
low volume procedures. CPT code 76825 has had fewer than 330 single 
claims for ratesetting for each year (327 single claims in CY 2008, 291 
single claims in CY 2009, and 282 single claims in CY 2010), with a CPT 
median cost that has ranged between $89 and $126. Similarly, CPT code 
76826 has had fewer than 50 single claims for ratesetting for each year 
(25 single claims in CY 2008, 23 single claims in CY 2009, and 43 
single claims in 2010), with a CPT median cost that has ranged between 
$85 and $92. Based on our claims data, we believe that CPT codes 76825 
and 76826 are more appropriately placed in APC 0697 based on their 
clinical homogeneity and resource costs to the other procedure assigned 
to APC 0697. Furthermore, despite the relatively low volumes, the 
median costs for these services are notably stable and are more 
consistent with the median costs of the services assigned to lowest 
level echocardiogram APC, specifically, APC 0697, than to the services 
assigned to APC 0269, which has an APC median cost of approximately 
$393.
    After consideration of the public comments received on our proposed 
APC reassignment, we are finalizing our CY 2012 proposal, without 
modification, to reassign CPT code 76825 from APC 0270 to APC 0697, and 
to reassign CPT code 76826 from APC 0269 to APC 0697, which has a final 
CY 2012 median cost of approximately $221.
    Commenter: Several commenters expressed concern that the proposed 
payment rate of approximately $567 for the non-contrast echocardiogram 
procedures that are assigned to APC 0270 is higher than the proposed 
payment rate of approximately $564 for the contrast echocardiograms 
procedures that are assigned to APC 0128. The commenters indicated that 
it is not appropriate for an APC with contrast enhanced echocardiogram 
procedures to have a lower median cost and lower payment rate than an 
APC with non-contrast enhanced echocardiogram procedures. The 
commenters requested that CMS develop a more consistent and stable 
payment methodology for echocardiograms that utilize contrast agents 
because the cost of the contrast agents is approximately $117 and 
requires significantly more work when compared to non-contrast 
echocardiogram procedures. One commenter recommended that CMS adopt 
three APCs for contrast-enhanced echocardiogram procedures to parallel 
the three APCs that exist for non-contrast enhanced echocardiogram 
procedures, while another commenter requested data analysis supporting 
the higher proposed payment rate for APC 0270. Several commenters urged 
CMS to pay separately for the administration and cost of the contrast 
agent.
    Response: As stated above, we have four separate APCs to which 
echocardiography services are assigned. Procedures that utilize 
contrast agents are assigned to APC 0128, while procedures without 
contrast agents are assigned to one of three APCs, specifically, APC 
0270, APC 0269, or APC 0697. As described above, in the CY 2012 OPPS/
ASC proposed rule, the proposed payment rates for APCs 0270, APC 0269, 
and APC 0697 varied between $219 and $567. Analysis of our claims data 
show that the median costs for two of the non-contrast echocardiogram 
APCs (APC 0697 and 0269) are lower than the median cost of the contrast 
echocardiogram APC (APC 0128). Specifically, our claims data show an 
APC median cost of approximately $221 for APC 0697 and approximately 
$393 for APC 0269, compared to the median cost of approximately $557 
for APC 0128. Our claims data show a higher median cost for one of the 
non-contrast echocardiography APCs, specifically, APC 0270, which has a 
median cost of approximately $581. We agree with the commenters that, 
in general, contrast-based echocardiography procedures would involve 
more resources than non-contrast echocardiography services. However, we 
believe that some non-echocardiography procedures are more complex than 
contrast-based echocardiography procedures despite the lack of contrast 
use, and as a result, we expect their costs to be higher. As shown by 
our claims data, the costs involved with the non-contrast 
echocardiography procedures assigned to APC 0270 are significantly 
higher than the contrast-based echocardiography procedures that are 
assigned to APC 0128. As we do every year, we will again review our 
claims data for these services for the CY 2013 OPPS rulemaking cycle. 
We find no evidence that would suggest that the median costs calculated 
for these APCs based on hospital claims and cost report data 
incorrectly reflect the relative resource costs of providing the 
services in APC 0128 or APC 0697. We also do not believe that it is 
necessary to separate APC 0128 into three APCs as one commenter 
suggested, because the current composition results in no 2 times rule 
violation and the major procedures in the APC are similar based on 
resource costs, ranging from approximately $505 to approximately $732.
    In addition, payment for the administration of contrast agents as 
well

[[Page 74235]]

as the contrast agent products are included in payment for the 
associated imaging procedure, as discussed in section V.B.2.d. of this 
final rule with comment period. In limited circumstances, we pay 
separately for contrast agents that are approved for pass-through 
status under the OPPS, as discussed in section V.A. of this final rule 
with comment period. Payment for pass-through status is limited to a 
minimum of 2 years but no more than 3 years.
    Furthermore, as we stated above, hospitals should report the 
appropriate units of the HCPCS codes for the contrast agents used in 
the performance of the echocardiograms procedures. It is extremely 
important that hospitals report all HCPCS codes, consistent with their 
descriptors, CPT and/or CMS instructions, and correct coding 
principles, for all charges for all services they furnish, whether 
payment for the services is made separately or is packaged. The 
appropriateness of the OPPS payment rates depend on the quality and 
completeness of the claims data that hospitals submit for the services 
they furnish to Medicare beneficiaries.
    After consideration of the public comments we received, we are 
finalizing, without modification, our CY 2012 proposal to continue to 
calculate our median costs for the non-contrast echocardiography 
procedures based on APCs 0697, 0269, and 0270, and to calculate our 
median costs for the contrast-echocardiography procedures based on APC 
0128. We believe that continuing this methodology in CY 2012 results in 
payment rates for the contrast echocardiography and non-contrast 
echocardiography procedures that appropriately reflect the costs for 
these services. For a more detailed discussion and history of the OPPS 
payment for echocardiography services, we refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66644 through 66646), 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68542 
through 68544), and the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60374 through 60383). Table 22 below shows the procedures and 
final median costs assigned to the four echocardiography APCs.

[[Page 74236]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.035

2. Gastrointestinal Services

a. Upper Gastrointestinal (GI) Services (APCs 0141, 0419, and 0422)
    For CY 2012 we proposed to create new APC 0419 (Level II Upper GI 
Procedures), an intermediate APC between APC 0141 (Level I Upper GI 
Procedures) and APC 0422 (Level II Upper GI Procedures, which we 
proposed to rename ``Level III Upper GI Procedures''). For APC 0141, we 
calculated a proposed rule median cost for CY 2012 of approximately 
$603. For proposed new APC 0419, we calculated a proposed rule median 
cost of approximately $904. For APC 0422, we calculated a proposed rule 
median cost of approximately $1,833.
    For CY 2011, there are two upper gastrointestinal (GI) procedure 
APCs, APC 0141, which has a CY 2011 national unadjusted payment rate of 
$611.73, and APC 0422, which has a CY 2011 national unadjusted payment 
rate of $1,148.75. In the CY 2011 OPPS/ASC proposed rule, we proposed 
to reconfigure APCs 0141 and APC 0422 by moving several CPT codes from 
APC 0141 to APC 0422. We had received public comments on the CY 2011 
proposed rule objecting to our CY 2011 proposal on the basis that the 
reconfiguration would reduce the median cost and, therefore, the 
payment for services to which APC 0422 was assigned and would not 
maintain the clinical homogeneity of these services. Instead 
commenters, including the applicable medical specialty societies, asked 
that we reconfigure APCs 0141 and 0422 to create three APCs by adding a 
new APC for upper GI procedures. They also recommended a HCPCS 
configuration that they believed would provide payment rates that would 
more accurately reflect the median costs of the services in APCs 0141 
and 0422. We

[[Page 74237]]

finalized our proposed changes to APCs 0141 and 0422 for CY 2011 
without establishing a third APC for upper GI procedures for the 
reasons discussed in the CY 2011 OPPS/ASC final rule with public 
comment period (75 FR 71907).
    However, when we developed the median costs for APCs 0141 and 0422 
using CY 2010 claims data for discussion at the APC Panel meeting of 
February 28-March 1, 2011, we observed that there was a 2 times rule 
violation for APC 0141 that had not existed for the CY 2010 OPPS. For 
the APC Panel meeting, we simulated the HCPCS codes and APC median 
costs that would result from the reconfiguration that was recommended 
by the stakeholders in their comments on the CY 2011 OPPS/ASC final 
rule with comment period, and we discussed the results with the APC 
Panel. The APC Panel recommended that CMS create an intermediate level 
upper GI procedures APC (APC Panel Recommendation 13). The APC Panel 
recommendations and report may be found at the APC Panel Web site, 
located at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    For the reasons we discuss below, as stated in the proposed rule, 
we accepted the APC Panel recommendation to propose to establish three 
levels of upper GI procedure APCs and to propose to adopt the 
reconfiguration recommended by stakeholders because we believe that the 
proposed reconfiguration will provide payments that are more closely 
aligned with the median costs of the services. We stated that creating 
an intermediate APC for upper GI procedures would provide APC median 
costs that are more closely aligned with the median costs for the many 
CPT codes for upper GI procedures, and therefore, the APC median costs 
better reflect the resources required to provide these services as 
defined by the CPT codes for them. Moreover, we believed that the 
proposed reconfiguration would resolve the 2 times rule violation that 
would result in APC 0141 if we were to apply the CY 2011 APC 
configuration to the CY 2012 proposed rule data. Therefore, we stated 
in the proposed rule that we believed that we would need to propose to 
reassign HCPCS codes, regardless of whether we created the intermediate 
APC for CY 2012. We stated that we believed that the proposed 
reconfiguration to create the intermediate APC would be the most 
appropriate means of avoiding a 2 times rule violation that would 
otherwise exist for CY 2012 and that the resulting median costs would 
provide payments that are more reflective of the relative costs of the 
services being furnished.
    Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42238), for 
CY 2012, we proposed to create new APC 0419 (Level II Upper GI 
Procedures), as recommended by the stakeholders, and we proposed to 
reassign HCPCS codes previously assigned to APCs 0141 and 0422 to the 
three APC configuration. Table 23 of the proposed rule contained the 
proposed HCPCS code reassignments for CY 2012 using the proposed three 
APC reconfiguration. We believe that this proposed reconfiguration 
classifies upper GI CPT codes in groups that demonstrate the best 
clinical and resource homogeneity. For APC 0141, we calculated a 
proposed rule median cost for CY 2012 of approximately $603. For 
proposed new APC 0419, we calculated a proposed rule median cost of 
approximately $904. For APC 0422, we calculated a proposed rule median 
cost of approximately $1,833.
    At its August 10-11, 2011 APC Panel meeting, the APC Panel 
recommended that CMS adopt the proposed APC reconfiguration for upper 
gastrointestinal (GI) procedures and the creation of a new APC 0419 
(Level II Upper GI Procedures). The Panel further recommended that 
HCPCS code 43227 (Esophagoscopy, rigid or flexible; with control of 
bleeding (e.g., injection, bipolar cautery, unipolar cautery, laser, 
heater probe, stapler, plasma coagulator)) and HCPCS code 43830 
(Gastrostomy, open; without construction of gastric tube (e.g., Stamm 
procedure) (separate procedure)) be reassigned to APC 0422 (proposed to 
be renames ``Level III Upper GI Procedures'').
    Response to APC Panel Recommendation: We do not agree with the APC 
Panel recommendation to move CPT code 43227 to APC 0422 because CPT 
code 43227 is a very low volume service with a total frequency of 45 in 
CY 2010, for which the median cost has varied considerably over the 
past few years ($1,010 in CY 2011; $725 in CY 2010). We will reassess 
the placement of CPT code 43227 for CY 2013. However, we agree with the 
APC Panel's recommendation to move CPT code 43830 to APC 0422 because 
the median cost for CPT code 43830 of approximately $1,630 is more 
similar to the median cost for APC 0422 of approximately $1,819 and is 
less similar to the median cost for APC 0319 of approximately $887. 
Therefore, we are assigning CPT code 43830 to APC 0422 for the CY 2012 
OPPS.
    Comment: Many commenters supported the creation of new APC 0419. 
Commenters indicated that creation of the new intermediate APC would 
result in APCs for upper GI procedures that are more cohesive with 
regard to the resources used to provide the services and would provide 
for more equitable payment for these services. In particular, 
commenters were pleased to with the proposed reassignment of CPT code 
43228 to APC 0422 because they believed that the assignment would 
enable facilities to cover the cost of the device and provide patients 
with greater access to the service. One commenter objected to the 
reconfiguration of these APCs on the basis that some of the services in 
each APC have median costs that are higher than the median cost for the 
APC and, therefore, would be paid less than their median cost.
    Response: We continue to believe that it is appropriate to create a 
third level of upper GI procedures and that it is appropriate to assign 
CPT code 43228 to APC 0422 for the reasons discussed in the proposed 
rule as summarized at the beginning of this section. Therefore, we are 
adopting our proposal to create new APC 0419 for CY 2012, and we have 
assigned CPT code 43228 to APC 0422 for CY 2012. We disagree with the 
commenter who objected to the reconfiguration of the upper GI procedure 
APCs on the basis that the medians for some HCPCS codes in each APC 
were higher than the median cost for the APC. The median cost by 
definition is the 50th percentile of the array of the costs of single 
bills. Therefore, the median costs for some HCPCS codes will always 
fall below the median cost for the APC. A fundamental principle of a 
prospective payment system like the OPPS is that prospective payment is 
set at a measure of central tendency that, on average, pays an amount 
that is appropriately reflective of the relative cost of the services 
in the group to which the payment rate applies.
    Comment: Several commenters objected to the proposed assignment of 
CPT code 43257 (Upper gastrointestinal endoscopy including esophagus, 
stomach, and either the duodenum and/or jejunum as appropriate; with 
delivery of thermal energy to the muscle of lower esophageal sphincter 
and/or gastric cardia, for treatment of gastroesophageal reflux 
disease) and CPT code C9724 (Endoscopic full thickness placation in the 
gastric cardia using endoscopic placation system (EPS); includes 
endoscopy) to APC 0422 and asked that CMS create an APC for transoral 
surgical endoscopy to which these codes would be assigned. The 
commenters believe that CPT codes 43257 and C9724 are clinically 
different

[[Page 74238]]

from most other services in APC 0422 because these services provide 
surgical therapy and that the resources required to furnish them are 
much greater than the resources required to furnish the other services 
in APC 0422. Commenters requested the creation of the new level IV 
upper GI procedure APC that they believed would result in appropriate 
payment for these procedures and would also improve the accuracy of the 
payment for the procedures that will remain in APC 0422. Commenters 
stated that current claims data for CPT code 43257 underestimates the 
cost of the service because hospitals are using the code incorrectly. 
They also stated that the CY 2010 claims data for CPT code 43257 
reports the cost of a generation 1 Stretta catheter that was sold at a 
cost of $1,225, although since 2010 hospitals have been using a 
generation 2 catheter which has an average sales price of $2,450. 
Therefore, the commenters asserted that the use of CY 2010 claims data 
will not fully reflect the cost of the devices that will be used in CY 
2012. Commenters suggested that CMS designate the new level IV APC that 
they requested as device dependent, establish procedure-to-device 
edits, and use only the claims that meet the device edits in setting 
the rates for the applicable APCs.
    Response: We disagree that it is necessary to create a fourth level 
upper GI APC to which to assign HCPCS codes 43257 and C9724. We believe 
that CPT codes 43257 and C9724 are clinically similar to the other 
services assigned to APC 0422 such as CPT codes 43228 (Esophagoscopy, 
rigid or flexible; with ablation of tumor(s), polyp(s), or other 
lesion(s), not amenable to removal by hot biopsy forceps, bipolar 
cautery or snare technique), and 43870 (Closure of gastrostomy, 
surgical), which are both therapeutic upper GI procedures. Moreover, 
the final median cost for CPT code 43257 of approximately $1,535 falls 
below the final median cost for APC 0422 of approximately $1,819. As we 
discuss in section II.A. of this final rule with public comment, we 
calculate the median costs of services based on the most recent charges 
and cost reports that are available to us at the time we are preparing 
the proposed and final rules. To the extent that the costs for the 
catheter used to furnish CPT code 43257 increased after CY 2010, those 
costs will be used to establish payment rates for the years in which 
the claims are used. With regard to HCPCS code C9724, we note that it 
is a low volume service for which the median cost has varied widely 
over the past few years (for example, $1,370 for CY 2009 OPPS; $2,947 
for CY 2010 OPPS; and $5,139 for CY 2011 OPPS), and we believe that its 
median cost of approximately $5,944 and low volume make it unsuited for 
establishment of a single service APC for CY 2012 OPPS. We note that 
placement of HCPCS code C9724 in APC 0422 is not a violation of the 2 
times rule because HCPCs code C9724 is not a significant procedure to 
which the 2 times rule applies because it has a single bill frequency 
of less than 1,000 and also has a single bill frequency that is less 
than 99 and the single bills represent less than 2 percent of the 
single bills used to calculate the median cost for APC 0422. We refer 
readers to section III.B. of this final rule with comment period for 
additional information regarding the 2 times rule.
    After consideration of the comments we received, we are finalizing 
our proposals to create new APC 0419 (Level II Upper GI Procedures), to 
rename APC 0422 as ``Level III Upper GI Procedures'', and to reassign 
the HCPCS codes for upper GI procedures to the three APC configuration 
(APCs 0141, 0419 and 0422) for CY 2012 OPPS, as shown in Table 23 
below. We are not creating a level IV upper GI procedure APC into which 
to place HCPCS codes 43257 and C9724 because we believe that HCPCS 
codes 43257 and C9724 are appropriately assigned to APC 0422 for CY 
2012. We are not accepting the APC Panel's recommendation that we 
reassign CPT code 43227 to APC 0422 because it is a very low volume 
service for which the median cost has not been stable over the past few 
years. We are accepting the APC Panel's recommendation that we reassign 
CPT code 43830 to APC 0422, and we have done so for the CY 2012 OPPS.
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b. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    The AMA CPT Editorial Panel created CPT code 0242T 
(Gastrointestinal tract transit and pressure measurement, stomach 
through colon, wireless capsule, with interpretation and report) 
effective January 1, 2011. For CY 2011, we assigned CPT code 0242T to 
APC 0361 (Level II Alimentary Tests) with a payment rate of $282.48. 
For CY 2012, we proposed to maintain the assignment of CPT code 0242T 
to APC 0361 with a proposed rule median cost of approximately $295, and 
a proposed payment of $284.80. (The CY 2012 OPPS/ASC final rule median 
cost for APC 0361 is approximately $286.)
    Comment: Several commenters on the CY 2011 final rule with comment 
period regarding the APC assignment of CPT code 0242T, requested 
reassignment of CPT code 0242T from APC 0361 to New Technology APC 1510 
(New Technology APC--Level X), which has a payment rate of $850. The 
commenters claimed that CPT code 0242T is not similar to the other 
procedures assigned to APC 0361 either in terms of clinical similarity 
or resource costs; therefore, it should be assigned to a New Technology 
APC because there currently are insufficient utilization and claims 
data for the service. The commenters believed that CPT code 0242T is 
significantly different than the other procedures in APC 0361, which

[[Page 74242]]

are predominantly indicated to assess the esophagus, while CPT code 
0242T is purportedly a unique test that provides transit, pressure, pH, 
and temperature measurement of the GI tract from the stomach to the 
colon. The commenters also stated that the resources, including 
clinical labor, for the procedures in APC 0361 differ from those of CPT 
code 0242T. The commenters claimed that the manometric tests assigned 
to APC 0361 measure neuromuscular activity in an anatomically specific, 
fixed manner, utilizing a reusable catheter, while CPT code 0242T 
utilizes a disposable capsule and a special meal to capture multiple 
pressure and transit measurements throughout the GI tract and cost $600 
per procedure. Adding other procedure costs to the disposable costs 
yields total procedure costs in excess of $800, according to the 
commenters. The commenters point to the past assignment of CPT code 
91110 (Gastrointestinal tract imaging, intraluminal (eg, capsule 
endoscopy), esophagus through ileum, with physician interpretation and 
report) to a New Technology APC until sufficient claims data were 
gathered for assignment to a clinical APC, and they request a similar 
approach to APC assignment for CPT code 0242T.
    Response: We disagree that assignment to a clinical APC necessarily 
implies that there are clinical and cost data for a new service. We 
routinely make assignments of new CPT codes to clinical APCs before we 
have claims data that are indicative of their source costs of a 
procedure. We make these assignments initially using the best currently 
available information, while reviewing claims data once such data 
become available and making reassignments accordingly based on those 
data. We expect to do the same regarding CPT code 0242T.
    As was the case when we made the initial assignment for CY 2011, we 
continue to believe that there are relevant clinical similarities 
between the CPT code 0242T service and other services in APC 0361 to 
continue to justify this APC assignment. CPT code 0242T and the 
services in APC 0361 all involve tests of the alimentary canal. 
Regarding resource costs, the final rule median cost of APC 0361 is 
approximately $288, with a median cost range of procedures in the APC 
from approximately $235 to approximately $680. We do not believe a New 
Technology APC is warranted for this procedure at this time. We believe 
that the clinical attributes and CY 2012 median costs of the services 
found in APC 0361 support the assignment of CPT code 0242T to APC 0361 
as an initial assignment. We generally wait until median cost claims 
data are available before reassignment to a new APC. For CY 2012, we 
will maintain our assignment of CPT code 0242T to APC 0361, which has a 
final median cost of approximately $286. We will review this assignment 
for CY 2013 when some claims data should be available for this 
procedure.
3. Genitourinary Services
a. Laser Lithotripsy (APC 0163)
    For CY 2012, we proposed to continue to assign CPT codes 52353 
(Cystourethroscopy, with ureteroscopy and/or pyeloscopy; with 
lithotripsy (ureteral catheterization is included)) and 50590 
((Fragmenting of kidney stone) to their existing CY 2011 APCs. That is, 
we proposed to continue to assign CPT code 52353 to APC 0163 (Level IV 
Cystourethroscopy and other Genitourinary Procedures), which had a 
proposed payment rate of approximately $2,566, and to continue to 
assign CPT code 50590 to APC 0169 (Lithotripsy), which had a proposed 
payment rate of approximately $3,568. CPT code 50590 was made effective 
January 1, 1986, and describes an extracorporeal shock wave 
lithotripsy. CPT code 52353 was made effective January 1, 2001, and 
describes a cystourethroscopy with lithotripsy. Our understanding is 
that the lithotripsy described in CPT code 52353 is laser lithotripsy.
    At the August 2011 APC Panel Meeting, a presenter requested the 
Panel to recommend to CMS to reassign CPT code 52353 from APC 0163 to 
the same APC as CPT code 50590, which is APC 0169. The presenter stated 
that the proposed payment rate for APC 0169 for CY 2012 shows an 
increase of approximately 23 percent in the OPPS and approximately 25 
percent in the ASCs, while the proposed payment rate for APC 0163 shows 
a 0.3 percent decrease in the OPPS and a 1.3 percent decrease in the 
ASCs, thereby creating a significant financial advantage for shock wave 
lithotripsy over ureteroscopy with lithotripsy. The presenter further 
suggested that placing CPT code 52353 in APC 0169 would be clinically 
appropriate because both procedures describe lithotripsy of stones in 
the ureter and kidney, and also because their historical median costs 
have tracked closely over time. After discussion of the of the median 
costs observed for both CPT codes 52353 and 50590, the APC Panel made 
no recommendation on the CY 2012 APC assignment for CPT code 52353.
    Comment: Some commenters recommended the reassignment CPT code 
52353 to the same APC as CPT code 50590, which is APC 0169. One 
commenter argued that the reassignment of CPT code 52353 to APC 0169 
would avoid potential incentives to use shock wave lithotripsy over 
ureteroscopy with lithotripsy. This commenter further stated that these 
two similar and competing procedures should be placed in the same APC 
so that their OPPS and ASC payment rates will increase, or decrease, 
consistently in the future.
    Response: CPT code 50590 has been assigned to APC 0169 since the 
OPPS was implemented in 2000. CPT code 52353 was initially assigned to 
APC 0162 (Level III Cystourethroscopy Procedures) when the CPT code was 
made effective in 2001. However, in CY 2002, we revised the APC 
assignment for CPT code 52353 to APC 0163 (Level IV Cystourethroscopy 
Procedures) based on input from our clinical advisors that the 
procedure is similar to the other procedures in APC 0163 based on 
clinical homogeneity and resource costs. Since CY 2002, CPT code 52353 
has been assigned to APC 0163.
    In addition, we disagree with the commenter that placing these two 
procedures in two separate APCs creates an incentive to use one 
procedure over another. We believe that physicians would choose the 
most appropriate procedure based on a patient's diagnosis and other 
relevant clinical factors. Further, based on our claims data, we do not 
believe that placing both procedures in the same APC would be 
appropriate. Our analysis of the final CY 2012 claims data reveal that 
shock wave lithotripsy (CPT code 50590) is more commonly performed on 
Medicare patients than ureteroscopy with lithotripsy (CPT code 52353). 
Specifically, our data show a CPT median cost of approximately $2,711, 
based on 3,366 single claims, for CPT code 52353. CPT code 52353 
represents 22 percent of the claims within APC 0163, and its CPT median 
cost of approximately $2,711 is relatively close to the CY 2012 final 
APC median cost of approximately $2,596 for APC 0163.
    In contrast, the CY 2012 final median cost for CPT code 50590, 
which is in APC 0169, is approximately $3,647, based on 30,178 single 
claims. This final median cost of approximately $3,647 for CPT code 
50590 is higher than the final median cost of approximately $2,711 for 
CPT code 52353.
    Comment: One commenter suggested that the increase in the median 
cost for CPT code 50590 may be a result of the application of a CCR 
calculated from costs and charges reported in the nonstandard cost 
center data for lithotripsy.

[[Page 74243]]

    Response: The nonstandard lithotripsy cost center 07699 is a 
feature of the hospital cost report CMS 2552-10. No CMS 2552-10 cost 
reports were used in determining the payment rates for the CY 2012 
OPPS. The CCRs in the CY 2012 OPPS are created from the hospital cost 
report CMS 2552-96, and there is no standard or nonstandard lithotripsy 
cost center in the CMS 2552-96 cost report.
    Given our claims data for the CY 2012 update for these lithotripsy 
procedures, we believe that CPT code 52353 is appropriately placed in 
APC 0163 based on its clinical homogeneity and resource cost compared 
to other procedures already assigned in APC 0163. As has been our 
practice since the implementation of the OPPS in 2000, we review, on an 
annual basis, the APC assignments for the procedures and services paid 
under the OPPS. We will continue to review on an annual basis the APC 
assignment for CPT code 52353 and determine whether a reassignment in 
the APC is necessary.
    Therefore, after consideration of the public comments we received, 
we are finalizing our CY 2012 proposal, without modification, to 
continue to assign CPT code 52353 to APC 0163, which has a final CY 
2012 median cost of approximately $2,596, and to continue to assign CPT 
code 50590 to APC 0169, which has a final CY 2012 median cost of 
approximately $3,647.
b. Percutaneous Renal Cryoablation (APC 0423)
    For CY 2012, 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 $3,969. This CPT code was new 
in CY 2008; however, the same service was previously described by CPT 
code 0135T (Ablation renal tumor(s), unilateral, percutaneous, 
cryotherapy). We note that in CY 2007, based upon the APC Panel's 
recommendation made at the March 2006 APC Panel meeting, we reassigned 
CPT code 50593 (then CPT code 0135T) from APC 0163 ((Level IV 
Cystourethroscopy and other Genitourinary Procedures)) to APC 0423. We 
expect hospitals, when reporting CPT code 50593, to also report the 
device HCPCS code, C2618 (Probe, cryoablation), associated with the 
procedure.
    Comment: One commenter disagreed with the proposed continued 
assignment for CPT code 50593 to APC 0423 because, the commenter 
stated, this APC includes other procedures that do not require the use 
of high-cost devices, such as cryoablation probes. The commenter 
reported that the payment rate of approximately $3,969 for the 
procedure does not accurately reflect the costs incurred by hospitals 
that perform this procedure, and, as a result, hospitals are reluctant 
to perform this procedure. The commenter suggested that CMS determine 
the payment rate for CPT code 50593 based on its mean cost, rather than 
on median cost. The commenter stated that the proposed mean cost for 
APC 0423 is approximately $4,835, and approximately $5,394 for CPT code 
50593. Further, the commenter recommended that CMS designate CPT code 
50593 as a device-dependent procedure and require hospitals to submit 
claims with the appropriate HCPCS code, C2618, so that charges can be 
reported appropriately. The commenter stated that CPT code 50593 cannot 
be performed without the device, and adding CPT code 50593 to the 
device-dependent procedure list would result in more accurate claims 
data for future ratesetting.
    Response: First, we believe that CPT code 50593 is appropriately 
placed in APC 0423 based on clinical and resource costs when compared 
to other procedures also assigned to APC 0423. 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 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 to reassign the procedure to APC 0423.
    For CY 2012, we proposed to assign four CPT codes to APC 0423. 
These procedures share similar median costs ranging from approximately 
$3,733 to approximately $4,493, which are well within the two-fold 
variation in median cost that is permitted by the law for an OPPS 
payment group. Therefore, the grouping of these procedures in the same 
APC does not violate the 2 times rule. We note that all four of these 
procedures are relatively low volume, with fewer than 1,800 total 
claims each for CY 2010 and fewer than 700 single claims each for 
ratesetting. We believe that grouping these clinically similar, low-
volume procedures for the percutaneous ablation of renal, liver, or 
pulmonary tumors in the same payment group helps to promote payment 
stability for these low volume services.
    Secondly, as we stated in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68611), the final APC relative weights and 
payment rates are based on median hospital costs, not mean costs, for 
APC groups. The OPPS relies on the relativity of costs for procedures 
as reported by hospitals in establishing payment rates, and we do not 
believe it would be appropriate to utilize a different payment 
methodology based on mean cost for one APC, while the payment rates for 
the other clinical APCs would be based on median costs. Mean and median 
costs are two different statistical measures of central tendency and, 
based on common distributions, mean costs typically are higher than 
median costs. Therefore, we do not believe it would be appropriate to 
use a combination of these measures to establish the payment weights 
for different APCs under the OPPS.
    Further, 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 designate a procedure as device-
dependent service based on consideration of all the procedures in a 
single APC. While all of the procedures assigned to APC 0423 require 
the use of 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.
    Finally, we remind hospitals that we expect all of the HCPCS codes 
to be reported that appropriately describe the items used to provide 
services, regardless of whether the HCPCS codes are packaged or paid 
separately. When reporting CPT code 50593, we expect hospitals to also 
report the device HCPCS code C2618, which is associated with this 
procedure. If hospitals use more than one probe in performing the CPT 
code 50593 procedure, 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 CPT code 50593 
procedure as the units of HCPCS code C2618, which describes these 
devices, with their charges for the probes. Since CY

[[Page 74244]]

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 devices used in procedures when 
they submit claims for those procedures.
    After consideration of the public comment we received, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
assign CPT code 50593 to APC 0423, which has a final CY 2012 APC median 
cost of approximately $4,096.
4. Nervous System Services
a. Revision/Removal of Neurostimulator Electrodes (APCs 0040 and 0687)
    As discussed in detail in the CY 2012 OPPS/ASC proposed rule (76 FR 
42233 through 42234), for CY 2012, we proposed to move CPT codes 63663 
(Revision, including replacement, when performed, of spinal 
neurostimulator electrode percutaneous array(s), including fluoroscopy, 
when performed) and 63664 (Revision, including replacement, when 
performed, of spinal neurostimulator electrode plate/paddle(s) placed 
via laminotomy or laminectomy, including fluoroscopy, when performed) 
from APC 0687 (Revision/Removal of Neurostimulator Electrodes) to APC 
0040 (Level I Implantation/Revision/Replacement of Neurostimulator 
Electrodes). We noted that the proposed CY 2012 median costs for CPT 
codes 63663 and 63664 of approximately $4,316 and $4,883, respectively, 
are more consistent with the proposed median cost of APC 0040 of 
approximately $4,516 than with the proposed median cost of APC 0687 of 
approximately $1,492. We also proposed to change the title of APC 0040 
from ``Percutaneous Implantation of Neurostimulator Electrodes'' to 
``Level I Implantation/Revision/Replacement of Neurostimulator 
Electrodes'' and the title of APC 0061 (Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes) from ``Laminectomy, 
Laparoscopy, or Incision for Implantation of Neurostimulator 
Electrodes'' to ``Level II Implantation/Revision/Replacement of 
Neurostimulator Electrodes.'' CPT codes 63661 (Removal of spinal 
neurostimulator electrode percutaneous array(s), including fluoroscopy, 
when performed), 63662 (Removal of spinal neurostimulator electrode 
plate/paddle(s) placed via laminotomy or laminectomy, including 
fluoroscopy, when performed), 63663, and 63664 were all effective 
January 1, 2010. We proposed that CPT codes 63661 and 63662 would 
remain in APC 0687.
    In addition, for CY 2012, we proposed to assign CPT 64569 (Revision 
or replacement of cranial nerve (eg, vagus nerve) neurostimulator 
electrode array, including connection to existing pulse generator), 
effective January 1, 2011, to APC 0687.
    Comment: Several commenters supported the proposed reassignment of 
CPT codes 63663 and 63664 from APC 0687 to APC 0040. The commenters 
believed that the proposed reassignment places these CPT codes in an 
APC that is consistent with their median costs. The commenters also 
supported the retention of CPT code 63661 and 63662 in APC 0687 because 
their proposed CY 2012 median costs are consistent with the overall 
proposed APC 0687 median costs. In addition, the commenters agreed with 
the proposed title changes for APC 0040 and APC 0061. One commenter 
agreed with the proposed reassignment of CPT codes 63663 and 63664 to 
APC 0040 but recommended the creation of two new HCPCS codes to allow 
hospitals to differentiate between revision and replacement procedures 
and to foster analysis of the cost differences between revision and 
replacement procedures for purposes of future APC assignments. The 
commenter also sought device-to-procedure and procedure-to-device edits 
to ensure device costs are completely captured.
    Response: We appreciate the commenters' support for the 
reassignment of CPT codes 63663 and 63664 from APC 0687 to APC 0040, 
the continued assignment of CPT codes 63661 and 63664 to APC 0687, and 
the title changes to APC 0040 and APC 0061. We agree with the 
commenters that the proposed changes would ensure that all four codes 
are in APCs that are consistent with their median costs. Therefore, we 
are finalizing our proposals to reassign CPT codes 63663 and 63664 to 
APC 0040, to continue to assign CPT codes 63661 and 63662 to APC 0687, 
and to change the titles of APC 0040 to ``Level I Implantation/
Revision/Replacement of Neurostimulator Electrodes'' and APC 0061 to 
``Level II Implantation/Revision/Replacement of Neurostimulator 
Electrodes.''
    We do not agree that it is necessary to create new HCPCS codes in 
order to differentiate between neurostimulator electrode replacement 
and revision procedures. As we discussed in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42234), we examined the CY 2010 claims data 
available for the proposed rule to compare the frequency of claims 
containing CPT codes 63663 or 63664 that were billed with and without 
HCPCS code C1778 (Lead, neurostimulator (implantable)) or HCPCS code 
C1897 (Lead, neurostimulator test kit (implantable)) in order to 
determine whether they describe mainly device revision or replacement 
procedures. Because the majority of claims did not contain HCPCS code C 
1778 or C1897, these findings suggested that these CPT codes are being 
used by hospitals to describe mainly device revision procedures, 
although there were a significant number of cases with device 
replacement procedures in the claims data. We also note that we 
implemented claims processing logic to allow CPT codes 63663 and 63664 
to satisfy the device-to-procedure edits for HCPCS codes C1778 and 
C1897, effective January 1, 2012. We cannot implement procedure-to-
device edits for CPT codes 63663 and 63664 because they do not always 
involve the implantation of a device.
    Comment: One commenter objected to the proposed assignment of CPT 
code 64569 to APC 0687. The commenter stated that CPT code 64569 is 
clinically similar to CPT codes 63663 and 63664, the only difference 
being CPT code 64569 is an incision-based procedure, while CPT codes 
63663 and 63664 are percutaneous. The commenter also argued that 
assigning CPT code 64569 to APC 0687 would result in significant 
financial losses for hospitals and presented simulated data using 
claims for CPT code 63663 and 63664 to estimate a median cost for CPT 
code 64569 ranging between approximately $5,551 and $7,790.
    Response: We are assigning CPT code 64569 to APC 0687, as we 
proposed, with a CY 2012 final rule median cost of approximately 
$1,451. We do not agree that CPT code 64569 is inappropriately assigned 
to APC 0687. Our clinical analysis indicates that CPT code 64569 is 
similar to the other device revision and replacement procedures in APC 
0687. Furthermore, since CPT code 64569 was effective January 1, 2011, 
we do not have frequency and cost information upon which to make an 
assessment of whether there is a meaningful difference between the cost 
of revising the VNS electrodes and generator or replacing them. We do 
not agree with the commenter that it is possible to derive meaningful 
estimates of the costs of providing the service described by CPT code 
64569 by using data for CPT codes 63663 and 63664 because these codes 
involve different types of devices. Therefore, we are not

[[Page 74245]]

convinced by the commenter that the assignment of the CPT code 64569 to 
APC 0687 is inappropriate. As we did with the CPT codes 63661 through 
63664, we will continue to monitor and analyze the data for CPT code 
64569 when it becomes available.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign CPT codes 
63663 and 63664 to APC 0040 and to assign CPT codes 63661, 63662, and 
64569 to APC 0687. We also are finalizing our proposal to change the 
title of APC 0040 from ``Percutaneous Implantation of Neurostimulator 
Electrodes'' to ``Level I Implantation/Revision/Replacement of 
Neurostimulator Electrodes'' and the title of APC 0061 from 
``Laminectomy, Laparoscopy, or Incision for Implantation of 
Neurostimulator Electrodes'' to ``Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes.''
b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067)
    There are three CPT codes associated with MEG: 95965 
(Magnetoencephalography (meg), recording and analysis; for spontaneous 
brain magnetic activity (eg, epileptic cerebral cortex localization)); 
95966 (Magnetoencephalography (meg), recording and analysis; for evoked 
magnetic fields, single modality (eg, sensory, motor, language, or 
visual cortex localization)); and 95967 (Magnetoencephalography (meg), 
recording and analysis; for evoked magnetic fields, each additional 
modality (eg, sensory, motor, language, or visual cortex 
localization)). For CY 2012 we calculated a proposed rule median cost 
of approximately $1,821 for CPT code 95965 based on a frequency of 48 
single bills out of a total frequency of 50 bills. We proposed to 
continue to assign CPT code 95965 to APC 0067 (Level III Stereotactic 
Radiosurgery, MRgFUS, and MEG), which had a proposed rule median cost 
of approximately $3,368.
    At its August 10-11, 2011 meeting, the APC Panel made two 
recommendations with regard to CPT code 95965. First, the APC Panel 
recommended that CMS implement appropriate edits requiring hospitals to 
use the new MEG revenue code, 086X, with CPT codes 95965, 95966, and 
95967. We address this recommendation in the context of a comment from 
the public to which we respond below. Second, the APC Panel recommended 
that CMS move CPT code 95965 from APC 0067 to APC 0066 (Level II 
Stereotactic Radiosurgery, MRgFUS, and MEG), for consistency. We agree 
with this recommendation and have reassigned CPT code 95965 to APC 0066 
because the median cost in the data available for this final rule with 
comment period for CPT code 95965 of approximately $1,741 is similar to 
the median cost of APC 0066 of approximately $2,521. In contrast, the 
median cost of APC 0067 of approximately $3,374 is substantially above 
the median cost for CPT code 95965. We note that the procedure 
described by CPT code 95965 is a low-volume service for which we have a 
single bill frequency of 70, compared to a total bill frequency of 75, 
in our CY 2012 OPPS final rule data. Although it is a low-volume 
service, single bills represent 93 percent of total frequency for CPT 
code 95965.
    Comment: Commenters stated that the costs of MEG are far higher 
than the costs of electroencephalograms (EEG) and electrocardiograms 
(ECG) and that therefore CMS should not use the CCRs from the cost 
centers for these services to reduce the charges for MEG to costs. 
Instead, according to commenters, CMS should create a new cost center 
on the Medicare hospital cost report to isolate the costs of MEG and 
calculate and apply a CCR from the dedicated MEG cost center to the 
charges for MEG to secure a more accurate estimated cost for MEG.
    Response: We refer readers to section II.A.1.c. of this final rule 
with comment period for a summary of public comments and responses 
related to the use of the CCRs for cost centers 3280 (EKG and EEG) as 
primary and 5400 (Electroencephalography) as secondary, to reduce the 
charges for MEG to estimated relative costs.
    Comment: Commenters urged CMS to require that hospitals use revenue 
codes that are specific to MEG. One hospital that furnished comments 
indicated that its MEG services are furnished through the radiology 
department, but that the department through which MEG services are 
furnished varies across hospitals. (As indicated previously, the APC 
Panel recommended that CMS implement appropriate edits requiring 
hospitals to use the MEG specific revenue codes, 086X, with CPT codes 
95965, 95966, and 95967.)
    Response: As we indicate in the Section 20.5, Chapter 4, of the 
Medicare Claims Processing Manual, generally, CMS does not instruct 
hospitals on the assignment of HCPCS codes to revenue codes for 
services provided under OPPS because hospitals' assignment of cost vary 
(available on the CMS Web site at: http://www.cms.gov/Manuals; select 
Internet Only Manuals). Where explicit instructions are not provided, 
hospitals should report their charges under the revenue code that will 
result in the charges being assigned to the same cost center to which 
the cost of those services are assigned in the cost report. We do not 
believe that establishing edits to require hospitals to report the 
charges for MEG under the dedicated MEG revenue code series is 
necessary or appropriate. Medicare pays for a low volume of MEG 
services for which there are no special requirements that would justify 
creation of edits that force hospitals to report particular revenue 
codes for particular CPT codes. Specifically, in the CY 2012 final rule 
claims data, a small number of hospitals reported one of the three CPT 
codes for MEG. We believe that it is not reasonable to implement 
national CPT-to-revenue code edits to enforce the use of MEG-specific 
revenue codes when a small number of hospitals reported only 144 lines 
of MEG total for the 3 MEG codes in CY 2010. Specifically, in the final 
rule single bills on which we are basing the CY 2012 median costs, 4 
hospitals reported 31 lines of CPT code 95967; 6 hospitals reported 384 
lines of CPT code 95966; and 10 hospitals reported 75 lines of CPT code 
95965. The MEG codes were first paid under the OPPS as new technology 
services in CY 2006 and the total frequency of services and the number 
of hospitals that furnish the service have always been very low.
    For CY 2012, as stated previously, we are accepting the APC Panel's 
recommendation to reassign CPT code 95965 to APC 0066 because the CY 
2012 final rule median cost of CPT code 95965 of approximately $1,741 
is more similar to the final median cost of APC 0066 of approximately 
$2,521 than to the median cost of APC 0067, which is approximately 
$3,374. We are not accepting the APC Panel's recommendation to 
implement edits requiring that hospitals that furnish MEG must report 
the charges for the service using the MEG specific revenue code series 
086X for the reasons stated above. For a response to the commenters' 
requests for a dedicated cost center on the Medicare cost report, we 
refer readers to section II.A.c. of this final rule with comment 
period.
c. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0218)
    For CY 2011, the CPT Editorial Panel deleted CPT code 0160T 
(Therapeutic repetitive transcranial magnetic stimulation treatment 
planning) on December 31, 2010, and replaced it with CPT codes 90867 
(Therapeutic repetitive transcranial magnetic

[[Page 74246]]

stimulation treatment; planning) effective January 1, 2011. Similarly, 
CPT code 0161T (Therapeutic repetitive transcranial magnetic 
stimulation treatment delivery and management, per session) was deleted 
on December 31, 2010, and was replaced with CPT code 90868 (Therapeutic 
repetitive transcranial magnetic stimulation treatment; delivery and 
management, per session) effective January 1, 2011.
    In Addendum B to the CY 2011 OPPS/ASC final rule with comment 
period, CPT codes 90867 and 90868 were assigned to APC 0216 (Level III 
Nerve and Muscle Tests) with a payment rate of approximately $186 and 
were flagged with comment indicator ``NI'' to indicate that these codes 
were new codes for CY 2011 with an interim APC assignment subject to 
public comment. We stated that we would address any public comments on 
issues regarding these new codes in this CY 2012 OPPS/ASC final rule 
with comment period.
    In addition, in the CY 2012 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT codes 90867 and 90868 to APC 0216 for CY 2012.
    Comment: One commenter on the CY 2011 OPPS/ASC final rule with 
comment period agreed with the APC assignment for CPT code 90867 and 
indicated that APC 0216 is appropriate, based on the resources required 
to perform TMS planning and its similarity to other procedures with 
similar resource costs in this APC. However, this same commenter 
disagreed with the placement of CPT code 90868 in APC 0216. The 
commenter stated there are no clinically similar procedures in APC 0216 
whose resources are comparable to that of TMS treatment delivery, and 
recommended the reassignment of CPT code 90868 from APC 0216 to APC 
0320 (Electroconvulsive Therapy), which has a payment rate of 
approximately $414 for CY 2011. The commenter asserted that the 
hospital outpatient claims data for TMS is not reliable and, therefore, 
should not be used as the basis for the assignment of CPT code 90868 to 
APC 0216.
    Response: Although both CPT codes 90867 and 90868 were new codes 
for CY 2011, the services they describe are not new because they were 
previously described by two predecessor CPT codes, specifically 
Category III CPT codes 0160T and 0161T. CPT code 90867 was previously 
described by CPT code 0160T, and CPT code 90868 was previously 
described by CPT code 0161T. Both CPT codes 0160T and 0161T were made 
effective July 1, 2006, and deleted on December 31, 2010. From July 1, 
2006 through December 31, 2010, both CPT codes 0160T and 0161T were 
assigned to APC 0216.
    We do not agree with the commenter that CPT code 90868 should be 
placed in APC 0320 based on resource similarity. Based on analysis of 
our hospital outpatient claims data for predecessor CPT codes 0160T and 
0161T from CY 2006 through CY 2010, we believe that both CPT codes 
90867 and 90868 would be more appropriately placed in APC 0218 (Level 
II Nerve and Muscle Tests) rather than in the proposed APC 0216. There 
were no claims data for either procedure (as described by CPT codes 
0160T and 0161T) during CY 2006, CY 2007, and CY 2008. For the CY 2011 
OPPS/ASC final rule with comment period, we used claims processed 
during CY 2009 for ratesetting, and our claims data showed a CPT median 
cost of approximately $176 for CPT code 0160T based on 17 single claims 
(out of 17 total claims), and a CPT median cost also of approximately 
$176 for CPT code 0161T based on 68 single claims (out of 69 total 
claims), which closely resemble the APC median cost of approximately 
$184 for APC 0216 for the CY 2011 OPPS. However, for this CY 2012 OPPS/
ASC final rule with comment period, which is based on the CY 2010 
hospital outpatient claims for ratesetting, our claims data show a CPT 
median cost of approximately $88 for CPT code 0160T (which is now 
described by CPT code 90867) based on 6 single claims (out of 9 total 
claims), and a CPT median cost of approximately $105 for CPT code 0161T 
(which is now described by CPT code 90868) based on 211 single claims 
(out of 221 total claims). Given our claims data for predecessor CPT 
codes 0160T and 0161T, we believe that both CPT codes 90867 and 90868 
are appropriately placed in APC 0218, which has a final APC median cost 
of approximately $84 for CY 2012 based on clinical homogeneity and 
resource costs. We note that the OPPS methodology allows hospitals to 
actively contribute on an ongoing basis to the ratesetting process and 
to influence future payment rates for services by submitting correctly 
coded and accurately priced claims for the services they provide. 
According to this methodology, it is generally not our policy to judge 
the accuracy of hospital coding and charging for purposes of 
ratesetting. We also do not agree with the commenter that the procedure 
described by CPT code 90868 would fit into APC 0320 from a clinical 
perspective because the provision of electroconvulsive therapy 
generally requires more extensive monitoring and services (for example, 
muscle blockade) than transcranial magnetic treatment delivery and 
management.
    Therefore, after consideration of the public comment we received on 
the CY 2011 OPPS/ASC final rule with comment period, we are finalizing 
our CY 2012 proposal, with modification. That is, we are reassigning 
CPT codes 90867 and 90868 from APC 0216 to APC 0218, which has a final 
CY 2012 median cost of approximately $84. Given the information 
reflected in the CY 2012 final rule claims data for predecessor CPT 
codes 0160T, which shows a median cost of approximately $105, and a 
median cost of approximately $88 for CPT code 0161T, we believe our 
claims data show the costs of these procedures are similar to the costs 
of other procedures assigned to APC 0218. We also believe that these 
procedures are similar to the other procedures assigned to APC 0218 
from a clinical standpoint. We will reevaluate the APC assignment for 
CPT codes 90867 and 90868 in future OPPS updates as additional 
information becomes available to us.
5. Ocular and Ophthalmic Services
a. Placement of Amniotic Membrane (APCs 0233 and 0244)
    For the CY 2011 update, the AMA CPT Editorial Panel revised the 
long descriptor for CPT code 65780 (Ocular surface reconstruction; 
amniotic membrane transplantation, multiple layers) to include the 
words ``multiple layers'' to further clarify the code descriptor. In 
addition, the AMA CPT Editorial Panel created two new CPT codes that 
describe the placement of amniotic membrane on the ocular surface 
without reconstruction; one describing the placement of a self-
retaining (non-sutured/non-glued) device on the surface of the eye, and 
the other describing a single layer of amniotic membrane sutured to the 
surface of the eye. Specifically, the AMA CPT Editorial Panel created 
CPT codes 65778 (Placement of amniotic membrane on the ocular surface 
for wound healing; self-retaining) and 65779 (Placement of amniotic 
membrane on the ocular surface for wound healing; single layer, 
sutured), effective January 1, 2011.
    As has been our practice since the implementation of the OPPS in 
2000, we review all new procedures before assigning them to an APC. In 
determining the APC assignments for CPT codes 65778 and 65779, we took 
into consideration the clinical and resource characteristics involved 
with placement of amniotic membrane products on the eye for wound 
healing via a self-retaining device and a sutured,

[[Page 74247]]

single-layer technique. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72402), we assigned CPT code 65780 to APC 0244 (Corneal 
and Amniotic Membrane Transplant) with a CY 2011 payment rate of 
approximately $2,681. We assigned CPT code 65778 to APC 0239 (Level II 
Repair and Plastic Eye Procedures) with a payment rate of approximately 
$559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye 
Procedures) with a payment rate of approximately $519. In addition, we 
assigned both CPT codes 65778 and 65779 to comment indicator ``NI'' in 
Addendum B of the CY 2011 OPPS/ASC final rule with comment period to 
indicate that both codes were new codes for CY 2011 with an interim APC 
assignment subject to public comment. We further stated that we would 
address any public comments on issues regarding these new codes in this 
CY 2012 OPPS/ASC final rule with comment period.
    At the APC Panel at the February 28-March 1, 2011 meeting, a 
presenter requested the reassignment of both new CPT codes 65778 and 
65779 to APC 0244, which is the same APC to which CPT code 65780 is 
assigned. The presenter indicated that, prior to CY 2011, the 
procedures described by CPT codes 65578 and 65779 were previously 
reported under the original version of CPT code 65780, which did not 
specify ``multiple layers,'' and, as such, these new codes should 
continue to be assigned to APC 0244. Further, the presenter stated that 
the costs of the new procedures described by CPT codes 65778 and 65779 
are very similar to the procedure described by CPT code 65780.
    The APC Panel recommended that CMS reassign both CPT codes 65778 
and 65779 to APC 0233 (Level III Anterior Segment Eye Procedures), 
citing clinical similarity to procedures already in APC 0233. Based on 
clinical as well as resource similarity to the other procedures 
currently assigned to APC 0233, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42237), we proposed to accept the APC Panel's recommendations to 
reassign CPT code 65778 from APC 0239 to APC 0233 and to reassign CPT 
code 65779 from APC 0255 to APC 0233. However, based upon our further 
review and analysis of the clinical characteristics of the procedure 
described by CPT code 65778, we also proposed to conditionally package 
CPT code 65778. The service described by CPT code 65778 would rarely be 
provided as a separate, stand-alone service in the HOPD; it would 
almost exclusively be provided in addition to and following another 
procedure or service. Our medical advisors indicated that the procedure 
described by CPT code 65778 is not significantly different than placing 
a bandage contact lens on the surface of the eye to cover a corneal 
epithelial defect. CPT code 65778 describes the simple placement of a 
special type of bandage (a self-retaining amniotic membrane device) on 
the surface of the eye, which would most commonly be used in the HOPD 
to cover the surface of the eye after a procedure that results in a 
corneal epithelial defect. In fact, the self-retaining amniotic 
membrane device is structurally similar to a bandage contact lens, 
except that the central material is amniotic membrane instead of 
contact lens polymer. Given the characteristics of this procedure, the 
device used in the procedure, and its likely use in the HOPD, we 
proposed to conditionally package CPT code 65778 for CY 2012 and 
reassign its status indicator from ``T'' to ``Q2'' to indicate that the 
procedure is packaged when it is billed on the same date with another 
procedure or service that is also assigned to status indicator ``T.'' 
Otherwise, separate payment would be made for the procedure.
    In summary, for CY 2012, we proposed to reassign CPT code 65778 
from APC 0239 to APC 0233 with a conditionally packaged status of 
``Q2,'' to reassign CPT code 65779 from APC 0255 to APC 0233, which had 
a proposed median cost of approximately $1,214, and to continue to 
assign CPT code 65780 to APC 0244, which had a proposed median cost of 
approximately $2,767.
    At the August 2011 APC Panel Meeting, a presenter urged the Panel 
to recommend to CMS not to conditionally package CPT code 65778 for CY 
2012, and instead, assign it to status indicator ``T.'' Based on 
information presented at the meeting, and after further discussion on 
the issue, the APC Panel recommended that CMS reassign the status 
indicator for CPT code 65778 from conditionally packaged ``Q2'' to 
status indicator ``T.''
    Comment: Several commenters urged CMS not to finalize its proposal 
to conditionally package CPT code 65778 by assigning it to status 
indicator ``Q2,'' and instead adopt the APC Panel's recommendation to 
assign it to status indicator ``T.'' One commenter expressed concern 
that conditionally packaging CPT code 65778 is inappropriate because it 
will result in no payment for the procedure despite the significant 
costs hospitals incur in furnishing the service, which includes the 
cost of the Prokera device (the self-retaining amniotic membrane 
device) that is used with this procedure. Further, this same commenter 
disagreed with CMS' assertion that the service described by CPT code 
65778 is merely a minor procedure that involves placing a bandage 
contact lens on the surface of the eye, and stated that the service is 
a significant, separate procedure that should continue to be separately 
paid.
    Response: We disagree that the procedure described by CPT code 
65778 is a significant procedure. The procedure has been described by 
the manufacturer as ``like inserting a contact lens.'' The 
manufacturer's Web site states the following about the Prokera self-
retaining amniotic membrane device: ``The ProKera[reg] device 
configuration enables easy insertion in the office, hospital bedside or 
following surgical procedures to prevent adhesions while delivering the 
wound repair and wound healing actions of amniotic membrane.'' Because 
this is a type of specialized bandage that is typically placed on the 
surface of the eye immediately after a surgery that has resulted in a 
corneal epithelial defect, we believe that assigning CPT code 65778 to 
a conditionally packaged status encourages hospitals to use resources 
more efficiently. We expect hospitals to provide only necessary, high 
quality care and to provide that care as efficiently as possible. We 
expect that, for most surgically induced corneal epithelial defects, 
hospitals will use a conventional eye patch or a standard bandage 
contact lens to promote faster wound healing and greater patient 
comfort, and that they will reserve very high cost products, such as 
the self-retaining amniotic membrane device, for rare and exceptional 
vision-threatening cases. We believe that the conditional packaging of 
CPT code 65778 is consistent with this expectation and will encourage 
efficient hospital outpatient care under these circumstances. Based on 
the nature of this procedure, we believe that assigning CPT code 65778 
to status indicator ``Q2'' is appropriate under the hospital OPPS. 
Therefore, we are not accepting the APC Panel's recommendation to 
reassign this procedure to status indicator ``T.''
    After consideration of the public comments we received and the APC 
Panel's August 2011 recommendation, we are finalizing our proposal, 
without modification, to assign status indicator ``Q2'' to CPT code 
65778. When the service is furnished with a separately payable surgical 
procedure with status indicator ``T''' on the same day, payment for CPT 
code 65778 is packaged. Otherwise, payment for CPT

[[Page 74248]]

code 65778 is made separately through APC 0233, which has a CY 2012 
final median cost of approximately $1,164. We also are finalizing our 
proposal to accept the APC Panel's recommendation to reassign CPT code 
65779 from APC 0255 to APC 0233, which has a final CY 2012 median cost 
of approximately $1,164. Further, we are finalizing our proposal, 
without modification, to continue to assign CPT code 65780 to APC 0244, 
which has a final CY 2012 median cost of approximately $2,654.
    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. In CY 2012, we will 
again reevaluate the status indicator and APC assignments for CPT codes 
65778, 65779, and 65780 for the CY 2013 OPPS rulemaking cycle. The 
amniotic membrane procedures and their CY 2012 final APC assignments 
are displayed in Table 24 below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.039

b. Insertion of Anterior Segment Aqueous Drainage Device (APC 0673)
    The AMA CPT Editorial Panel created category III CPT code 0253T 
(Insertion of anterior segment aqueous drainage device, without 
extraocular reservoir; internal approach, into the suprachoroidal 
space) effective on January 1, 2011. We assigned CPT code 0253T to APC 
234 (Level IV Anterior Segment Eye Procedures) in the OPPS, effective 
January 1, 2011 with a comment indicator ``NI'' in Addendum B of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72448). For CY 
2012, we proposed to continue to assign CPT code 0253T to APC 0234, 
with a proposed payment rate of approximately $1,754.
    Comment: A few commenters requested that CMS reassign CPT code 
0253T to APC 0673 (Level V Anterior Segment Eye Procedures), with a 
proposed CY 2012 payment rate of approximately $2,901. The commenters 
claimed that CPT code 0253T would be more appropriately placed in APC 
0673 based on clinical homogeneity and resource costs. Specifically, 
the commenters stated that, because CPT code 0253T is a glaucoma 
treatment with an implantable device, it should be assigned to APC 0673 
because, unlike the procedures assigned to APC 0234, the procedures 
assigned to APC 0673 are primarily glaucoma treatments with an 
implantable device. Commenters also stated that the procedure described 
by CPT code 0253T is very similar to the procedure described by CPT 
code 0191T (Insertion of anterior segment aqueous drainage device, 
without extraocular reservoir; external approach), which is assigned to 
APC 0673. Finally, the commenters stated that the cost of the device 
used in CPT code 0253T is similar to that of other devices used in 
glaucoma treatment procedures assigned to APC 0673.
    Response: After revisiting this issue and reexamining the clinical 
and resource characteristics of CPT code 0253T, we agree with the 
commenters that CPT code 0253T is similar clinically and in terms of 
resource utilization to the procedures currently assigned to APC 0673. 
In fact, the procedure described by CPT code 0253T is almost the same 
as the procedure described by CPT code 0191T, which is currently 
assigned to APC 0673. Also, both of these procedures employ the same 
type of internally inserted implantable glaucoma drainage device. 
Therefore, after consideration of the public comments we received, we 
are modifying our proposal and reassigning CPT code 0253T from APC 0234 
to APC 0673, which has a final median cost of approximately $2,911 for 
CY 2012. We will monitor claims and cost report data related to CPT 
code 0253T as the data become available for future updates.
c. Scanning Ophthalmic Diagnostic Imaging (APC 0230)
    For CY 2011, the CPT Editorial Panel deleted CPT codes 0187T 
(Scanning computerized ophthalmic diagnostic imaging, anterior segment, 
with interpretation and report, unilateral) and 92135 (Scanning 
computerized ophthalmic diagnostic imaging, posterior segment, (e.g., 
scanning laser) with interpretation and report, unilateral) on December 
31, 2010, and replaced them with three new codes effective January 1, 
2011. Specifically, CPT code 0187T was replaced with CPT code 92132 
(Scanning computerized ophthalmic diagnostic imaging, anterior segment, 
with interpretation and report, unilateral or bilateral), and CPT code 
92135 was replaced with CPT codes 92133 (Scanning computerized 
ophthalmic diagnostic imaging, posterior segment, with interpretation 
and report, unilateral or bilateral; optic nerve) and 92134 (Scanning 
computerized ophthalmic diagnostic imaging, posterior segment, with 
interpretation and report, unilateral or bilateral; retina).
    In Addendum B of the CY 2011 OPPS/ASC final rule with comment 
period, CPT codes 92132, 92133, and 92134 were assigned to APC 0230 
(Level I Eye Tests & Treatments) with a payment rate of approximately 
$42 and were flagged with comment indicator ``NI'' to indicate that 
these codes were

[[Page 74249]]

new codes for CY 2011 with an interim APC assignment subject to public 
comment. We stated that we would address any public comments on issues 
regarding these new codes in this CY 2012 OPPS/ASC final rule with 
comment period.
    In addition, in the CY 2012 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT codes 92132, 92133, and 92134 to APC 0230.
    Comment: One commenter on the CY 2011 OPPS/ASC final rule with 
comment period requested that CMS reassign CPT codes 92132, 92133, and 
92134 from APC 0230 to APC 0698 (Level II Eye Tests & Treatments), 
which has a CY 2011 payment rate of approximately $67, to account for 
the long descriptor changes for the new codes. Specifically, the 
commenter indicated that the predecessor codes, specifically, CPT codes 
0187T and 92135 described a unilateral procedure; however, the new 
codes, specifically, CPT codes 92132, 92133, and 92134, describe a 
``unilateral or bilateral'' procedure in the code descriptors. Further, 
the commenter expressed concern that the new codes are paid at half the 
CY 2010 payment rate, which the commenter believed is inappropriate 
since the typical patient encounter involves two tests.
    Response: As indicated above, CPT codes 92132, 92133, and 92134 
were assigned to APC 0230 effective on January 1, 2011. We assigned 
these new codes to the same APC and status indicator as their 
predecessor CPT codes 0187T and 92135. We note that these predecessor 
CPT codes were active codes for some time. CPT code 92135 was made 
effective January 1, 1999 and deleted on December 31, 2010, while CPT 
code 0187T was made effective January 1, 2008, and deleted on December 
31, 2010. Given the history of the predecessor codes, we reviewed our 
claims.
    For the CY 2012 update, the payment rates are based on data from 
claims submitted during CY 2010 according to the standard OPPS 
ratesetting methodology. Based on our analysis, we found significant 
claims data for predecessor CPT codes 92135 and 0187T. Our CY 2012 
final claims data show that the median cost for CPT code 92135 is 
approximately $41 based on 191,170 single claims (out of 191,934 total 
claims), and approximately $44 based on 341 single claims (out of 348 
total claims) for CPT code 0187T. We believe that the final rule median 
costs of approximately $41 and $44 are similar to the final median cost 
of approximately $48 for APC 0230. We also believe that the resources 
consumed in performing these procedures are not significantly different 
for unilateral versus bilateral imaging.
    After consideration of the public comment we received on the CY 
2011 OPPS/ASC final rule with comment period, we are finalizing our CY 
2012 proposal, without modification. Given the significant information 
reflected in the CY 2012 final rule claims data for predecessor CPT 
codes 92135 and 0187T, we believe our claims data are sufficient for us 
to continue to assign these services to APC 0230, which has a final CY 
2012 median cost of approximately $45. We will reevaluate the APC 
assignment for CPT codes 92132, 92133, and 92134 in future OPPS updates 
as additional information becomes available to us. Also, we expect to 
have the first claims data available for CPT codes 92132, 92133, and 
92134 for the CY 2013 OPPS/ASC rulemaking cycle.
d. Intraocular Laser Endoscopy (APC 0233)
    CPT code 66711 (Ciliary body destruction; cyclophotocoagulation, 
endoscopic) is assigned to APC 0233 (Level III Anterior Segment Eye 
Procedures) for CY 2011, with a CY 2011 payment rate of $1,233.03. In 
the CY 2012 OPPS/ASC proposed rule, we proposed continued assignment 
for CPT code 66711 for CY 2012 to APC 0233, with a proposed payment 
rate of $1,171.65. The final rule median cost for APC 0233 is 
approximately $1,164.
    Comment: One commenter, the manufacturer of a single use 
intraocular laser endoscope, indicated that the device used to 
accomplish CPT code 66711 is used to treat patients with glaucoma and 
retinal disease. The commenter had previously manufactured a multiple 
use version of the intraocular laser endoscope, and claimed that the 
multiple use device had lower per unit costs per use than the new 
single use device, but that it could no longer be manufactured due to 
supply constraints of a part used in the manufacturing process. The 
commenter stated that the most frequent service code used to deliver 
this service is represented by CPT code 66711, and stated that the 
multiple procedure discount typically applies, which reduces the OPPS 
payment rate to approximately $616 for CY 2011. The commenter stated 
that the procedure is also performed in the ASC setting with a payment 
rate of approximately $694 for CY 2011, but a multiple procedure 
discount typically applies, for a payment rate of approximately $347. 
The commenter requested that CMS use one of several suggested 
approaches to pay for the higher costs associated with the single use 
device. One approach the commenter mentioned was to establish a device 
pass-through category for the single use intraocular laser endoscope, 
while noting that it had filed an OPPS pass-through application, and 
that it expected a separate decision on the pass-through application. 
Another alternative suggested by the commenter was for CMS to use its 
equitable adjustment authority under section 1833(t)(2)(E) of the SSA, 
to adjust payment rates when necessary to ensure patients' treatment 
options are not inappropriately limited as a result of CMS policies. 
The third option the commenter listed was to temporarily assign the CPT 
code 66711 procedure to a different clinical APC or to a new technology 
APC, based on external data provided by the commenter, until Medicare 
claims data are available for ratesetting.
    Response: As stated above, CPT code 66711 is assigned to APC 0233 
for CY 2011, which has a CY 2011 final rule median cost of 
approximately $1,168. CPT code 66711 has a CY 2012 final median cost of 
approximately $1,430. The commenter stated that the CPT code 66711 
procedure will not change with use of the single use laser endoscope 
over the multi-use endoscope. We do not believe that it is necessary to 
invoke the equitable adjustment clause in this case. There are several 
clinical APCs for anterior segment eye procedures that are potential 
APCs for this type of service, and the particular APC assignment 
depends in part on the underlying claims data for the procedure. Upon 
further review of the various procedures in APC 0233 and APC 0234 
(Level IV Anterior Segment Eye Procedures), we believe that CPT code 
66711 is more clinically similar to the range of procedures in APC 0234 
than the procedures in APC 0233. Both APCs 0233 and 0234 consist of 
anterior segment eye procedures, but APC 0234 includes several 
intraocular procedures for the treatment of glaucoma, which also 
describes CPT code 66711. From a resource perspective, CPT code 66711 
fits in either APC 0233 or APC 0234, which have CY 2012 final median 
costs of approximately $1,164 and $1,631, respectively. Therefore, we 
are reassigning CPT code 66711 to APC 0234 for CY 2012.
    We agree with the commenter that we will decide on any device pass-
through application by means of our normal process for that payment 
mechanism.

[[Page 74250]]

6. Orthopedic and Musculoskeletal Services
a. Percutaneous Laminotomy/Laminectomy (APC 0208)
    We created new HCPCS code C9729 (Percutaneous laminotomy/
laminectomy (intralaminar approach) for decompression of neural 
elements, (with ligamentous resection, discectomy, facetectomy and/or 
foraminotomy, when performed) any method under indirect image guidance, 
with the use of an endoscope when performed, single or multiple levels, 
unilateral or bilateral; lumbar), and assigned it to APC 0208 
(Laminotomies and Laminectomies) effective April 1, 2011. AMA's CPT 
Editorial Panel thereafter created CPT code 0275T (Percutaneous 
laminotomy/laminectomy (intralaminar approach) for decompression of 
neural elements, (with or without ligamentous resection, discectomy, 
facetectomy and/or foraminotomy) any method under indirect image 
guidance (eg, fluoroscopic, CT), with or without the use of an 
endoscope, single or multiple levels, unilateral or bilateral; lumbar) 
effective July 1, 2011. We assigned CPT code 0275T to APC 0208 and 
deleted HCPCS code C9729 effective July 1, 2011. For CY 2011, APC 0208 
has a payment rate of $3,535.92. For CY 2012 we proposed to maintain 
assignment of percutaneous laminotomy/laminectomy (HCPCS code C9729 is 
used in the CY 2012 proposed rule, while CPT code 0275T is used in this 
CY 2012 final rule with comment period) to APC 0208, because we believe 
the service is similar clinically and with regard to resources to other 
APC 0208 procedures, APC 0208 had a CY 2012 proposed rule median cost 
of approximately $3,676, and has a final rule median cost of 
approximately $3,553
    Comment: One commenter believed it is appropriate to assign CPT 
code 0275T to APC 0208, in the case of ``unilateral'' percutaneous 
laminotomy/laminectomy, but not in the case of bilateral or multiple 
level procedures, which are, according to the commenter, more resource 
intensive. The commenter claimed that the phrase ``unilateral or 
bilateral'' in the CPT code 0275T descriptor suggests to providers that 
the code must be reported unmodified when the procedure is performed 
either unilaterally or bilaterally, which will preclude the use of 
modifier ``50'' when the bilateral approach is employed, even though 
additional physician and facilities resources are used. Additionally, 
the commenter believed that the CPT code 0275T descriptor's inclusion 
of ``single or multiple levels'' will preclude providers from reporting 
modifier ``51'' with CPT code 0275T, to reflect the additional 
resources consumed when the procedure is performed on multiple levels 
of the spine. Therefore, the commenter believed that the APC 0208 
payment rate is not adequate when CPT code 0275T is performed 
bilaterally or on multiple levels. The commenter recommended that, for 
CY 2012, CMS either allow the use of modifiers when CPT code 0275T is 
used, or that CMS create a HCPCS G-code that describes the service when 
performed bilaterally or on multiple levels. The commenter anticipated 
that the CPT Editorial Panel will take up the issue of bilateral or 
multiple levels in the CPT code 0275T code descriptor for CY 2013.
    Response: Concerning the request for availability of modifiers 50 
or 51, or modification to the descriptor for CPT code 0275T, we refer 
the commenter to the CPT Editorial Panel. CPT code 0275T is the 
property of the AMA, and CMS may not modify any CPT codes. We also will 
wait to see if the CPT Editorial Panel changes the descriptor for CY 
2013, and we will not create a HCPCS G-code for CY 2012.
    CPT code 0275T is a new code effective July 1, 2011 (as was its 
predecessor code, HCPCS code C9729, which was available for one 
quarter, beginning April 1, 2011), and as such we have no claims data 
at this time. For CY 2013, we should have partial CY 2011 data for both 
HCPCS code C9729 and CPT code 0275T, which we can use to reevaluate any 
APC assignment for percutaneous laminotomy/laminectomy for CY 2013. 
These claims data will include the hospital costs related to all of the 
various clinical options to perform this service, (that is, unilateral 
versus bilateral, and single versus multiple levels) to the extent they 
were performed. Based on those claims, we will reevaluate the APC 
placement of CPT code 0275T.
    After consideration of the public comments we received, we are 
finalizing our proposed assignment of CPT code 0275T to APC 0208 for CY 
2012, which is clinically similar to the procedures in APC 0208, and 
which has a median cost of approximately $3,553.
b. Level II Arthroscopy (APC 0042)
    The CY 2012 proposed rule median cost for APC 0042 (Level II 
Arthroscopy) was approximately $3,485, based on 5,676 single bill 
claims from the 28 procedures assigned to APC 0042. The CY 2011 final 
rule median is $3,301, based on 6,297 single bill claims from those 28 
arthroscopic procedures. Our CY 2012 final rule data consist of a 
median cost of approximately $3,996, based on 3,140 single bill claims 
based on 234 procedures.
    Comment: One commenter believed that the procedures currently 
assigned to APC 0042 have widely varying median costs, which range from 
approximately $88 to more than $10,000, according to the CY 2012 
proposed rule data. The commenter claimed that the APC currently 
violates the 2 times rule. The commenter recommended that CMS 
reconfigure APC 0042 and create two additional APCs in order to group 
procedures similar in clinical features and resources together. The 
commenter recommended that CMS place the following hip procedures in 
the reconfigured APC 0042: CPT codes 29861 (Arthroscopy, hip, surgical; 
with removal of loose body or foreign body), 29914 (Arthroscopy, hip, 
surgical; with femoroplasty (ie, treatment of cam lesion)), 29915 
(Arthroscopy, hip, surgical; with acetabuloplasty (ie, treatment of 
pincer lesion)), and 29916 (Arthroscopy, hip, surgical; with labral 
repair). The commenter also recommended that CMS separate the remaining 
CPT codes in APC 0042 into new APC 0043 (proposed descriptor ``Level 
III Upper Extremity Arthroscopy'') and APC 0044 (Level IV Lower 
Extremity Arthroscopy), with respective payment amounts based on the 
median costs of those service groupings.
    Response: We do not agree that the HCPCS codes comprising APC 0042 
have widely varying median costs or that there is a 2 times rule 
violation for services currently assigned to APC 0042, as claimed by 
the commenter. As we stated in the CY 2012 OPPS/ASC proposed rule (76 
FR 42231), 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 median cost of the highest cost item or 
service within an APC group is more than 2 times greater than the 
median of the lowest cost item or service within that same group. In 
making this determination, we consider only those HCPCS codes that are 
significant based on the number of claims. We note that, for purposes 
of identifying significant HCPCS codes for examination in the 2 times 
rule, we consider codes that have more than 1,000 single major claims 
or codes that have both greater than 99 single major claims and 
contribute at least 2 percent of the single major claims used to 
establish the APC median cost to be significant (75 FR

[[Page 74251]]

71832). Based on this rule, we have no 2 times rule violations in APC 
0042. Using our CY 2012 final rule claims data, the highest significant 
procedure in APC 0042 is CPT code 29827 (Arthroscopy, shoulder, 
surgical; with rotator cuff repair) with a final median cost of 
approximately $4,817, and the lowest significant procedure in the APC 
is CPT code 29823 (Arthroscopy, shoulder, surgical; debridement, 
extensive), with a final median cost of approximately $2,959, leading 
to a ratio of approximately 1.6, well below the 2.0 required for a 
violation. Furthermore, we do not agree with the commenter's 
recommendation to establish an arthroscopy APC with the four hip 
arthroscopy procedures, specifically, CPT codes 29861, 29914, 29915, 
and 29916, as a viable alternative, because all four of those CPT codes 
have no CY 2010 median costs. Therefore, there would be no basis for 
establishing an APC median cost and payment amount for those four 
procedures. We see no compelling reason to revise the current 
procedures of APC 0042 for CY 2012 because they are similar both 
clinically and in terms of resource utilization. We will keep the 
current HCPCS code configuration of APC 0042 for CY 2012, and will 
review the APC 0042 and component HCPCS code median costs again next 
year for clinical and resource similarity.
c. Closed Treatment Fracture of Finger, Toe, and Trunk (APCs 0129, 
0138, and 0139)
    In Addendum A (Proposed OPPS APCs for CY 2012) of the CY 2012 OPPS/
ASC proposed rule, we proposed to continue with the existing group 
titles for APCs 0129, 0138, and 0139 to read as follows:

 APC 0129 (Level I Closed Treatment Fracture Finger/Toe/Trunk)
 APC 0138 (Level II Closed Treatment Fracture Finger/Toe/Trunk)
 APC 0139 (Level III Closed Treatment Fracture Finger/Toe/
Trunk)

    We note that Addendum A did not appear in the printed version of 
the Federal Register as part of the CY 2012 OPPS/ASC proposed rule. 
Rather, it was published and made available only via the Internet on 
the CMS Web site at: http://www.cms.gov/.
    Comment: One commenter recommended that CMS remove the words 
``Finger/Toe/Trunk'' from the group titles for APCs 0129, 0138, and 
0139 because there is no need to make this distinction since there are 
no other APCs that describe closed treatment fractures.
    Response: We appreciate the commenter's suggestion, and we accept 
this recommendation. We agree that removing the words ``Finger/Toe/
Trunk'' from the group titles for APCs 0129, 0138, and 0139 more 
appropriately describe these APCs.
    After consideration of the public comment we received, we are 
revising the group titles for APCs 0129, 0138, and 0139 to ensure that 
the title describes all procedures assigned to these APCs. Table 25 
shows the final group titles for APCs 0129, 0138, and 0139 for CY 2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.040

d. Level I and II Strapping and Cast Application (APCs 0058 and 0426)
    In Addendum A (Proposed OPPS APCs for CY 2012) of the CY 2012 OPPS/
ASC proposed rule, we proposed to continue with the existing group 
titles for APCs 0058 and 0426 to read as follows:

 APC 0058 (Level I Strapping and Cast Application)
 APC 0426 (Level II Strapping and Cast Application)

    We note that Addendum A did not appear in the printed version of 
the Federal Register as part of the CY 2012 OPPS/ASC proposed rule. 
Rather, it was published and made available only via the Internet on 
the CMS Web site at: http://www.cms.gov/.
    Comment: One commenter stated there is only a single level APC for 
the strapping procedures; therefore, the designation ``Level I'' is not 
appropriate in the group title because there is no ``Level II.''
    Response: We disagree with the commenter. There is another level 
APC for the strapping procedures, specifically, APC 0426 which reads 
``Level II Strapping and Cast Application.'' Under the OPPS, APC 0426 
was made effective January 1, 2005. We remind hospitals that APCs with 
multiple levels are not always in sequential order and, as a result, 
may not always appear close to each other in Addendum B.
    After consideration of the public comment we received, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
title APC 0058 to read ``Level I Strapping and Cast Application'' and 
APC 0426 to read ``Level II Strapping and Cast Application.''
7. Radiology Services
a. Proton Beam Therapy (APC 0664 and 0667)
    For CY 2012, we proposed to continue to assign CPT codes 77520 
(Proton treatment delivery; simple, without compensation) and 77522 
(Proton treatment delivery; simple, with compensation) to APC 0664 
(Level I Proton Beam Radiation Therapy), which had a proposed payment 
rate of approximately $992. We also proposed to continue to assign CPT 
codes 77523 (Proton treatment delivery; intermediate) and 77525 (Proton 
treatment delivery; complex) to APC 0667 (Level II Proton Beam 
Radiation Therapy), which had a proposed payment rate of approximately 
$1,298.
    Comment: Some commenters appreciated the relative stability in the 
hospital outpatient proton therapy rates and supported the proposed 
payments for the proton beam treatment CPT codes.

[[Page 74252]]

    Other commenters indicated that they were pleased with CMS' 
proposal to exempt APC 0667 from the 2 times rule based on the list of 
APCs that appeared in Table 18 of the CY 2012 OPPS/ASC proposed rule, 
but expressed concern with the proposed decrease in payments for the 
proton beam therapy APCs.
    Response: In accordance with sectionS 1833(t)(2)(B) and 
1833(t)(9)(A) of the Act and Sec. Sec.  419.31 and 419.50 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 and clinical homogeneity. The payment rates, including the 
relative weights, set annually for these services are based on review 
of the claims data used for ratesetting. For the CY 2012 update, the 
payment rates for APCs 0664 and 0667 are based on data from claims 
submitted during CY 2010 according to the standard OPPS ratesetting 
methodology. Specifically, we used 12,263 single claims (out of 13,364 
total claims) from CY 2012 proposed rule claims data (and we used 
13,437 single claims (out of 14,519 total claims) from CY 2012 final 
rule claims data) to calculate the median cost upon which the CY 2012 
payment rate for APC 0664 is based. In addition, we used 3,379 single 
claims (out of 3,879 total claims) from CY 2012 proposed rule claims 
data (and we used 3,638 single claims (out of 4,145 total claims) from 
CY 2012 final rule claims data) to calculate the median cost for APC 
0667.
    For CY 2012, we are setting the final payment rate for proton beam 
therapy based on median costs of approximately $1,184 for APC 0664 and 
approximately $1,549 for APC 0667. We note that these median costs are 
higher than the median costs upon which the CY 2012 proposed payment 
rates for these APCs were based ($1,028.10 and $1,344.90, respectively) 
and higher than the median costs upon which the final CY 2011 payment 
rates were based ($1,020.72 and $1,335.24, respectively). As we have in 
the past (75 FR 71916), we note that our cost-finding methodology is 
based on reducing each hospital's charge for its services to an 
estimated cost by applying the most discrete hospital-specific CCR 
available for the hospital that submitted the claim. Therefore, it is 
the hospitals' claims and cost reports that determine the estimated 
costs that are used to calculate the median cost for each service and, 
when aggregated into APC groups, the hospital data are used to 
calculate the median cost for the APC on which the APC payment rate is 
based.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposal, without modification, to pay for 
proton beam therapy through APCs 0664 and 0667, with payment rates 
based upon the most current claims and cost report data for these 
services. Specifically, we will continue to assign CPT codes 77520 and 
77522 to APC 0664, with a final CY 2012 APC median cost of 
approximately $1,184, and CPT codes 77523 and 77525 to APC 0667, with a 
final CY 2012 APC median cost of approximately $1,549 because we 
continue to believe these placements are appropriate in light of the 
resource cost and clinical intensity of the services describe by these 
CPT codes.
b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 
0065, 0066, 0067, and 0127)
    For CY 2012, we proposed to continue to assign CPT code 77371 
(Radiation treatment delivery, stereotactic radiosurgery (SRS), 
complete course of treatment of cranial lesion(s) consisting of 1 
session; multi-source Cobalt 60 based) to APC 0127 (Level IV 
Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment 
rate of approximately $7,368. We also proposed to continue to recognize 
four existing HCPCS G-codes that describe linear accelerator-based SRS 
treatment delivery services for separate payment in CY 2012. 
Specifically, we proposed the following: to assign HCPCS code G0173 
(Linear accelerator based stereotactic radiosurgery, complete course of 
therapy in one session) and HCPCS code G0339 (Image-guided robotic 
linear accelerator-based stereotactic radiosurgery, complete course of 
therapy in one session or first session of fractionated treatment) to 
APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and MEG), with a 
proposed payment rate of approximately $3,251; to assign HCPCS code 
G0251 (Linear accelerator-based stereotactic radiosurgery, delivery 
including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, maximum five sessions per course 
of treatment) to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, 
and MEG), with a proposed payment rate of approximately $864; and to 
assign HCPCS code G0340 (Image-guided robotic linear accelerator-based 
stereotactic radiosurgery, delivery including collimator changes and 
custom plugging, fractionated treatment, all lesions, per session, 
second through fifth sessions, maximum five sessions per course of 
treatment) to APC 0066 (Level II Stereotactic Radiosurgery, MRgFUS, and 
MEG), with a proposed payment rate of approximately $2,447. Further, we 
proposed to continue to assign SRS CPT codes 77372 (Radiation treatment 
delivery, stereotactic radiosurgery (SRS) (complete course of treatment 
of cerebral lesion(s) consisting of 1 session); linear accelerator 
based) and 77373 (Stereotactic body radiation therapy, treatment 
delivery, per fraction to 1 or more lesions, including image guidance, 
entire course not to exceed 5 fractions) status indicator ``B'' (Codes 
that are not recognized by OPPS when submitted on an outpatient 
hospital Part B bill type (12x and 13x)) under the OPPS, to indicate 
that these CPT codes are not payable under the OPPS.
    Comment: One commenter requested that CMS continue to recognize 
HCPCS codes G0173, G0251, G0339, and G0340 for CY 2012 as proposed and 
supported the proposed assignment of status indicator ``B'' to CPT 
codes 77372 and 77373. The commenter also recommended that CMS revise 
the code descriptors for HCPCS code G0173, G0251, G0339, and G0340 to 
distinguish between robotic and nonrobotic gantry-based SRS systems. 
Based on analysis of claims data for HCPCS codes G0339 and G0340, the 
commenter found that 41 and 42 percent of the claims submitted for 
HCPCS codes G0339 and G0340, respectively, during CY 2010 were paid to 
hospitals without image-guided robotic SRS systems. The commenter 
suggested specific code descriptor changes for the four HCPCS G-codes 
to ensure submission of correctly coded claims. Alternatively, the 
commenter requested that CMS provide guidance on the reporting of the 
existing SRS HCPCS G-codes if no change is made to the HCPCS code 
descriptors.
    Response: As we have stated in the past (75 FR 71915), these HCPCS 
G-codes for SRS have been in effect for several years and, based on 
questions brought to our attention by hospitals, we have no reason to 
believe that hospitals are confused about the reporting of these codes. 
Moreover, based on our analysis of the hospital outpatient claims data 
that we use for ratesetting, we see resource differences reflected in 
the median costs of the four HCPCS G-codes that are reasonably 
consistent with our expectations for different median costs for the 
services based on the current code descriptors. We continue to believe 
it would be confusing to hospitals if we were to revise the code 
descriptors for HCPCS codes G0173, G0251, G0339, and G0340 at this 
point in time and could lead to instability in our median costs and 
inaccurate payments for some services. Therefore, we believe that 
modifying the

[[Page 74253]]

HCPCS G-code descriptors is not necessary for us to continue to provide 
appropriate payment for the services they describe. Further, we have 
provided instruction on the reporting of these SRS codes in Chapter 4, 
Section 200.3 of the Medicare Claims Processing Manual of the Internet-
Only Manual.
    After consideration of the public comment we received, we are 
finalizing our CY 2012 proposals, without modification, to maintain the 
existing CY 2011 APC assignments for the SRS HCPCS codes for CY 2012. 
Specifically, we are continuing to assign HCPCS G-codes G0173 and G0339 
to APC 0067, which has a final CY 2012 APC median cost of approximately 
$3,374; HCPCS G-code G0251 to APC 0065, which has a final CY 2012 APC 
median cost of approximately $903; HCPCS G-code G0340 to APC 0066, 
which has a final CY 2012 APC median cost of approximately $2,521; and 
CPT code 77371 to APC 0127, which has a final CY 2012 APC median cost 
of approximately $7,461 because we continue to believe these placements 
are appropriate in light of the resource cost and clinical intensity of 
the services describe by these CPT codes. In addition, we are 
finalizing our proposals, without modification, to continue to assign 
CPT codes 77372 and 77373 to status indicator ``B'' under the OPPS.
c. Adrenal Imaging (APC 0408)
    For CY 2012, we proposed to reassign CPT code 78075 (Adrenal 
imaging, cortex and/or medulla) from APC 0408 (Level III Tumor/
Infection Imaging), which had a proposed payment rate of approximately 
$953, to APC 0414 (Level II Tumor/Infection Imaging), which had a 
proposed payment rate of approximately $485.
    Comment: Commenters questioned CMS' rationale for the proposal to 
reassign CPT code 78075 from APC 0408 to APC 0414, citing a lack of 
clinical reasoning to justify its movement as well as CPT code 78075's 
cost similarity to a clinically similar procedure assigned to APC 0408. 
Commenters requested that CMS reevaluate the reassignment of CPT code 
78075 and consider maintaining its placement in APC 0408. Commenters 
further recommended that CMS provide rationale in all proposed rules 
when any CPT code placement change is proposed.
    Response: After revisiting this issue and analyzing the final CY 
2012 median cost for CPT code 78075, we agree with commenters' 
assertion that CPT code 78075 should remain in APC 0408 and, therefore, 
we will continue to assign CPT code 78075 to APC 0408 for CY 2012 based 
on its final median cost of approximately $997 (calculated using 99 
single claims out of 127 total claims), which is similar to the APC 
median cost of APC 0408 of approximately $958. . We note that the 
proposed rule does not include service-specific discussions for each 
separately paid HCPCS code reassignment or for each APC. Rather, we 
discuss the general methodology used to calculate the median costs upon 
which the proposed payment rates are based (76 FR 42183 through 42190) 
and the principles applied in determining APC configurations (76 FR 
42230 through 42232). We discuss specific APCs or services in the 
proposed rule only when we have a specific reason to do so, such as 
when we apply a nonstandard ratesetting methodology to calculate a 
proposed payment rate for a particular item or service. In most cases, 
a proposed reduction of a median cost for an APC or for a HCPCS code 
that is calculated from actual charges and cost data will not result in 
a service specific discussion in the propose rule. The number of APCs 
and the volume of HCPCS codes for which median costs are calculated 
prohibit a detailed explanation of each in the proposed rule.
    After consideration of the public comments we received, we are 
modifying our CY 2012 proposal to reassign CPT code 78075 to APC 0414 
and will instead continue to assign it to APC 0408, with a final CY 
2012 APC median cost of approximately $958.
d. Positron Emission Tomography (PET) Imaging (APC 0308) (Created From 
Myocardial Positron Emission Tomography (PET) Imaging (APC 0307) and 
Non-Myocardial Positron Emission Tomography (PET) Imaging (APC 0308))
    For CY 2012, we proposed to continue to assign CPT codes 78459 
(Myocardial imaging, positron emission tomography (PET), metabolic 
evaluation), 78491 (Myocardial imaging, positron emission tomography 
(PET), perfusion; single study at rest or stress), and 78492 
(Myocardial imaging, positron emission tomography (PET), perfusion; 
multiple studies at rest and/or stress) to APC 0307 (Myocardial 
Position Emission Tomography (PET) Imaging), for which we proposed a 
national unadjusted payment rate of approximately $921. The CY 2011 
national unadjusted payment rate is approximately $1,107.
    For CY 2012, we proposed to continue to assign CPT codes 78608 
(Brain imaging, positron emission tomography (PET); metabolic 
evaluation), 78811 (Tumor imaging, positron emission tomography (PET) 
imaging; limited area (eg, chest, head/neck)), 78812 (Tumor imaging, 
positron emission tomography (PET) imaging; skull base to mid-thigh), 
78813 (Tumor imaging, positron emission tomography (PET) imaging; whole 
body), 78814 (Tumor imaging, positron emission tomography (PET) with 
concurrently acquired computed tomography (CT) for attenuation 
correction and anatomical localization imaging; limited area (eg, 
chest, head/neck)), 78815 (Tumor imaging, positron emission tomography 
(PET) with concurrently acquired computed tomography (CT) for 
attenuation correction and anatomical localization imaging; skull base 
to mid-thigh), and 78816 (Tumor imaging, positron emission tomography 
(PET) with concurrently acquired computed tomography (CT) for 
attenuation correction and anatomical localization imaging; whole body) 
to APC 0308 (Non-Myocardial Positron Emission Tomography (PET) 
imaging), for which we proposed a national unadjusted payment rate of 
$1,015. The CY 2011 national unadjusted payment rate for APC 0308 is 
approximately $1,042.
    Comment: Commenters objected to the proposed decrease in the 
payment rate for APC 0307. Commenters were concerned with the 
volatility of the payment rates from one year to the next and the 
proposed reduction in the payment rate for CY 2012, particularly in 
view of the reduction in the payment rate from CY 2010 to CY 2011. The 
commenters urged CMS to validate the costs estimated from the CY 2010 
hospital claims and cost report data for the limited number of 
hospitals reporting CPT codes 78459, 78491, and 78492 to determine the 
reason for the proposed change in payment. Several commenters asked 
that CMS limit to 5 to 10 percent the amount of decrease in the payment 
rate for CY 2012 compared to CY 2011 because they believed that the 
reduction CMS proposed for myocardial PET for CY 2012 would jeopardize 
access to the service. One commenter asked that CMS combine APC 0307 
and APC 0308 into one single PET imaging APC because the commenter 
believed that myocardial PET and non-myocardial PET are clinically 
similar and have similar resource requirements. The commenter also 
believe that merging the APCs would result in more appropriate payment 
for myocardial PET services and would increase the stability of payment 
for myocardial PET services.
    Several commenters indicated that they believed that aberrant CCRs 
for a few hospitals that furnish myocardial PET services are affecting 
the median cost for APC 0307 and that the

[[Page 74254]]

methodology must be flawed to permit this to occur. Commenters stated 
that their analyses of the claims data showed that 4 of the top 25 
hospitals contribute 34 percent of all single bills used in ratesetting 
for CPT code 78492 and that these hospitals have substantially lower 
calculated costs as compared to their peer institutions. The commenters 
believed that the CCRs of these institutions are aberrantly low and 
have skewed the data and lowered the overall median cost for APC 0307 
due to the significant percentage of single bills attributable to them. 
The commenter recommended that CMS delete claims from hospitals with a 
CCR lower than 0.15 or 0.20 from ratesetting for APC 0307 to remove the 
effect of these hospitals on the APC 0307 median cost. In contrast, 
another commenter asked that CMS ensure that claims from every hospital 
that furnished a service assigned to APC 0307 are included in the 
calculation of the median for APC 0307.
    One commenter stated that the median cost for myocardial PET 
services is decreasing because they are performed at a relatively small 
number of hospitals and because hospitals do not always align the costs 
and charges for the service properly in their accounts and, therefore, 
the CCRs that result from the cost reports understate the cost of the 
services. Commenters also stated that they were concerned that 
hospitals had not charged appropriately for the services and the 
radiopharmaceutical that is needed to furnish the service. Some 
commenters objected to the absence of a strict definition of what costs 
should be included in each cost center because this results in a wide 
variance in the calculation of costs. One commenter stated that the 
absence of CMS guidance to hospitals with regard to how to charge for 
services results in the potential for hospitals to set charges at 4 to 
5 times the cost for established procedures but to establish charges at 
1.5 times the cost for new, more expensive procedures. One commenter 
urged CMS to remind hospitals to accurately report all myocardial PET 
costs on their Medicare cost reports to improve the accuracy of the 
CCRs in the futures, while another commenter suggested that CMS 
establish a new cost center or CCRs for PET to moderate the 
fluctuations in the median cost calculation for PET services.
    Response: We agree that myocardial PET and non-myocardial PET have 
similar clinical characteristics and, currently, appear to have 
somewhat similar resource requirements. Therefore, for CY 2012, we are 
deleting the myocardial PET APC (APC 0307) and are reassigning CPT 
codes 78459, 78491, and 78492 to APC 0308, which we have renamed 
``Positron Emission Tomography (PET) Imaging.'' The CY 2012 final rule 
median cost for newly reconfigured APC 0308 is approximately $1,038.
    We were influenced in this decision by a significant unexpected and 
unusual decrease in the median cost for CPT code 78492 between the 
proposed rule data and the final rule data for the CY 2012 OPPS. CPT 
code 78492 comprises approximately 98 percent of the volume of the 3 
myocardial PET services that were assigned to APC 0307 and therefore 
largely would control the median cost for APC 0307 if it had been 
retained for CY 2012 OPPS. The proposed rule median cost for CPT code 
78492 was approximately $954, but the final rule median cost for CPT 
code 78492 is approximately $778, a decrease of approximately 18 
percent from the proposed rule median cost and a decrease of 
approximately 29 percent from the CY 2011 OPPS median cost of 
approximately $1,096. APC 0307 had a median cost of approximately 
$1,096 for CY 2011, a median cost of approximately $954 for the CY 2012 
proposed rule, and had we not deleted it for this final rule, APC 0307 
would have had a median cost of approximately $809, a 15-percent 
decrease from the median cost on which the CY 2012 proposed payment 
rate was based.
    We examined the claims and cost report data for the single 
procedure claims for CPT code 78492 to determine why it declined 
substantially from the CY 2011 OPPS final rule data and the CY 2012 
proposed rule and yet further between the CY 2012 proposed rule and the 
CY 2012 final rule data. We believe that there are multiple reasons 
that the median cost for APC 0307 declined from CY 2011 to CY 2012. 
Specifically, we looked at the following elements for CPT code 78492 
across the three data sets: Line item CCRs; line item charges; line 
item costs; packaged costs; number of hospitals billing the service; 
and number of single bills. Our findings are contained in Table 26 
below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.041

    We note three significant observations from these data for CPT code 
78492, which is the myocardial PET imaging service that represents 98 
percent of the volume of APC 0307. First, the median line item CCR for 
CPT code 78492

[[Page 74255]]

decreased 21 percent from the CY 2011 final rule claims data to the CY 
2012 proposed rule claims data, although the median charge increased 
only 5 percent over the same time between the two data sets. Similarly, 
the median line item CCR for CPT code 78492 decreased 5.8 percent from 
the CY 2012 proposed rule data to the CY 2012 final rule data, although 
the line item charge remained the same in both data sets. Therefore, 
the median line item CCR for CPT code 78492 decreased 25.5 percent from 
the CT 2011 final rule data to the CY 2012 final rule data although the 
median line item charge increased only 5 percent over the same period, 
thus resulting in a significant decrease in the CY 2012 final rule line 
item median cost compared to both the CY 2011 line item median cost and 
the CY 2012 line item median cost. Secondly the estimated median cost 
of the packaged radiopharmaceutical and other supplies necessary to 
furnish the service decreased in each data set. Specifically, the 
estimated median packaged cost decreased by 16.2 percent from the CY 
2011 final rule data to the CY 2012 proposed rule data and by 16.6 
percent from the CY 2012 proposed rule data to the CY 2012 final rule 
data, or a decrease of 30.1 percent from the CY 2012 final rule data to 
the CY 2012 final rule data. Third, we observed that the number of 
hospitals that furnished the service increased in a significant 
proportion and that the volume of services furnished increased by 25 
percent from CY 2009 (CY 2011 final rule data) to CY 2010 (CY 2012 
proposed and final rule data sets) and by an additional 6.7 percent 
from the CY 2012 proposed rule data set to the CY 2012 final rule data 
set, or a total increase from CY 2009 to CY 2010 of 33.3 percent.
    We are particularly concerned with the volatility that is displayed 
in the data, particularly from the CY 2012 proposed rule data to the CY 
2012 final rule data. In particular, there seems to be a transition in 
CCRs underway that should stabilize itself once the number of hospitals 
that furnish the service is stable and once the volume of services 
being furnished each year is stable. We believe that the CCR changes 
are increasing the instability in the median costs for CY 2012 and that 
combining the two APCs is a reasonable response for the CY 2012 final 
rule, particularly because both former APC 0307 and APC 0308 are for 
PET imaging services and because it is reasonable to expect that the 
costs would be similar. However, we will reevaluate the relative 
resource utilization of the services after the cost center transitions 
are complete. In general, large volumes of services enhance stability 
of median costs, and we believe that by reassigning CPT codes 78459, 
78491 and 78492 to APC 0308, we can lessen the volatility of payment 
changes for these services for CY 2012. There are many legitimate 
reasons why costs for these services may go down (for example, 
hospitals are becoming more efficient as they provide greater volumes 
of these services without incurring additional substantial costs for 
equipment and staff, the radiopharmaceuticals used to provide these 
services are furnished by use of a generator that produces a dose 
periodically for 28 days and, therefore, additional doses are no more 
costly during the life of the generator, among others). If we determine 
that the per unit costs for providing myocardial PET have genuinely 
decreased over time and stabilized, we believe that it is appropriate 
that our payment rates would reflect these diminishing costs.
    With regard to the comments that we should exclude claims from 
hospitals with CCRs less than 0.15 or 0.20, we note that we applied our 
standard policy regarding calculation of CCRs to the calculation of the 
median cost of myocardial PET services for the proposed and final rule 
data for the CY 2012 OPPS. Specifically, as we discuss in detail in the 
claims accounting description that accompanies this final rule with 
comment period, we excluded claims from hospitals whose CCRs were 
flagged as invalid. These included claims for hospitals without a CCR, 
for hospitals paid an all inclusive rate, for CAHs, for hospitals with 
obviously erroneous CCRs (greater than 90 or less than .0001), and for 
hospitals with CCRs that were identified as outliers (3 standard 
deviations from the geometric mean after removing error CCRs). This 
longstanding practice has resulted in enhancing the number of claims we 
use for ratesetting, while eliminating claims that cannot be reduced to 
cost or for which hospital CCRs are clearly erroneous. In the case of 
myocardial PET services, the commenter indicated that the claims that 
the commenter requested be deleted from the set of claims used for 
ratesetting comprise 34 percent of the set of single bills and were 
submitted by hospitals with CCRs lower than 0.15. Assuming that the 
commenter's statement is correct, we believe that to remove 34 percent 
of the claims (more than 1 in every 3 single bills) from hospitals 
because their CCRs are lower than 0.15 would result in a skewed set of 
single bills and that the resulting median cost would not be an 
accurate representation of the relative cost of the service furnished 
by the full population of providers that furnish the service. These 
claims would be retained in the dataset used to set median costs under 
our standard process because they would not be affected by the standard 
claim trims. We refer readers to section II.A.2.c. of this final rule 
with comment period for discussion of our policy with regard to 
trimming of claim records before median cost calculation. The OPPS is a 
system of averages in which the measure of central tendency is used as 
the basis for the payment for a service, and to delete 34 percent of 
the data points would necessarily result in a median cost that would be 
a less accurate, if perhaps higher, reflection of the cost of the 
service. We believe that the low CCRs that are of concern to the 
commenter may be only one element in the transition in the data for 
these codes. For CY 2012, we believe that deleting APC 0307 and 
reassigning CPT codes 78459, 78491, and 78492 to APC 0308 is a more 
reasonable response than deleting 34 percent of the single bills for 
the procedures. Similarly, we do not believe that it is necessary to 
create a service-specific cost center for the purpose of calculating a 
PET-specific CCR because correct and consistent reporting of the costs 
of PET services on the Medicare hospital cost report and accurate 
crosswalking of the charges for PET to the cost center in which the 
costs are housed will result in appropriate estimates of the cost of 
PET services when the CCR for the cost center is applied to the charges 
for the services.
    With regard to what the commenter viewed as the absence of CMS 
guidance regarding what cost centers should be used to record the costs 
of services and how hospitals should charge for services, we note that 
CMS provides extensive instructions on how cost reports should be 
completed in the Provider Reimbursement Manual. However, hospitals 
charges are a reflection of the monetary value that the hospital 
establishes for service it is furnishing and the only CMS restriction 
on hospital charges is that charges must be reasonably related to cost 
and that the same amount must be charged to all payers for the same 
service (we refer readers to the definition of ``charges'' for cost 
reporting purposes in 42 CFR 413.53(b)). We recognize that some 
hospitals may charge at different markups over cost for similar 
services. However, as long as the cost report is correctly completed 
and the charges are mapped to the cost center in which the costs for 
the service are recorded, the CCRs should represent a valid reflection

[[Page 74256]]

of the relationship between the costs and the charges in the aggregate 
for services for which the cost is reported in that cost center. The 
OPPS, like all other prospective payment systems, assumes that 
hospitals complete the cost report properly, including mapping the 
charges for a service to the cost center in which the costs for that 
service are captured. Therefore, when the appropriate CCR is applied to 
the charge for a service for which the costs are housed in the cost 
center from which the CCR is calculated, the result should be a 
reasonable estimate of the cost of the service.
    With regard to the comment that we should limit the decline in 
payment for APC 0307 in CY 2012 to 5 to 10 percent compared to the 
payment for these services in CY 2011, we do not believe that it is 
appropriate to limit the decrease in payment in such an arbitrary 
manner for CY 2012. Moreover, for the reasons we discuss above, we have 
deleted APC 0307 for CY 2012. Accordingly, we also believe that there 
will be no adverse impact on access to care as a result of deleting APC 
0307 and reassigning CPT codes 78459, 78491 and 78492 to APC 0308.
    Comment: One commenter asked CMS to explain why it proposed to pay 
more for the non-myocardial PET APC (APC 0308) than for the myocardial 
PET APC (APC 0307).
    Response: We proposed to pay more for non-myocardial PET (APC 0308) 
than for myocardial PET (APC 0307) because the proposed rule median 
cost we calculated for APC 0308 of approximately $1,051 was higher than 
the proposed rule median cost we calculated for APC 0307 of 
approximately $954. We calculated both median costs using our 
longstanding standard cost estimation methodology which applied each 
hospital's most current, hospital-specific and departmental-specific 
CCR to that hospital's charge for services furnished in CY 2010. 
However, we are deleting APC 0307 for CY 2012 and, therefore, all PET 
imaging services will be paid at the same payment rate for CY 2012, 
based on the APC 0308 median cost of approximately $1,038.
    Comment: Commenters noted that the median cost for single 
myocardial PET scans, represented by CPT code 78491, has been higher 
than the median cost for multiple scans, represented by CPT code 78492 
in CYs 2007, 2009 and 2010. The commenters believed that this is 
evidence indicating that the data on which CMS is basing the payment 
rate are flawed. One commenter also stated that the CY 2012 proposed 
payment rate for APC 0307 is below the mean cost for each of the codes 
assigned to APC 0307 (CPT codes 78459, 78491, and 78492) and is also 
below the median cost for three of the codes in APC 0307 that comprise 
10,929 of the 11,060 total claims for the APC.
    Response: We do not believe that the presence of a median cost for 
multiple scans that is greater than the median cost for a single scan 
indicates that the data are flawed. There are many reasons that the 
median cost for a single scan could be higher than the median cost for 
multiple scans, including different charging practices and cost 
structures across hospitals and different hospital utilization of 
single versus multiple scans. Our standard ratesetting methodology 
converts the hospital's charge to cost by application of the most 
specific departmental or overall hospital-specific CCR and after 
trimming claims for which the cost exceeds +/-3 standard deviations 
from the geometric mean, and calculates the 50th percentile, that is, 
the median cost, the array of costs. Variation in hospital patterns of 
utilization combined with differential hospital charging practices can 
result in valid relative costs, as we define them for the OPPS, in 
which the median cost for single scans exceeds the median cost for 
multiple scans.
    With respect to the commenter's observation that the proposed rule 
mean cost for APC 0307 as it was proposed is higher than its proposed 
rule median cost, we note that it is very common for the mean cost to 
be higher than the median cost for services that are paid under the 
OPPS because there is frequently a wide range between the minimum cost 
and the maximum cost. For example, for CPT code 78492, the CY 2012 
proposed rule minimum cost on a single bill was approximately $175 and 
the maximum cost was approximately $7,828, although the median cost was 
approximately $954 and the mean cost was approximately $1,186. 
Therefore, it is clear that the cost of most of the single bills were 
closer to $175 than they were to $7,827, but when all of the single 
bill costs were averaged, the mean cost (approximately $1,186) was 
greater than the median cost (approximately $954). We do not understand 
what is meant by the commenter's additional statement that the CY 2012 
proposed rule median cost for APC 0307 ``is also below the median cost 
for three of the codes in APC 0307 that comprise 10,929 of the 11,060 
total claims for the APC'' because there were only three codes in APC 
0307. CPT codes 78459, 78491, and 78492 were the only CPT codes 
assigned to now deleted APC 0307. We note that it is not surprising 
that the median cost for APC 0307 in the CY 2012 proposed rule data was 
equal to the median cost for CPT code 78492 because CPT code 78492 
contained 98 percent of the single bills in APC 0307 (deleted for CY 
2012) and, therefore, CPT code 78492 would be likely to control the 
median cost in the array of single procedure bills.
    Comment: One commenter objected to the absence of a CMS 
presentation and explanation of the change in median cost for APC 0307 
at either the winter or summer APC Panel meetings in 2011 and to the 
limited amount of information furnished in the proposed rule.
    Response: We do not discuss all services paid under the OPPS at the 
APC Panel meetings. The APC Panel meetings offer the opportunity for 
any member of the public to make presentations on any issue of interest 
that is within scope of the Panel's charter and for CMS to seek Panel 
comment and advice on issues for which CMS believes such comment and 
advice would be useful. The winter APC Panel meeting generally reviews 
concerns of the public with regard to the final rule for that year and 
provides an opportunity for the public and CMS to seek the Panel's 
comment and advice on issues for the forthcoming year's OPPS. The 
summer APC Panel meeting occurs during the comment period of the 
proposed rule and is generally limited to hearing the views of the 
public on the proposed rule for the upcoming year. No member of the 
public asked to make a presentation on the payment rate for APC 0307 at 
either the Panel's winter or the summer meetings in 2011. Moreover, we 
had no clinical or resource-related question related to APC 0307 for 
which we believed that APC Panel input would be useful. Therefore, like 
many other topics applicable to the CY 2012 OPPS, there was no 
discussion of the proposed payment for APC 0307 for CY 2012.
    We also note that the proposed rule does not include service-
specific discussions of the calculation of median cost for each 
separately paid HCPCS code or for each APC. Rather, we discuss the 
general methodology used to calculate the median costs on which the 
proposed payment rates are based and the principles applied in 
determining APC configurations. We discuss specific APCs or services in 
the proposed rule only when we have a specific reason to do so, such as 
when we apply a nonstandard ratesetting methodology to calculate a 
proposed payment rate for a particular item or service. In most cases, 
a proposed reduction of a median cost for an APC or for a HCPCS code 
that is calculated from actual charges and cost

[[Page 74257]]

data does not result in a service-specific discussion in the proposed 
rule. The number of APCs and the volume of HCPCS codes for which median 
costs are calculated prohibit a detailed explanation of each change in 
a median cost in the proposed rule because annual changes to hospital 
charges and costs generally result in changes to median costs for each 
HCPCS code and, therefore, for each APC each year.
    Comment: Commenters objected to the proposed decrease in the 
payment rate for non-myocardial PET imaging services assigned to APC 
0308.
    Response: For CY 2012, the payment rate for APC 0308 is based on 
data from claims submitted during CY 2010 according to the standard 
OPPS ratesetting methodology after the reassignment of CPT codes 78459, 
78491, and 78492 to APC 0308 for the reasons we discuss above. 
Specifically, we used 249,026 single procedure bills (out of 289,786 
total claims) from CY 2012 final rule claims data to calculate the 
final median cost upon which the CY 2012 payment rate for APC 0308 is 
based. For CY 2012, we are setting the final payment rate for all PET 
imaging services (including CPT codes 78459, 78491 and 78492 that were 
in APC 0307 for CY 2011) based on final rule median costs of 
approximately $1,038 for APC 0308. This median cost results in a modest 
decline in the final CY 2012 median cost for PET imaging services 
compared to the CY 2011 median cost for non-myocardial PET imaging 
services. We note that our cost-finding methodology is based on 
converting each hospital's charge for its services to an estimated cost 
by applying the most discrete hospital-specific CCR available for the 
hospital that submitted the claim. Therefore, it is each hospital's 
claims and cost reports that determine the estimated costs that are 
used to calculate the median cost for each service and, when aggregated 
into APC groups, the hospital data are used to calculate the median 
cost for the APC on which the APC payment rate is based.
    In summary, based on our review of the claims and cost report data 
and our assessment of the similarity of the services in APCs 0307 and 
0308, we have reassigned CPT codes 78459, 78491, and 78492 to APC 0308, 
for which we have calculated a median cost of approximately $1,038 for 
CY 2012. We have revised the description of APC 0308 to be ``Positron 
Emission Tomography (PET) Imaging,'' so that it will describe both non-
myocardial PET and myocardial PET services, and we have deleted APC 
0307 for CY 2012 for the reasons we discuss previously in this section. 
We have made no other reassignments to APC 0308 nor have we removed 
codes that are assigned to APC 0308 for CY 2011 from APC 0308 for CY 
2012.
    We will reassess whether it continues to be appropriate to assign 
both the non-myocardial PET and the myocardial PET services to the same 
APC for CY 2013 based on the CY 2013 OPPS cost data. We would propose 
to make any reassignments that we may believe to be necessary through 
the standard annual notice-and-comment rulemaking process.
e. Device Construction for Intensity Modulated Radiation Therapy (IMRT) 
(APC 0305)
    CPT code 77338 (Multi-leaf collimator (MLC) device(s) for intensity 
modulated radiation therapy (IMRT), design and construction per IMRT 
plan) was new for CY 2010. The service was previously reported using 
multiple units of CPT code 77334 (Treatment devices, design and 
construction; complex (irregular blocks, special shields, compensators, 
wedges, molds or casts)). For CY 2012, the first year of claims data 
for CPT code 77338, we proposed to assign CPT code 77338 to APC 0305 
(Level II Therapeutic Radiation Treatment Preparation), with a proposed 
median cost of approximately $266 because we calculated a proposed rule 
median cost for CPT code 77338 of approximately $186 based on a single 
bill frequency of 32,547 (out of a total bill frequency of 41,663) in 
the CY 2010 claims data that we used to establish the proposed payment 
rates for the CY 2012 OPPS.
    For CY 2011, we had assigned CPT code 77338 to APC 0310 (Level III 
Therapeutic Radiation Treatment Preparation) based on a simulated 
median cost of approximately $792 that we calculated using CY 2009 
claims data for CPT code 77334, the predecessor code to CPT code 77338. 
Using CY 2009 claims data, we estimated that hospitals would furnish 4 
units of CPT code 77334 per IMRT treatment plan and that the estimated 
CY 2009 cost per unit for CPT code 77334 was $198, thus resulting in an 
estimated cost per IMRT plan of $792. Based on this simulated median 
cost for CPT code 77338, we assigned the code to APC 0310 which had a 
CY 2011 median cost of approximately $917. We stated that, for the CY 
2012 OPPS, we planned to use our standard cost estimation process using 
the CY 2010 claims data and the most recent cost report data to 
establish a median cost for CPT code 77338, and that, based on that 
data, we would assess whether placement of CPT code 77338 in APC 0310 
would remain appropriate for the CY 2012 OPPS (75 FR 71916).
    Using the claims data from CY 2010, upon which we proposed to base 
the CY 2012 OPPS payment rates, we proposed to move CPT code 77338 from 
APC 0310 to APC 0305 for CY 2012 because its presence in APC 0310 would 
have created a 2 times rule violation. We refer readers to section 
III.B. of this final rule with comment period for discussion of the 2 
times rule. Specifically, the proposed rule median cost for APC 0310 of 
approximately $953 was more than twice the median cost of approximately 
$186 that we calculated for CPT code 77338, and the single bill 
frequency for CPT code 77338 of 32,547 caused it to meet the criteria 
as a significant procedure in APC 0310. To resolve the 2 times rule 
violation, we proposed to move CPT code 77338 to APC 0305 for CY 2012 
OPPS.
    Comment: Commenters objected to our proposal to move CPT code 77338 
from APC 0310 to APC 0305. They believed that even if assigned to APC 
0310, the code is being underpaid because the predecessor code CPT code 
77334 would have been charged 3 to 9 units for the initial IMRT 
treatment and that additional units would be charged 3 to 9 units for 
the successive IMRT treatments. Therefore, the commenters stated that 
if CPT code 77334 had not been replaced by CPT code 77338, they would 
have charged and been paid approximately $4,625 for 18 total units of 
CPT code 77334. Commenters stated that it is illogical that the 
proposed rule median cost of $213 for CPT code 77334, which is for one 
device, would be greater than the median cost of $186 for CPT code 
77338, which is for all devices in an IMRT plan of treatment. One 
commenter stated that its analysis revealed there is huge variability 
in hospital charges for CPT code 77338, specifically, that 25 percent 
of hospitals charge less than $500 and 8.5 percent of hospitals charge 
more than $5,000 for one unit of CPT code 77338. This commenter noted 
that this variability is carried through the CMS cost data, with CMS 
finding costs of less than $100 for 17.5 percent of hospitals and costs 
of more than $1,000 for 10 percent of hospitals. Another commenter 
indicated that its analysis of the proposed rule claims data indicated 
that only 13 percent of hospitals submitted claims in line with CMS 
expectations of the charges for CPT code 77338. Many commenters stated 
that it is clear that hospitals require guidance with regard to billing 
for this service before improved data should be used to establish 
payment rates. Commenters asked that CMS reassign CPT code

[[Page 74258]]

77338 to APC 0301 (Level II Radiation Therapy), or alternatively assign 
the procedure to an APC that would pay for construction of 10 to 20 
devices or assign the code to a new technology APC. Commenters also 
asked that CMS provide guidance to ensure that hospitals bill 
appropriately for this new service because they believed that their 
data analysis shows that median costs are not accurate.
    Response: After consideration of the public comments, the nature of 
the service being reported by CPT code 77338, and our claims data, we 
are finalizing our placement of CPT code 77338 in APC 0305, consistent 
with the median cost that we calculated based on the actual charges 
reported by 965 hospitals for CPT code 77338, converted to cost by 
application of the CCRs we calculated from the billing hospitals' most 
recently submitted cost reports. CPT code 77338 has similar clinical 
characteristics to the services in APC 0305 (Level II Therapeutic 
Radiation Treatment Preparation). In addition, the final rule median 
cost for CPT code 77338 of approximately $188 is more similar to the 
median cost for APC 0305 of approximately $264 than it is similar to 
the median cost for APC 0310 of approximately $955.
    Our examination of the CY 2010 claims that we used to calculate the 
final median cost of approximately $188 for CPT code 77338 reveals that 
the median charge in the single bills used for ratesetting for CPT code 
77338 was approximately $826. The median CCR that we used to reduce the 
hospital established charges to costs was 0.23. We used 36,860 single 
procedure bills from 965 hospitals (out of 47,589 total lines) or 
approximately 78 percent of the total lines containing actual charges 
for CPT code 77338, to calculate the final rule median cost for CPT 
code 77338, which is defined as including all devices required for an 
IMRT treatment plan.
    We recognize that there is considerable variability in the charges 
that hospitals established for these new codes, but it is not uncommon 
for there to be a high level of variability in the charges for a 
service, and it is normal that such variability would be carried 
through to the calculation of estimated costs for the service. We do 
not advise hospitals with regard to what they should charge for a 
service other than to require that the charges be reasonably related to 
their cost for the service and that they must charge all payers the 
same amount for the same service. However, our use of the median 
charges to establish payment levels was specifically designed to 
address wide variances in hospital cost accounting systems and billing 
patterns, and has also consistently been a reliable mechanism for 
promoting increased consistency without introducing additional 
regulations. We recognize that it is peculiar that the estimated cost 
for CPT code 77334, which represents the cost of a single device, would 
be greater than the estimated cost for CPT code 77338, which represents 
the cost of all devices in a single IMRT plan of treatment, but our 
estimated costs are based on the amounts of the charges established by 
hospitals for the service and the hospitals' CCRs, which are calculated 
from their Medicare cost reports. There are many reasons why this 
apparent anomaly could exist, including clinical rationales such as the 
inclusion of labor-intensive physical blocks, shields, and molds in the 
service described by CPT code 77334, as well as accounting rationales 
such as the crosswalking of a single collimator setting to the charges 
for the construction of a physical block, also in the service described 
by CPT code 77334. It is not unusual for hospitals to establish charges 
that do not comport with our expectation of the charges they would 
establish based on the definition of the code for the service for which 
they are establishing charges and on which we based simulated medians.
    The OPPS is based on the expectation that hospital charges reflect 
the relative resources that are required to furnish the service for 
which they are requesting a specified amount of payment. This self-
selected hospital charge is converted to an estimated cost by the 
application of a CCR for the billing hospital which is calculated from 
the billing hospital's own cost report. As described previously, in 
this case the single bills used to calculate the median cost were 
submitted in significant volume by 965 hospitals (36,860 single bills 
were used for ratesetting out of 47,589 total lines). Therefore, we 
have no reason to believe that the median cost we have calculated from 
such a robust submission of charge data from a significant number of 
hospitals should not be used to establish the payment for the service 
reported by CPT code 77338 for CY 2012. To the extent that hospitals 
determine that their charges should be revised to better reflect the 
resources required to furnish the service as defined by CPT code 77338, 
the revised charges would be reflected in future years' OPPS payment 
rates. However, for CY 2012, based on the robust set of single 
procedure bills containing actual charges for CPT code 77338 by 965 
hospitals, we believe that it is appropriate to apply our longstanding 
cost-finding methodology, as we proposed, to calculate the median cost 
on which the payment for CPT code 77338 is based for CY 2012. We see no 
basis to ignore our robust set of single procedure claims submitted by 
a significant number of hospitals by continuing to simulate a median 
cost for CPT code 77338.
    In conclusion, we see no irregularities in our calculation of the 
median cost for CPT code 77338 based on the actual charges reported on 
36,860 single procedure bills submitted by 965 hospitals. Therefore, we 
are finalizing our assignment of CPT code 77338, which has a final 
median cost of approximately $188 to APC 0305, which has a final median 
cost of $264 for CY 2012.
f. Computed Tomography of Abdomen and Pelvis (APC 0331 and 0334)
    The AMA CPT Editorial Panel created three codes for computed 
tomography (CT) of abdominal and pelvis that were effective January 1, 
2011, specifically, CPT code 74176 (Computed tomography, abdomen and 
pelvis; without contrast material); CPT code 74177 (Computed 
tomography, abdomen and pelvis; with contrast material(s)); and CPT 
code 74178 (Computed tomography, abdomen and pelvis; without contrast 
material in one or both body regions, followed by contrast material(s) 
and further sections in one or both body regions). As with all new CPT 
codes for CY 2011, these new codes were announced through the 
publication of the CY 2011 CPT in November 2010, effective on January 
1, 2011.
    In accordance with our longstanding policy, we made an interim APC 
assignment for each new code for CY 2011 based on our understanding of 
the resources required to furnish the service as the service was 
defined in the new code (75 FR 71898). Specifically, for CY 2011, we 
assigned new CPT code 74176 to APC 0332 (Computed Tomography without 
Contrast), which has a CY 2011 payment rate of approximately $194; we 
assigned CPT code 74177 to APC 0283 (Computed Tomography with 
Contrast), which has a CY 2011 payment rate of approximately $300; and 
we assigned CPT code 74178 to APC 0333 (Computed Tomography Without 
Contrast Followed by with Contrast), which has a CY 2011 payment rate 
of approximately $334. For CY 2011, we also made these codes eligible 
for composite payment under the multiple imaging composite APC 
methodology when they are furnished with other CT

[[Page 74259]]

procedures to the same patient on the same day.
    As is our standard practice each year, our clinicians review each 
of the many CPT code changes that will be effective in the forthcoming 
year and make a decision regarding status indicator and/or APC 
assignment based on their understanding of the nature of the services 
furnished. We are unable to include a proposed status indicator and/or 
APC assignment in the proposed rule for codes that are not announced by 
the AMA CPT Editorial Board prior to the proposed rule. Therefore, in 
accordance with our longstanding policy, we include, in the final rule 
with comment period, an interim status indicator and/or APC assignment 
for all new CPT codes that are announced by the AMA CPT Editorial Board 
subsequent to the OPPS/ASC proposed rule to enable payment to be made 
for new services as soon as the code is effective. In accordance with 
our longstanding practice, we identified the new codes for abdominal/
pelvis CT for CY 2011 in Addendum B of the CY 2011 OPPS/ASC final rule 
with comment period as having new interim APC assignments by showing a 
comment indicator of ``NI,'' and we provided a public comment period. 
As we do with all new CPT codes, we are responding to the public 
comments in this OPPS/ASC final rule with comment period for CY 2012. 
This longstanding process enables us to pay for new services as soon as 
the new CPT codes for them go into effect, despite the fact that they 
first become publicly available around the same time the final rule 
with comment period for the upcoming year is made public.
    At its February 28-March 1, 2011 meeting, the APC Panel heard 
public presentations on this issue and recommended that CMS provide 
more data on the new CPT codes for combined abdomen and pelvis CT as 
soon as these data are available. In the CY 2012 OPPS/ASC proposed rule 
(76 FR 42235), we stated that we were accepting this recommendation, 
and we would provide claims data as soon as the data are available. We 
noted that, because these codes were effective January 1, 2011, the 
first available claims data for these codes will be the APC Panel 
claims data for the CY 2013 OPPS rulemaking. These data will be for 
dates of service January 1, 2011 through and including September 30, 
2011, as processed through the Common Working File on or before 
September 30, 2011.
    As we described in the proposed rule, in general, stakeholders who 
provided comments on the interim assignment of these codes for CY 2011 
stated that the most appropriate approach to establishing payment for 
these new codes is to assign these procedures to APCs that recognize 
that each of the new codes reflects the reporting under a single code 
of two services that were previously reported under two separate codes 
and that, therefore, payments would be more accurate and better 
reflective of the relative cost of the services under the OPPS if we 
were to establish payment rates for the codes for CY 2012 using claim 
data that reflect the combined cost of the two predecessor codes. They 
noted that when these services were reported in CY 2010 using two CPT 
codes, rather than a single code, the services that are being reported 
under CPT code 74176 were assigned to imaging composite APC 8005 (CT 
and CTA without Contrast) for which the CY 2010 payment was $419.45. 
Similarly, the services being reported under CPT code 74177 or CPT code 
74178 were assigned to composite APC 8006 (CT and CTA with Contrast) 
for which the CY 2010 payment was $628.49. They indicated that they 
believed that simulating the median cost for CPT codes 74176, 74177, 
and 74178 using historic claims data from the predecessor codes in a 
manner similar to that used to create the composite APC medians would 
result in the best estimates of costs for these codes and, therefore, 
the most accurate payment rate for these codes.
    After considering the presentations at the APC Panel meeting, the 
views of stakeholders who met with us to discuss this issue, and the 
comments in response to the CY 2011 final rule with public comment 
period, and after examining our claims data for the predecessor codes, 
we stated in the proposed rule that we believe that establishment of 
payment rates for these services based on historic claims data for the 
combinations of predecessor codes that are now reported by CPT codes 
74176, 74177, and 74178 would result in a more accurate and appropriate 
payment for these services for CY 2012 because it would take into 
account the full cost of both services that are now reported by a 
single CPT code. We indicated that we believe that the best way to 
secure the most appropriate payments for CY 2012 is to use the claims 
data from the predecessor codes under which the new codes were reported 
for CY 2010 to simulate median costs for the new codes and to create 
APCs that are appropriate to the services. To do so should reflect both 
the full cost of the service as reported by the new code and should 
also reflect the efficiencies of reporting the service represented by 
the single new code. Therefore, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42234), we proposed to establish two APCs to which we proposed 
to assign the combined abdominal and pelvis CT services. Specifically, 
we proposed to create new APC 0331 (Combined Abdominal and Pelvis CT 
Without Contrast), to which we proposed to assign CPT code 74176 and 
for which we proposed to base the CY 2012 OPPS payment rate on a median 
cost of approximately $417. We also proposed to create new APC 0334 
(Combined Abdominal and Pelvis CT With Contrast), to which we proposed 
to assign CPT codes 74177 and 74178 for the CY 2012 OPPS and for which 
we proposed to base the CY 2012 OPPS payment rate on a median cost of 
approximately $592. We proposed to create two new APCs to which to 
assign these codes, rather than one, because CPT code 74176 is 
furnished without contrast, while CPT codes 74177 and 74178 are 
furnished with contrast. Section 1833(t)(2)(G) of the Act requires that 
services with contrast may not be assigned to APCs that contain 
services without contrast. Therefore, we could not assign CPT code 
74176, which does not require contrast, to the same APC as CPT codes 
74177 and 74178, which require contrast.
    We proposed to create new APC 0331 to which we proposed to assign 
CPT code 74176 and to create new APC 0334 to which we proposed to 
assign CPT codes 74177 and 74178 because the proposed methodology for 
simulating the median costs for CPT codes 74176, 74177, and 74178, 
which uses claims data for the predecessor codes is unique to these CPT 
codes. Therefore, we believe that it is appropriate to create APCs 
comprised only of services for which we calculated medians using claims 
data for the predecessor codes. We stated in the proposed rule that, to 
the extent this policy is finalized, we would reassess whether it 
continues to be appropriate to pay these codes under APCs 0331 and 0334 
once the median costs for the proposed CY 2013 OPPS are calculated 
using our standard methodology, based on hospitals' CY 2011 charges for 
CPT codes 74176, 74177, and 74178.
    To calculate the proposed median costs for proposed APCs 0331 and 
0334 for CY 2012, we selected claims that contained one unit of both of 
the predecessor CPT codes that appear in the CY 2011 CPT for CPT codes 
74176, 74177, and 74178. The predecessor codes were limited to the 
codes in Table 20 of the proposed rule (now Table 27 of this final rule 
with comment period).

[[Page 74260]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.042

    For purposes of selecting claims to be used to calculate simulated 
median costs, we selected only claims that contained one (and only one) 
unit of each of the predecessor codes in the allowed combinations 
identified in Table 21 of the proposed rule (now Table 28 of this final 
rule with comment period). We used only claims that contained one and 
only one unit of each of the code combinations because we believe that 
it represents the best simulation of the definition of the new codes. 
Where more than one unit of either or both codes were reported, the 
claim would be paid under an imaging composite APC, not under APC 0331 
or 0334. For median calculation, claims that contained more than one 
unit of either or both codes were assigned to the applicable imaging 
composite APC. We refer readers to section II.A.2.e.5. of the proposed 
rule and this final rule with comment period for discussion of the 
imaging composite APCs.
[GRAPHIC] [TIFF OMITTED] TR30NO11.043

    After we selected the claims that contained one and only one unit 
of each code in each combination, we deleted claims that contained 
other separately paid HCPCS codes if those codes did not appear on the 
bypass list (we refer readers to section II.A.1.b. of the proposed rule 
and this final rule with comment period, and to Addendum N, which was 
available via the Internet on the CMS Web site). We bypassed the costs 
for codes that appeared on the

[[Page 74261]]

bypass list to create simulated single procedure claims for CPT codes 
74176, 74177, and 74178. Using the remaining simulated single procedure 
claims for the combined abdominal and pelvis CT services, we applied 
our standard trimming, packaging, and wage standardization methodology 
to calculate the median cost for each combined abdominal and pelvis CT 
code for the two proposed APCs. We refer readers to section II.A.2.c. 
of the proposed rule and this final rule with comment period for 
discussion of our standard trimming, packaging, and wage 
standardization methodology.
    We found that using the proposed methodology resulted in a 
simulated median cost for CPT code 74176 of approximately $417, and 
that, because we proposed that CPT code 74176 would be the only HCPCS 
code assigned to APC 0331, the simulated median cost for APC 0331 also 
would be approximately $417. We found that using this proposed 
methodology, the simulated median cost for CPT code 74177 was 
approximately $570 and the simulated median cost for CPT code 74178 was 
approximately $638, and that the simulated median cost for proposed APC 
0334 was approximately $592. We proposed to use this simulation 
methodology to establish proposed median costs for proposed APCs 0331 
and 0334 for the CY 2012 OPPS.
    We also proposed that, in cases where CPT code 74176 is reported 
with CT codes that describe CT services for other regions of the body 
other than the abdomen and pelvis in which contrast is not used, it 
would be assigned to imaging composite APC 8005 (CT and CTA without 
Contrast), for which we proposed a median cost of approximately $445 
for the CY 2012 OPPS. In cases where CPT code 74177 or 74178 is 
reported with CT codes that describe CT services for regions of the 
body other than abdomen and pelvis in which contrast is used, we 
proposed that the code would be assigned to APC 8006 (CT and CTA with 
Contrast), for which we proposed a median cost of approximately $744 
for the CY 2012 OPPS. We proposed to assign CPT codes 74176 to imaging 
composite APC 8005 and to assign CPT codes 74177 and 74178 to imaging 
composite APC 8006 because the predecessor codes for CPT codes 74176, 
74177, and 74178 (identified in Table 20 of the proposed rule) continue 
to be reported when either abdominal CT or pelvis CT (but not both) is 
furnished, and we proposed to continue to assign them to imaging 
composite APCs 8005 and 8006. We stated that we believe that it would 
be inconsistent with our proposed imaging composite policy if we did 
not propose to assign CPT codes 74176, 74177, and 74178 to the 
applicable imaging composite APC for CY 2012. We refer readers to 
section II.A.2.e.(5) of the proposed rule and this final rule with 
comment period for the discussion of the calculation of our median 
costs for APCs 8005 and 8006 for CY 2012.
    In summary, we proposed to establish new APCs 0331 and 0334 to 
which we would assign the abdominal and pelvis CT codes that were 
created by the AMA CPT Editorial Panel for CY 2011 and to use the 
simulation methodology we describe above to establish simulated median 
costs on which we would base the CY 2012 payment rates because we 
believe that to do so would result in relative payment weights for 
these new services that will more accurately reflect the resources 
required to furnish these services as defined by CPT than would be true 
of continued assignment of the codes to the single service APCs to 
which we made interim assignments for CY 2011. We noted that claims and 
cost data for these services will be available for the CY 2013 OPPS 
rulemaking, and we will reassess the payment policy for these codes 
based on the cost data that are used to establish the CY 2013 OPPS 
median cost and payment rates.
    At its August 10-11, 2011 meeting, the APC Panel recommended that 
CMS adopt the proposal to create new APC 0331 (Combined Abdomen and 
Pelvis CT [computed tomography] without Contrast), for payment of CPT 
code 74176 (Computed tomography, abdomen and pelvis; without contrast 
material); and new APC 0334 (Combined Abdomen and Pelvis CT with 
Contrast), for payment of CPT code 74177 (Computed tomography, abdomen 
and pelvis; with contrast material(s)); and CPT code 74178 (Computed 
tomography, abdomen and pelvis; without contrast material in one or 
both body regions, followed by contrast material(s) and further 
sections in one or both body regions). We respond to the Panel's 
recommendation as part of the response to comments below.
    Comment: Commenters supported the use of data for the predecessor 
codes for the services that were combined into CPT codes 74176, 74177, 
and 74178 to create simulated median costs for use in establishing 
payments for CY 2012. Commenters supported the creation of APC 0331, to 
which we proposed to assign CPT code 74176, and APC 0334, to which we 
proposed to assign CPT codes 74177 and 74178 for CY 2012. As described 
previously, commenters on the CY 2011 OPPS/ASC final rule with comment 
period also stated that the most appropriate approach to establishing 
payment for these new codes is to assign these procedures to APCs that 
recognize that each of the new codes reflects the reporting under a 
single code of two services that were previously reported under two 
separate codes and that, therefore, payments would be more accurate and 
better reflective of the relative cost of the services under the OPPS 
if we were to establish payment rates for the codes for CY 2012 using 
claims data that reflect the combined cost of the two predecessor 
codes.
    Response: We continue to believe that it is appropriate to base 
payment for CPT codes 74176, 74177, and 74178 on simulated median costs 
established using the cost data for predecessor codes for CY 2012 for 
the reasons we stated in the proposed rule, as summarized in the 
discussion above. Therefore, the median costs for CPT codes 74176, 
74177, and 74178 for CY 2012 are based on the cost data for the 
predecessor codes, and we are establishing new APCs 0331 and 0334 to 
which these codes are assigned, as we proposed. The final rule median 
cost for CPT code 74176, which is the only code in APC 0331, is 
approximately $406. The final median cost for CPT code 74177 is 
approximately $561 and the final median cost for CPT code 74178 is 
approximately $631. The final median cost for APC 0334 to which CPT 
codes 74177 and 74178 are assigned is approximately $581.
    We have a large volume of services in the predecessor data on which 
to base the simulated median costs for APCs 0331 and 0334. 
Specifically, to calculate the medians for CPT code 71476, we used 
222,193 claims; for CPT code 71477, we used 331,262 claims; and for CPT 
code 74178, we used 201,693 claims. Because these codes were created 
effective January 1, 2011, we will have claims data containing actual 
charges for use in calculating the median cost of these services for 
the CY 2013 OPPS. We expect to have a very robust set of claims data 
containing actual hospital charges to which we expect to apply our 
standard processes to calculate the median costs for these codes for CY 
2013 because of the large volume of services that we found in the 
predecessor data that meet the definition of the new codes. At that 
time, we will decide whether it is necessary and appropriate to propose 
to retain APCs 0331 and 0334. However, we note that the extent to which 
hospitals establish charges in a manner that reflects that the new 
codes report both the abdominal and pelvis CT services will greatly 
affect the median

[[Page 74262]]

costs that are calculated, using our longstanding methodology, from the 
charge data present on claims for services in CY 2011.
    Comment: One commenter on the CY 2012 proposed rule and several 
commenters on the CY 2011 final rule with comment period asked that CMS 
increase payment for the services described by CPT codes 74176, 74177, 
and 74178 for CY 2011 because they believe that CMS inappropriately 
reduced payment for these services as a result of the assignment of CPT 
code 74176 to APC 0332 and the assignment of CPT codes 74177 and 74178 
to APC 0333 for CY 2011. Commenters on the CY 2011 final rule with 
comment period objected to the assignment of CPT code 74176 to APC 0332 
and to the assignment of CPT codes 74177 and 741178 to APC 0333 on the 
basis that the payments for these single service APCs reduced the 
payment for the services which, when coded using multiple CPT codes in 
CY 2010, would have been paid as imaging composite APCs at much higher 
payment rates.
    Response: The prospective payments that were established as a 
result of publication of the CY 2011 OPPS/ASC final rule with comment 
period are generally final payments, with the exception of any outlier 
payment or transitional outpatient payment to which the hospital may be 
entitled. We generally do not change payments that we implement as a 
result of the standard regulatory process during the year in which the 
payments are in effect unless required by legislation. We followed our 
longstanding policy when we made an interim assignment of CPT code 
74176 to APC 0332 and when we made an interim assignment of CPT codes 
74177 and 74178 to APC 0333 for CY 2011, based on our understanding of 
the hospital resources required to furnish these services. It is our 
longstanding practice to assign new CPT codes to interim APCs without 
having an opportunity to acquire comment from the public because the 
new codes are not announced to the public until after the opportunity 
for public comment has ended. This interim assignment remains in effect 
for the calendar year under this established process. The first 
opportunity to change the APC assignment for new codes is the final 
rule with comment period following the year the new codes are first 
recognized for OPPS payment.
    After consideration of the public comments we received, for CY 
2012, for the reasons we discussed previously in this section, we are 
creating new APC 0331, to which we are assigning CPT code 74176, and 
new APC 0334, to which we are assigning CPT codes 74177 and 74178. 
Using the claims data for the predecessor codes and the methodology we 
identify above and in the proposed rule, we calculated a simulated 
median cost of approximately $406 for APC 0331 and a simulated median 
cost of approximately $581 for APC 0334 for CY 2012. We will reassess 
whether there is a continued need for these APCs for the CY 2013 OPPS 
once we have actual charges for these services.
    For the reasons we discuss previously in this section, we also are 
finalizing our proposal to assign CPT code 74176 to imaging composite 
APC 8005 where CPT code 74176 is reported with CT codes that describe 
CT services for regions of the body other than the abdomen and pelvis 
in which contrast is not used and to assign CPT codes 74177 and 74178 
to APC 8006 when either of them is reported with CT codes that describe 
CT services for regions of the body other than abdomen and pelvis in 
which contrast is used. For CY 2012, APC 8005 has a median cost of 
approximately $432 and APC 8006 has a median cost of approximately 
$722.
g. Complex Interstitial Radiation Source Application (APC 0651)
    APC 0651 (Complex Interstitial Radiation Source Application) 
consists of one service described by CPT code 77778 (Interstitial 
radiation source application; complex). Composite APC 8001 (Low Dose 
Rate Prostate Brachytherapy Composite) employs claims on which both CPT 
code 77778 and CPT code 55875 (Transperineal placement of needles or 
catheters into prostate for interstitial radioelement application, with 
or without cystoscopy) are found on the same date of service, as 
described in section II.A.2.e.(2) of this final rule with comment 
period. For the CY 2012 proposed rule, APC 0651 had a median cost of 
approximately $897, based on 96 claims. APC 0651 has a final CY 2012 
median cost of approximately $835, based on 92 single claims.
    Comment: Several commenters expressed concern about the low volume 
of single and ``pseudo'' single claims used for APC 0651 ratesetting. 
They pointed out that both CY 2011 and CY 2012 payment rates for APC 
0651 are based on fewer than 100 claims, and that the proposed CY 2012 
payment rate for APC 0651 of $866.08 is a 23.3 percent decrease from 
the final CY 2011 payment rate of $1,129.46. The commenters believed 
the 96 claims used to set the proposed CY 2012 rate for APC 0651 are 
inadequate, and recommended that CMS continue to explore additional 
methodologies to increase the number of multiple procedure claims used 
for brachytherapy ratesetting.
    Response: While we agree that 96 single claims associated with CPT 
code 77778 is not optimal for APC 0651 ratesetting, we believe that a 
low volume of single claims for this code is not unexpected due to the 
clinical nature of the procedure. As we describe in section 
II.A.2.e.(2) of this final rule with comment period, the application of 
brachytherapy sources described by CPT code 77778 and the placement of 
needles or catheters into the prostate described by CPT code 55875 are 
generally provided in the same operative session in the same hospital 
on the same date of service to the Medicare beneficiary being treated 
with LDR brachytherapy for prostate cancer. For this reason, we are 
continuing to pay for these two procedures when performed together 
through composite APC 8001. However, as we indicate in that section, we 
understand that there are a few occasions when a physician places the 
needles or catheters outside the hospital and the patient is then 
transferred to a hospital for brachytherapy source application, in 
which case CPT code 77778 would be reported alone in the hospital 
outpatient setting. While we agree with the commenter that it would be 
preferable if we had more single bills on which to base the payment for 
APC 0651, we believe the variation in the median costs for CPT code 
77778 between the CY 2011 final rule and the CY 2012 final rule appears 
to be normal variation that we would expect to see for low-volume 
services. We also found from examining the single bills for CPT code 
77778 that they are from different hospitals from year to year, which 
also could result in fluctuations in the median costs. We will continue 
to evaluate additional refinements and improvements to our ratesetting 
methodologies to maximize our use of claims data generally and continue 
to study means by which we can use more claims data to establish the 
payment rate for APC 0651 in particular.
    For CY 2012, the final median cost for APC 0651 is approximately 
$835, based on 92 single bills. We will continue to use this median 
cost to establish payment for APC 0651 for CY 2012, and are finalizing 
our policy for CY 2012 that CPT code 77778, when billed alone, will be 
paid at the APC 0651 payment rate.

[[Page 74263]]

h. Radioelement Applications (APC 0312)
    APC 0312 consists of six radioelement application codes, one of 
which is unlisted CPT code 77799 (Unlisted procedure, clinical 
brachytherapy). For the CY 2012 proposed rule, APC 0312 had a median 
cost of approximately $338 based on 168 single claims. For CY 2011, APC 
0312 had a final rule median cost of $351.17, based on 254 single 
claims.
    Comment: One commenter stated that the number of APC 0312 single 
claims is sparse and shows large and random variations in yearly median 
costs. The commenter pointed to a decrease in single claims from the CY 
2011 final rule to the CY 2012 proposed rule of 33 percent, and a 
decrease in the CY 2011 final payment rate to the CY 2012 proposed 
payment rate of 8.1 percent. The commenter recommended that CMS 
continue to explore additional methodologies to increase the number of 
multiple procedure claims used for brachytherapy ratesetting, such as 
for APC 0312.
    Response: The CY 2012 final median cost of approximately $378 shows 
an increase of 7.8 percent from the CY 2011 final median of $351.17. We 
believe the variation in the median costs between the CY 2011 final 
rule and the CY 2012 final rule appears to be normal variation that we 
would expect to see for low-volume services. We agree with the 
commenter that it would be preferable if we had more single bills on 
which to base the payment for APC 0312, and we will continue to 
evaluate additional refinements and improvements to our ratesetting 
methodologies generally to maximize our use of claims data generally 
and continue to study means by which we can use more claims data to 
establish the payment rate for APC 0312 in particular. However, we note 
that 268, or approximately 36 percent, of the 736 total lines reported 
for services that are assigned to APC 0312 in the CY 2012 final rule 
data, were reported as CPT code 77799, which we do not use for setting 
the median cost for the APC because there is no definition of the 
service that was furnished. Therefore, some of the approximately 36 
percent of the lines paid under APC 0312 might be used to establish the 
median cost for services in APC 0312 if they had been coded 
specifically, or in cases in which there is no existing code for the 
service, a new code were to be created to describe the services being 
furnished.
    After consideration of the public comments we received, we are 
finalizing a CY 2012 median cost for APC 0312 of approximately $378, 
based on 183 single claims.
8. Respiratory Services
a. Pulmonary Rehabilitation (APC 0102)
    Section 144(a)(1) of Public Law 110-275 (MIPPA) 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. Accordingly, in the CY 2010 OPPS/ASC final 
rule with comment period, we established a policy to pay for pulmonary 
rehabilitation services furnished as a part of the comprehensive 
pulmonary rehabilitation program benefit (74 FR 60567). There was and 
continues to be no single CPT code that fully and accurately describes 
the comprehensive pulmonary rehabilitation benefit provided in section 
1861(fff) of the Act. Moreover, at that time, there were no 
alphanumeric HCPCS codes that described the comprehensive pulmonary 
rehabilitation benefit in effect for CY 2008 (on which the CY 2010 OPPS 
was based) or CY 2009 (on which the CY 2011 OPPS was based). Therefore, 
for CY 2010, we created new HCPCS code G0424 (Pulmonary rehabilitation, 
including exercise (includes monitoring), one hour, per session, up to 
two sessions per day) and assigned the code to APC 0102 (Level II 
Pulmonary Treatment), which we also created for the CY 2010 OPPS. 
Because none of the pulmonary treatment codes for which there were 
charges for CY 2008 or CY 2009 accurately described the comprehensive 
pulmonary rehabilitation service for which MIPPA provided coverage, we 
did not assume that the charge reported on any one of the previously 
existing HCPCS codes under which pulmonary treatments were reported 
would represent the full charge for the comprehensive pulmonary 
rehabilitation service.
    Instead, for the CY 2010 OPPS, which was based on claims for 
services in CY 2008, we calculated a median ``per session'' cost that 
we simulated from historical hospital claims data for pulmonary therapy 
services that were billed in combination with one another, much like we 
create composite APC median costs by summing the costs of multiple 
procedures that are typically provided on the same date. Our 
methodology for calculating the ``per session'' median cost that we 
used as the basis for the CY 2010 OPPS payment rate for HCPCS code 
G0424 and APC 0102 is discussed in detail in the CY 2010 OPPS final 
rule with comment period (74 FR 60567 through 60570).
    Specifically, to simulate the ``per session'' median cost of new 
HCPCS code G0424 from claims data for existing services, we used only 
claims that contained at least one unit of HCPCS code G0239 
(Therapeutic procedures to improve respiratory function or increase 
strength or endurance of respiratory muscles, two or more individuals 
(includes monitoring), the group code that is without limitation on 
time duration, and one unit of HCPCS code G0237 (Therapeutic procedures 
to increase strength or endurance of respiratory muscles, one on one, 
face to face, per 15 minutes (includes monitoring) or HCPCS code G0238 
(Therapeutic procedures to improve respiratory function or increase 
strength or endurance of respiratory muscles, one on one, face to face, 
per 15 minutes (includes monitoring), the individual, face-to-face 
codes that report 15 minutes of service, on the same date of service. 
We reasoned that patients in a pulmonary rehabilitation program would 
typically receive individual and group services in each session of 
approximately 1 hour in duration. This was consistent with public 
comments that suggested that pulmonary rehabilitation is often provided 
in group sessions in the HOPD, although patients commonly require 
additional one-on-one care in order to fully participate in the 
program. We note that our use of ``per session'' claims reporting one 
unit of HCPCS code G0237 or G0238 and one unit of HCPCS code G0239 in 
this simulation methodology was also consistent with our overall 
finding of approximately 2.4 service units of the HCPCS G-codes per day 
on a single date of service, usually consisting of both individual and 
group services, for patients receiving pulmonary therapy services in 
the HOPD based upon CY 2008 claims. We concluded that the typical 
session of pulmonary rehabilitation would be 1 hour based on public 
comments that indicated that a session of pulmonary rehabilitation is 
typically 1 hour and based on our findings that the most commonly 
reported HCPCS code for pulmonary treatment is HCPCS code G0239, which 
has no time definition for this group service.
    We included all costs of the related tests and assessment services 
(CPT codes 94620 (Pulmonary stress testing; simple (e.g., 6-minute walk 
test, prolonged exercise test for bronchospasm with pre- and post-
spirometry and oximetry)); 94664 (Demonstration and/or evaluation of

[[Page 74264]]

patient utilization of an aerosol generator, nebulizer, metered dose 
inhaler or IPPB device); and 94667 (Manipulation chest wall, such as 
cupping, percussion and vibration to facilitate lung function; initial 
demonstration and/or evaluation), and all CPT codes for established 
patient clinic visits, on the same date of service as the HCPCS G-codes 
in the claims we used to simulate the median cost for HCPCS code G0424. 
After identifying these ``per session'' claims, which we believe to 
represent 1 hour of care, we summed the costs on them and calculated 
the median cost for the set of selected claims. In light of the cost 
and clinical similarities of pulmonary rehabilitation and the existing 
services described by HCPCS codes G0237, G0238, and G0239 and the CPT 
codes for related assessments and tests, and the significant number of 
``per session'' hospital claims we found, we believed that the 
simulated median cost for HCPCS code G0424, constructed to include the 
costs of these services where furnished, was our best estimate of the 
expected hospital cost of a pulmonary rehabilitation session, given 
that we did not have hospital charges for the comprehensive pulmonary 
rehabilitation service provided by MIPPA for which we created HCPCS 
code G0424. We indicated in our discussion of the simulated median that 
we expected hospitals would establish charges for pulmonary 
rehabilitation that would reflect all of the services that are included 
in comprehensive benefit that would be reported by one unit of HCPCS 
code G0424 (76 FR 42240).
    We used the resulting simulated median ``per session'' cost of 
approximately $50 as the basis for the payment for pulmonary 
rehabilitation service for CY 2010, the first year in which the 
comprehensive pulmonary rehabilitation benefit was covered. For CY 
2011, which was based on claims for services furnished in CY 2009, we 
continued to assign HCPCS code G0424 to APC 0102 and to apply the 
simulation methodology that we used in CY 2010 to claims for services 
in CY 2009 to calculate a median ``per session'' cost simulated from 
historical hospital claims data for similar pulmonary therapy services 
for the CY 2011 OPPS. The CY 2011 OPPS final rule median cost of 
approximately $62 resulted in a national unadjusted payment rate for CY 
2011 of approximately $63.
    For the CY 2012 OPPS, however, we have a very robust set of claims 
for HCPCS code G0424 on which hospitals reported the charges for the 
comprehensive pulmonary rehabilitation service for which MIPPA provided 
the pulmonary rehabilitation benefit beginning on January 1, 2010. 
Specifically, the CY 2012 OPPS proposed rule data, based on CY 2010 
claims, contained a total frequency of 393,056 lines of HCPCS code 
G0424, of which we were able to use 391,901 single procedure bills or 
almost 100 percent of the claims submitted for HCPCS code G0424. This 
is an extremely robust volume of single procedure bills containing 
charges for HCPCS code G0424 on which to base a median cost. In 
general, we have found that higher volumes of single bills both in 
absolute numbers and as a percentage of total frequency provide very 
stable estimates of hospital costs.
    Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42239 and 
42240), we proposed that the payment rate for HCPCS code G0424 and, 
therefore, for APC 102, would be based on the median cost for the 
service as derived from claims for services furnished in CY 2010 and 
the most current available cost report information, using our 
longstanding process for estimating the median cost of a service 
described by a HCPCS code. We refer readers to section II. of the 
proposed rule and this final rule with comment period for a description 
of our longstanding standard process for calculating the median costs 
on which the OPPS payment rates are based. Using our standard median 
calculation process for HCPCS code G0424 resulted in a proposed median 
cost of approximately $38 for HCPCS code G0424 and, therefore, for APC 
0102. Given that the volume of claims in the CY 2012 OPPS proposed rule 
data was so robust for HCPCS code G0424, we believed that the proposed 
median cost we calculated for HCPCS code G0424 was a valid reflection 
of the relative cost of the comprehensive pulmonary rehabilitation 
service described by HCPCS code G0424 and that the proposed median cost 
for HCPCS code G0424 was an appropriate basis on which to establish the 
proposed national unadjusted payment rate for APC 0102.
    We indicated in the proposed rule that we recognized that there is 
a significant difference between our simulated median cost for CY 2011 
and the CY 2012 proposed rule median cost of approximately $38 that was 
derived from application of our standard median calculation process to 
hospital claims data for CY 2010. We believe that this difference 
arises because the median simulation methodology we used for CY 2010 
and CY 2011 selected claims that contained multiple procedures and 
packaged the costs of numerous services into the ``per session'' cost 
for the simulated code where numerous services appeared on the same 
date of service. Our simulation methodology assumed that hospitals 
would include the charges for these additional services in their CY 
2010 charges for HCPCS code G0424 because the services are included in 
the definition of comprehensive pulmonary rehabilitation.
    In response to the CY 2012 OPPS proposed median cost of 
approximately $38 for HCPCS code G0424, we looked at our claims data in 
more depth. We found that 1,048 hospitals, approximately 25 percent of 
hospitals paid under the OPPS, reported HCPCS code G0424 and that the 
median line item median cost (exclusive of packaging) was approximately 
$38, virtually no different from the median cost per unit that we 
derived from the single bills. We also examined the charges that were 
submitted for HCPCS code G0424 in CY 2010 and the CCRs that were 
applied to the charges for HCPCS code G0424 to calculate the estimated 
median cost for the code for the CY 2012 proposed rule. We also looked 
at the revenue codes under which charges for HCPCS code G0424 were 
reported and the percentage of cost that was associated with packaged 
costs, such as oxygen, drugs, and medical supplies. We found that the 
median line item charge for HCPCS code G0424 in the CY 2012 proposed 
rule data was approximately $150 and that the median CCR was 0.29. We 
also found that the most frequently reported revenue code for HCPCS 
code G0424 was revenue code 410 (Respiratory therapy), approximately 
108,000 single bills, and with revenue code 948 (Pulmonary 
Rehabilitation), approximately 81,000 single bills, being the second 
most commonly reported revenue code for HCPCS code G0424. We found that 
only 0.02 percent of the cost of HCPCS code G0424 was packaged cost 
(for example, oxygen, drugs, and supplies). In general, our detailed 
examination of total and line item charges for pulmonary 
rehabilitation, the CCRs used to reduce the charges to estimated costs 
on the single bills, the revenue codes reported, and the absence of 
packaging on the single bills supports the proposed median cost of 
approximately $38 per unit as a valid estimate of the relative cost of 
one unit of HCPCS code G0424.
    In summary, our examination of the claims and cost data for HCPCS 
code G0424 caused us to believe that the proposed median cost that we 
calculated from claims data for HCPCS code G0424 was calculated 
correctly

[[Page 74265]]

according to our longstanding standard median cost calculation 
methodology. Therefore, we proposed to base the CY 2012 OPPS payment 
rate for HCPCS code G0424 and APC 0102 on the median cost that we 
derive from applying our standard median calculation methodology to the 
CY 2010 charges and cost data for HCPCS code G0424.
    Comment: Commenters objected to the proposed CY 2012 payment 
because it proposed a significant reduction in payment from the payment 
that resulted from the simulated median cost for pulmonary 
rehabilitation for CY 2010 and CY 2011. They stated that such a 
reduction in payment would not cover the labor cost of the service and 
would result in hospitals ceasing to furnish the service and, 
therefore, would reduce access to care for beneficiaries. Commenters 
believed that hospitals do not understand the nature of HCPCS code 
G0424 as a unit of a comprehensive service. They believed that 
hospitals are very familiar with HCPCS code G0237, which is for 15 
minutes of care for patients with chronic pulmonary diseases, and they 
believed that hospitals presumed that a single code for very similar 
services correlated to a different diagnosis would also be a 15 minute 
code and that they set the charge for HCPCS code G0424, which is for 
similar services but is limited to persons with chronic obstructive 
pulmonary disease (COPD), accordingly. Commenters stated that CMS data 
support that hospitals are not reporting charges associated with the 
corollary services that are part of HCPCS code G0424. They urged CMS to 
freeze the payment for pulmonary rehabilitation for CY 2012 at the CY 
2011 rate and to shift from the use of a standard cost center to the 
use of a nonstandard cost center for determining the relative cost of 
pulmonary rehabilitation services because they believed that using a 
standard cost center does not adequately capture the cost of the 
services. The commenters believed that continuing the CY 2011 payment 
for CY 2012 is justified because there is strong historical data for 
HCPCS codes G0237 through G0239 and a weak data base for HCPCS code 
G0424 and that using 10 years of data for HCPCS codes G0237 through 
G0239 is wiser than using one year of artifact data for HCPCS code 
G0424 as the basis for the payment for HCPCS code G0424. They indicated 
that the proposed payment for pulmonary rehabilitation will reduce 
access to care and thereby result in CMS losing an important tool for 
reducing readmissions and decreasing length of stay in inpatient 
hospital settings. The commenters stated that HCPCS codes G0237 through 
G0239 are used to report individual pulmonary services while HCPCS code 
G0424 is generally recognized as a group code with a maximum ratio of 
one staff to four patients. However, they stated that this is not 
always the case and that HCPCS code G0424 is sometimes requires a one-
to-one staff to patient ratio. Therefore, until such time as a more 
robust set of data is available, the commenters asked that CMS continue 
to base payment for HCPCS code G0424 on the data for HCPCS codes G0237 
through G0239 using the simulated median methodology that was the basis 
for payments for HCPCS code G0424 for CY 2010 and 2011.
    Response: After considering the comments and reexamining our claims 
data, we are establishing the CY 2012 median cost on which the CY 2012 
payment for HCPCS code G0424 will be based on our claims and cost 
report data. The final rule median cost for APC 0102 to which HCPCS 
code G0424 is assigned is approximately $37. Our final rule data shows 
that hospitals billed a total frequency of 448,396 lines of pulmonary 
rehabilitation, of which we were able to use 446,456 or nearly 100 
percent of the billed lines, for the calculation of the final median 
cost for HCPCS code G0424 for CY 2012. We disagree with commenters that 
these claims are artifact claims that should not be used.
    For this final rule we expanded our data analysis to look not only 
at the charges and CCRs for HCPCS code G0424, but also to look at the 
charges and CCRs for HCPCS code G0237 through G0239, which the 
commenters indicated are similar services, and also to look at the cost 
centers that were used to reduce the charges to costs. We found that 
the median charge for one unit of HCPCS code G0424 is approximately 
$152 and the median charge for HCPCS code G0239, which is defined to 
include services to two or more persons, rather than one on one 
service, is approximately $120. Commenters stated that HCPCS code G0424 
is generally, but not always, considered to be a group service with a 
staff to patient ratio of 1:4. Therefore, we view it as most similar to 
HCPCS code G0239, which is defined as a group service and which was the 
basis for the simulated median cost methodology on which we based the 
OPPS payments for CY 2010 and CY 2011. Therefore, it seems logical that 
hospitals charged more for the comprehensive pulmonary rehabilitation 
service of HCPCS code G0424 than for HCPCS code G0239 which is not a 
comprehensive service but which is a group service for which time is 
not limited. Hospital charges represent the hospital's statement of the 
dollar value of the service they furnish and we conclude that hospitals 
place a higher dollar value on HCPCS code G0424 than on G0239. We do 
not view HCPCS code G0237 or G0238, which have median charges of 
approximately $88 and $85, respectively, and which represent 15 minutes 
of care to be similar to HCPCS code G0424 because each of them is for 
one-on-one care, as opposed to the group nature of HCPCS codes G0239 
and G0424. For that reason, when we simulated median costs for CY 2010 
and CY 2011, we based the simulation on the presence of HCPCS code 
G0239 on the claim, with HCPCS code G0237 and/or HCPCS code G0238 being 
a secondary requirement.
    We next looked at the revenue codes under which hospitals reported 
HCPCS code G0424 and G0239. We found that the most commonly reported 
revenue codes on the lines with the single bills for HCPCS code G0424 
were 0410, Respiratory Services, with 108,154 single bills; 0948, 
Pulmonary Rehabilitation, with 84,126 single bills; 0460, Pulmonary 
Function, with 64,641 single bills; 0419, Other Respiratory Services, 
with 37,833 single bills, and 0940, Other Therapeutic, with 59,533 
single bills. Therefore, of the 446,456 single bills used to set the 
median cost for APC 102, 345,738 bills (excluding the single bills 
reported as ``Other therapeutic''), or 77 percent, were reported under 
revenue codes that were specific to respiratory services of some nature 
(that is, revenue codes 0410, 0948, 0460, and 0419). The remaining 
single bills were reported under a variety of revenue codes. We next 
looked at the cost centers that were applied to the charges on the 
single bills, and we found that we used the respiratory therapy cost 
center, cost center 4900 on the hospital cost report CMS 2552-96, to 
reduce the charges on the line to costs on 63 percent of the single 
bills. When we looked at the CCRs used to reduce charges to cost for 
HCPCS codes G0424 and G0239, we found that both the HCPCS codes G0424 
and G0239 have a CCR of 0.25, which is consistent with our finding that 
charges for both codes were usually reduced by the CCR for cost center 
4900, Respiratory Therapy. We disagree with the commenters' request 
that we create a nonstandard cost center for pulmonary rehabilitation 
because we believe that it is not necessary and would not result in 
more accurate estimated median costs for pulmonary rehabilitation.

[[Page 74266]]

Stakeholders have repeatedly told us that respiratory therapists 
furnish most pulmonary rehabilitation. Therefore, we expect that the 
costs of pulmonary rehabilitation are captured in the standard cost 
center 4900 (Respiratory Therapy), which is used to convert charges to 
costs for pulmonary rehabilitation for approximately 63 percent of 
single bills used to establish the median cost for pulmonary 
rehabilitation. We note also that a nonstandard cost center, which 
commenters' requested, is not required to be used to report costs. 
However, a standard cost center, like cost center 4900, must be 
completed by a hospital if it has a cost account for those costs in its 
general ledger. Hence, the creation of a nonstandard cost center would 
not necessarily be used.
    Everything we observe in the claims data for the 446,456 single 
bills used to report the CY 2010 charges from which we calculated the 
median cost for HCPCS code G0424 leads us to believe that the 
calculation of the median cost of approximately $37 for HCPCS code 
G0424 is appropriate, based on the charge that hospitals set for the 
service. The median cost was calculated using charges, the majority of 
which are reported under pulmonary specific revenue codes and using 
CCRs, and which mostly used the respiratory therapy cost center.
    With regard to the comment that the payment that results from a 
median cost of approximately $37 would be insufficient to pay the labor 
cost for the service, we note that, given that HCPCS code G0424 is 
generally recognized to be a group service, generally with a ratio of 1 
staff to 4 patients, the payment for an hour of service would usually 
be 3 to 4 times the payment for one unit of HCPCS code G0424.
    We do not agree with the commenters that freezing the payment for 
HCPCS code G0424 at the rate that was based on the simulated median 
cost for CY 2011 would be appropriate, given the results of our 
analysis of the robust charge data and cost report data that hospitals 
submitted. Similarly, we see no basis for continuing to use the 
simulated methodology to calculate median costs for pulmonary 
rehabilitation because we now have an abundant number of single bills 
containing the actual charges that hospitals requested in payment for 
the service they are furnishing. With regard to the comment that 
hospitals established their charges based on misunderstanding of the 
nature of the service or based on charges for services that they 
wrongly viewed to be similar, we note that the median hospital charge 
for HCPCS code G0424 is higher than the median charge for HCPCS code 
G0239, the group respiratory service as we would expect given that 
HCPCS code G0424 is a comprehensive service. The charges that hospitals 
establish for services are the amount they seek to be paid for the 
service they furnish, and therefore, we view them as being a reflection 
of the monetary value the hospital places on the service. Under our 
longstanding methodology, we use hospital charges to calculate the 
median costs on which the OPPS payment is based.
    Lastly, we do not agree with commenters that payment based on the 
median cost we derived from hospital's costs and charges for CY 2010 
will necessarily result in reduced access to care for Medicare 
patients. We note that the respiratory therapy services reported under 
HCPCS code G0239, which commenters stated is for an hour of group 
respiratory therapy and is the most similar code to HCPCS code G0424, 
has a median cost of approximately $31, which compares reasonably to 
the median cost of approximately $37 which we found for HCPCS code 
G0424, a service of more complexity. We note that in CY 2010, when the 
payment rate for HCPCS code G0239 was $27.39, hospitals reported a 
total frequency of 146,616, which indicates no absence of access to 
care at a payment rate significantly less than the median cost for 
HCPCS code G0424 in CY 2012.
    Comment: Commenters also stated that some CMS instructions to 
contractors were not issued until May 2010 and that some MACs did not 
permit billing of HCPCS code G0424 until October of 2010. Moreover, 
they stated that some MACs instructed hospitals to report HCPCS codes 
G0237 through G0239 for pulmonary rehabilitation for COPD patients 
contrary to CMS instructions. They added that, given these issues with 
implementation of billing and payment for HCPCS code G0424, it is 
understandable that hospitals struggled with developing charges for a 
one hour code for COPD patients when charges were already in place for 
very similar services for patients with other chronic pulmonary 
diseases.
    Response: Hospitals are responsible for updating their billing 
systems to recognize changes to codes and payment for services, 
particularly with regard to the quarterly changes to HCPCS codes, 
including the addition of new codes. CMS posts all instructions 
regarding new codes on the CMS Web site, issues Medicare Learning 
Network (MLN) Matters articles on new codes and hosts Hospital Open 
Door Forum calls regularly to provide easy ways for hospitals to stay 
up to date on changes in Medicare payment policy. The instructions to 
MACs are available to the public via the Web site. If a hospital 
believes that a MAC is not in compliance with the instructions and 
cannot achieve satisfaction from discussing the issue with the MAC, the 
hospital should bring it to the attention of the CMS regional office 
staff for the area in which the hospital is located. We acknowledge 
that Change Request (CR) 6823 regarding coverage and implementation of 
pulmonary rehabilitation was issued by CMS on May 7, 2010, effective 
for services furnished on and after January 1, 2010. However, the 
Federal Register notice of the OPPS for CY 2010, which was posted to 
http://www.cms.gov/HospitalOutpatientPPS/ on October 30, 2009, 
contained the coverage and payment policy for the pulmonary 
rehabilitation benefit, a discussion of how the services should be 
coded, including a full discussion of HCPCS code G0424 and an 
explanation of how the simulated median was created, including how CMS 
viewed HCPCS code G0424 to be similar to HCPCS codes G0237 through 
G0239 (74 FR 60569). Moreover, CMS hosted regular Hospital Open Door 
Forum calls between November 2009 and January 1, 2010 at which CMS 
staff was available to discuss any issue arising from the Medicare 
hospital OPPS. CMS expected that hospitals would use the detailed 
explanation of how we arrived at the simulated median that was 
articulated in the CY 2010 OPPS/ASC final rule with comment period that 
was posted on the CMS Web site as a basis for establishing charges for 
the services for HCPCS code G0424 for CY 2010, because CMS advised 
hospitals of how the simulated median was created. Therefore, 
notwithstanding the delay in the issuance of CR 6823, we believe that 
hospitals had access to all of the information that was necessary to 
report the new codes and to establish appropriate charges for HCPCS 
code G0424 beginning with the January 1, 2010 effective date.
    Comment: Commenters asked that, for hospital cost reports filed 
January 1, 2012 and later, CMS require that pulmonary rehabilitation be 
reported in a nonstandard cost center rather than a standard cost 
center. They believed that the recommendations of RTI in its 2006 
report, with regard to the creation of a new nonstandard cost center 
for cardiac rehabilitation, should also apply to pulmonary 
rehabilitation because the

[[Page 74267]]

authorizing legislation is almost identical and because they believed 
that this would result in more accurate charge data and cost reports 
for pulmonary rehabilitation.
    Response: We do not agree that the accuracy of median calculation 
would be improved if CMS would create a nonstandard cost center for 
pulmonary rehabilitation. There is already a cost center in which 
hospitals can isolate the costs of respiratory services (which may 
include the cost of hospital staff other than respiratory therapists 
who furnish respiratory therapy): Cost center 4900, Respiratory 
Therapy, on the CMS form 2552-96 and cost center 6600, Respiratory 
Therapy, on the CMS form 2552-10. However, we believe that respiratory 
therapists provide the majority of pulmonary rehabilitation and that 
the costs of respiratory therapists are largely reported on the cost 
report under the respiratory therapy cost center. Therefore, we believe 
that most of the costs of pulmonary rehabilitation are already carried 
in the Respiratory Therapy cost center, based on our finding that the 
CCR for the Respiratory Therapy cost center (4900 in the CMS hospital 
cost report form 2552-96) is reported sufficiently often that it was 
used to reduce the charge for 279,803 of the 446,456 single bills, or 
63 percent of the single bills, to cost. In view of the existence of 
the standard cost center for respiratory therapy on both the CMS form 
2552-96 and the CMS form 2552-10 hospital cost reports, we have no 
reason to believe that creation of a nonstandard cost center would 
result in more specific and accurate cost data for HCPCS code G0424. In 
contrast, unlike respiratory therapy, which has long had a dedicated 
cost center, the costs of the staff who furnish cardiac rehabilitation 
were not predominantly carried in a single cost center before the 
creation of the cardiac rehabilitation cost center. For this reason, 
the creation of a cardiac rehabilitation cost center does not justify 
the creation of a pulmonary rehabilitation cost center.
    Comment: One commenter asked that CMS reconsider the valuation of 
the cost of HCPCS code G0424 to appropriately account for the services 
delivered by physical therapists. The commenter asked that, 
alternatively, CMS create a separate HCPCS code that can be used to 
delineate those patients who require individualized physical therapy 
within the pulmonary rehabilitation program. The commenter stated that 
the need for the service that would be reported by the new code would 
be determined by conducting separate screening that has clear and 
distinct criteria that justify the need for the physical therapy 
services.
    Response: Pulmonary rehabilitation is a comprehensive service in 
which it would be inappropriate to create a code for a particular type 
of professional who participates in providing the service. The charge a 
hospital establishes for HCPCS code G0424 is a charge for the 
comprehensive package of services that are encompassed in the pulmonary 
rehabilitation benefit and includes the charge for whatever portion of 
those services may be furnished by a physical therapist. We do not 
believe that it would be appropriate to create a new and separate code 
for the services furnished by a physical therapist as part of a 
comprehensive pulmonary rehabilitation service because those services 
are already included in the charge for HCPCS code G0424. Similarly no 
additional payment should be made for those services because payment 
for HCPCS code G0424 includes payment for the comprehensive package of 
services for which payment is claimed when a hospital reports HCPCS 
code G0424.
    In summary, for CY 2010, we are establishing payment for APC 0102, 
for which HCPCS code G0424 is the only assigned code, based on the 
median cost of approximately $37 that we calculated using 446,456 
single bills of 448,396 total frequency, or nearly 100 percent, of the 
billed lines for HCPCS code G0424 and the most recent hospital cost 
reports for the hospitals whose bills are being used. We are not 
establishing a special purpose cost center for pulmonary rehabilitation 
because the service is largely furnished by respiratory therapists for 
which there is standard cost center (4900, Respiratory Therapy), which 
is already used to reduce most charges for HCPCS code G0424 to costs. 
Therefore, we do not believe that creating a pulmonary rehabilitation 
cost center in addition to the standard respiratory therapy cost center 
is necessary to the calculation of the median cost of HCPCS code G0424.
b. Bronchial Thermoplasty (APC 0415)
    We created two new HCPCS codes, C9730 (Bronchoscopic bronchial 
thermoplasty with imaging guidance (if performed), radiofrequency 
ablation of airway smooth muscle, 1 lobe) and C9731 (Bronchoscopic 
bronchial thermoplasty with imaging guidance (if performed), 
radiofrequency ablation of airway smooth muscle, 2 or more lobes), also 
known as bronchial thermoplasty, and assigned them to APC 0415 (Level 
II Endoscopy lower airway), effective July 1, 2011. Bronchial 
thermoplasty is indicated for the treatment of severe persistent 
asthma, and the bronchial thermoplasty system consists of a 
radiofrequency (RF) controller and a single use device with an 
electrode array that is delivered through the working channel of a 
bronchoscope. The bronchial thermoplasty services, technology, and 
estimated costs came to our attention via an application for the 
services to be placed into a New Technology APC. The APC 0415 median 
cost for the CY 2012 proposed rule is $2,094.64. AMA's CPT Editorial 
Panel has recently created two new Category III CPT codes to be 
effective January 1, 2012, specifically, CPT codes 0276T (Bronchoscopy, 
rigid or flexible, including fluoroscopic guidance, when performed; 
with bronchial thermoplasty, 1 lobe) and 0277T (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with 
bronchial thermoplasty, 2 or more lobes). At the August 2011 APC Panel 
meeting, the APC Panel heard from a presenter regarding APC placement 
for bronchial thermoplasty, but the Panel did not make any 
recommendations to CMS. We indicated at the August 2011 APC Panel 
meeting that we anticipate retiring HCPCS codes C9730 and C9731, and 
replacing them with CPT codes 0276T and 0277T, respectively, effective 
January 1, 2012. For CY 2012, we proposed maintaining assignment of 
bronchial thermoplasty services to APC 0415.
    Comment: One commenter stated that the bronchial thermoplasty 
codes, HCPCS codes C9730 and C9731, should not be assigned to APC 0415 
for CY 2012 because the resources are not covered by the CY 2012 
proposed rule median cost for APC 0415 of $2,094.64. The commenter's 
estimated costs for the bronchial thermoplasty procedures range from 
approximately $4,130 to $5,087, which includes its estimated cost of 
$2,500 for the single use catheter, while the CY 2012 proposed rule 
median costs of service codes assigned to APC 0415 range from 
approximately $1,780 to $3,122. The commenter contended that no 
existing clinical APCs are appropriate both in terms of clinical 
characteristics and resource costs. On the other hand, the commenter 
requested that CMS consider an assignment of the bronchial thermoplasty 
codes to APC 0423 (Level II percutaneous abdominal and biliary 
procedures). The commenter argued that APC 0423 includes CPT code 32998 
(Ablation therapy for reduction or eradication of one or more pulmonary 
tumor(s) including pleura or chest wall when involved by tumor 
extension,

[[Page 74268]]

percutaneous, radiofrequency, unilateral), a service that the commenter 
claimed is a better comparator for bronchial thermoplasty in terms of 
procedural costs as well as clinical similarity. The commenter stated 
that, clinically, the two procedures entail similar supplies and 
equipment and involve ablative techniques. However, the commenter 
stated that CPT code 32998 is performed percutaneously, while bronchial 
thermoplasty is performed through a bronchoscope. The commenter 
asserted that bronchial thermoplasty requires a disposable catheter 
costing $2,500, while CPT code 32998 requires a disposable probe 
costing approximately $1,375. Also, the commenter asserted that because 
the CY 2012 proposed median cost of CPT code 32998 is approximately 
$3,962 and the CY 2012 proposed median cost of APC 0423 is about 
$4,112, bronchial thermoplasty should be assigned to APC 0423 because 
of greater resource similarity as reflected in the higher median cost. 
The second option recommended by the commenter is to revise existing 
APC 0415 into APCs ``0415A'' and ``0415B'' and place the two bronchial 
thermoplasty codes into an APC 0415B with CPT codes 31626 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with placement of fiducial markers, single or multiple), 
31631 (Bronchoscopy, rigid or flexible, including fluoroscopic 
guidance, when performed; with placement of tracheal stent(s) (includes 
tracheal/bronchial dilation as required)), and 31636 (Bronchoscopy, 
rigid or flexible, including fluoroscopic guidance, when performed; 
with placement of bronchial stent(s) (includes tracheal/bronchial 
dilation as required), initial bronchus). The commenter's third, final 
and preferred recommendation was to assign bronchial thermoplasty codes 
to a New Technology APC.
    Response: As stated above, effective January 1, 2012, newly created 
CPT codes 0276T and 0277T will be the codes used to report bronchial 
thermoplasty, and HCPCS codes C9730 and C9731 will be deleted effective 
that date. Regarding the commenter's recommended option to assign 
bronchial thermoplasty codes to APC 0423, we do not believe that the 
bronchial thermoplasty service is clinically similar to the procedures 
in APC 0423. APC 0423 consists of percutaneous procedures, while CPT 
codes 0276T and 0277T are bronchoscopic procedures, clinically similar 
to services in bronchoscopy APCs. We also do not agree that APC 0415 
needs to be split into 2 APCs at this time. All of the bronchoscopy 
procedures in APC 0415 are clinically similar, and the final rule 
median costs for procedures within APC 0415 range from approximately 
$1,745 to approximately $3,300, with an overall median cost of 
approximately $2,048. We proposed to assign bronchial thermoplasty to 
APC 0415 because it is similar clinically to the bronchoscopy 
procedures in APC 0415, particularly CPT code 31641 (Bronchoscopy, with 
destruction of tumor or relief of stenosis by any method other than 
excision (e.g., laser therapy, cryotherapy)), and because the estimated 
resource costs are approximately similar to the upper end of the range 
of median costs for procedures assigned to APC 0415. We generally 
prefer to wait until median cost claims data are available before 
reassignment of a service to a new APC. We also note that, according to 
our usual practice, when adequate actual hospital reported cost data 
become available for these procedures, we reevaluate their APC 
assignments and may reassign them to another APC, as appropriate. 
Regarding the option to assign the service to a New Technology APC, we 
believe that APC 0415 is an appropriate clinical APC for bronchial 
thermoplasty procedures. Therefore, we are maintaining assignment of 
the bronchial thermoplasty services to APC 0415.
    We are finalizing our proposal to maintain the assignment of 
bronchial thermoplasty procedures (CPT codes 0276T and 0277T beginning 
January 1, 2012) to APC 0415 for CY 2012, which has a final median cost 
of approximately $2,024.
c. Insertion of Bronchial Valve (APC 0415)
    AMA's CPT Editorial Panel created CPT code 0250T (Airway sizing and 
insertion of bronchial valve(s), each lobe) effective January 1, 2011 
to report insertion of a bronchial valve for treatment of prolonged air 
leaks of the lung. CPT code 0250T is an add-on code; therefore, 
hospitals must list the code in addition to the primary bronchoscopy 
procedure code. For 2011, we assigned CPT code 0250T to APC 0415 (Level 
II Endoscopy lower airway), with a payment rate of $1,971.77. We 
believe CPT code 0250T is similar to other services in APC 0415 in its 
clinical characteristics. For 2012, we proposed to maintain the 
assignment of CPT code 0250T to APC 0415, which had a proposed rule 
median cost of approximately $2,095, and a proposed payment rate of 
approximately $2,022. The CPT code 0250T procedure is performed with a 
bronchial valve intended to control prolonged air leaks of the lung 
following three specific surgical procedures: Lobectomy, segmentectomy, 
or lung volume reduction surgery (LVRS).
    Comment: One commenter stated that APC 0415 does not adequately 
cover the resource costs of CPT code 0250T, and recommended that CMS 
create a new clinical APC that would accurately reflect the device and 
procedural costs associated with CPT code 0250T. The commenter claimed 
that the cost for the bronchial valve that is necessary to perform the 
CPT code 0250T procedure is $2,750, and that a total device cost based 
on the number of valves (2.4 mean, or median of 2.0 valves) is $6,600 
based on the mean number of valves and $5,500 based on the median 
valves. The commenter asserted that it certified to the FDA that the 
current price of $2,750 complies with Humanitarian Device Exemption 
(HDE) regulations governing the price of the device. The commenter 
estimated that the CY 2012 total procedural cost for CPT code 0250T is 
$7,268.91 (based on the mean number of valves) or $6,168.91 (based on 
the median). The commenter asserted that the highest paying 
bronchoscopy in APC 0415 does not adequately pay for the cost of CPT 
code 0250T and requested that CMS create a new clinical APC for 
bronchial valve insertion and reassign CPT code 0250T to that APC for 
CY 2012.
    Response: CPT code 0250T is a new code as of January 1, 2011, and 
therefore, we have no CY 2010 claims data for this service for CY 2012 
ratesetting. The commenter apparently agrees that the bronchoscopy APC 
classification is the correct clinical APC type for the CPT code 0250T 
procedure, but that the estimated resource costs support a higher 
paying bronchoscopy APC. We generally wait until median cost claims 
data are available before reassignment to a new APC, particularly when 
there are no comparable clinical procedures that would allow us to 
easily estimate the cost of this new procedure. We again note that CPT 
code 0250T is an add-on code to a base bronchoscopy code.
    After consideration of the public comments we received, we are 
maintaining our assignment of CPT code 0250T to APC 0415 for CY 2012, 
which has a final median cost of approximately $2,024, because it is 
clinically similar to the services in APC 0415. We will review this 
assignment for CY 2013, when we should have some claims data for CPT 
code 0250T to determine the cost of the procedure.

[[Page 74269]]

9. Other Services
a. Skin Repair (APCs 0133, 0134, and 0135)
    For CY 2012, we proposed to reassign CPT code 15004 (Surgical 
preparation or creation of recipient site by excision of open wounds, 
burn eschar, or scar (including subcutaneous tissues), or incisional 
release of scar contracture, face, scalp, eyelids, mouth, neck, ears, 
orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm 
or 1% of body area of infants and children) from APC 0135 (Level III 
Skin Repair) to APC 0134 (Level II Skin Repair). Similarly, we also 
proposed to reassign CPT code 15430 (Acellular xenograft implant; first 
100 sq cm or less, or 1% of body area of infants and children) from APC 
0135 (Level III Skin Repair) to APC 0134 (Level II Skin Repair). We 
reassigned CPT codes 15004 and 15430 from APC 0135 to APC 0134 to avoid 
a 2 times rule violation in APC 0135.
    For CY 2012, the AMA's CPT Editorial Panel deleted 24 skin 
replacement and skin substitute-related CPT codes and replaced them 
with 8 new CPT codes in the Integumentary System section of the 2012 
CPT code book to describe more accurately the services associated with 
skin replacement procedures. In particular, the CPT Editorial deleted 
24 skin replacement and skin substitute-related CPT codes in the range 
between CPT code 15170 through 15431 and created 8 new CPT codes in the 
range between 15271 through 15278, which will be effective January 1, 
2012.
    Our standard process for dealing with new CPT codes is to assign 
the code to the APC that we believe contains services that are 
comparable with respect to clinical characteristics and resources 
required to furnish the service. The new CPT code is given a comment 
indicator of ``NI'' (New code, interim APC assignment; comments will be 
accepted on the interim APC assignment for the new code) to identify it 
as a new interim APC assignment for the new year and the APC assignment 
for the new codes is then open to public comment. In the case of the 
new the skin replacement and skin substitute-related CPT codes, we 
crosswalked the existing CY 2011 CPT codes to the new CY 2012 CPT codes 
that appropriately describes them. In assigning the new codes to their 
appropriate APCs, we took into consideration the size of the wound 
described in the code descriptor. Specifically, we assigned the new 
codes to their appropriate APCs based on the following factors:
     New codes whose long descriptors included the words ``each 
additional 25 sq cm'' were assigned to APC 0133;
     New codes whose long descriptors included the words 
``first 25 sq cm or less'' or ``each additional 100 sq cm'' were 
assigned to APC 0134; and
     New codes whose long descriptors included the words 
``first 100 sq cm'' were assigned to APC 0135
    Table 29 below lists the CY 2011 APC assignments for the CY 2011 
CPT codes that will be deleted on December 31, 2011, and crosswalked to 
the replacement codes, which are described by the new CY 2012 CPT codes 
that will be effective January 1, 2012. We note that because the eight 
new CPT codes will be effective January 1, 2012, they are flagged with 
comment indicator ``NI'' in Addendum B of this final rule, which will 
be published and made available only via the Internet on the CMS Web 
site at http://www.cms.gov/.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
    Comment: Some commenters requested CMS to continue to assign CPT 
code 15004 to APC 0135 because the procedure is clinically similar to 
CPT codes 15002, 15003, and 15005, which are in APC 0135.
    Response: As we stated above, we reassigned CPT code 15004 from APC 
0135 to APC 0134 to eliminate a 2 times rule violation in APC 0135. 
Based on our analysis, our claims data show a CPT median cost of 
approximately $278 for CPT code 15004 based on 1,529 single claims (out 
of 5,116 total claims). The median cost of approximately $278 for CPT 
code 15004 is closer to the median cost of approximately $227 for APC 
0134 than to the median cost of approximately $345 for APC 0135. 
Moreover, the range of the median costs for the procedures with 
significant claims data that are assigned to APC 0134 is between $157 
and $291, while the range for the procedures with significant claims 
data that are assigned to APC 0135 is between $284 and $642. The median 
cost of approximately $278 for CPT code 15004 is in the range of median 
costs for the procedures with significant claims data in APC 0134 but 
not in the range of median costs for the procedures with significant 
claims data in APC 0135. Further, we believe that CPT code 15004 is 
similar to the procedures in APC 0134 based on clinical homogeneity and 
resource costs. We remind hospitals that we have more than two levels 
of skin repair APCs. Specifically, we have five levels of skin repair 
APCs as follows:
     APC 0133 (Level I Skin Repair)
     APC 0134 (Level II Skin Repair)
     APC 0135 (Level III Skin Repair)
     APC 0136 (Level IV Skin Repair)
     APC 0137 (Level V Skin Repair)
    Therefore, after consideration of the public comments that we 
received, we are finalizing our CY 2012 proposal, without modification, 
to reassign CPT code 15004 from APC 0135 to APC 0134, which has a final 
CY 2012 APC median cost of approximately $227.
    Comment: Several commenters urged CMS not to finalize its proposal 
to assign CPT code 15430 to APC 0134 and requested that CMS continue to 
assign the code to APC 0135, which is the same APC that is assigned to 
its add-on CPT code 15431 (Acellular xenograft implant; each additional 
100 sq cm, or each additional 1% of body area of infants and children, 
or part thereof). The commenters stated that APC 0135 is the 
appropriate APC assignment for CPT code 15430 based on its clinical 
homogeneity and resource costs to other procedures assigned in APC 
0135. One commenter indicated that the proposed CPT median cost of 
approximately $300 is closer to the proposed payment rate of 
approximately $361 for APC 0135 than to the proposed payment rate of 
approximately $228 for APC 0134.
    Response: Although we proposed to reassign CPT code 15430 from APC 
0135 to APC 0134, the code will be deleted on December 31, 2011, and 
replaced with new CPT codes effective January 1, 2012. As listed in 
Table 29, the replacement codes for CPT code 15430 have been 
crosswalked to APC 0135 based on the code descriptor.
    Comment: One commenter recommended that CMS provide proper notice 
and comment before deleting HCPCS codes from the system. The commenter 
indicated that, in the case of HCPCS code Q4109 (Tissuemend, per square 
centimeter), the public should be provided adequate notice before the 
code is deleted with an explanation for its deletion. This same 
commenter requested that CMS temporarily reassign HCPCS code Q4109 to 
status indicator ``K'' (Nonpass-Through Drugs and Nonimplantable 
Biologicals, Including Therapeutic Radiopharmaceuticals) for CY 2012.
    Response: HCPCS code Q4109 was deleted on December 31, 2010. We are 
not considering a status indicator reassignment for this code because 
the HCPCS code is no longer active. This HCPCS code was assigned to 
status indicator ``D'' (Discontinued Codes) in Addendum B of the CY 
2011 OPPS/ASC final rule with comment period. Every

[[Page 74276]]

year hundreds of new codes are created, revised, and deleted as part of 
the annual HCPCS cycle. In its role as the Level II Alphanumeric HCPCS 
code set maintainer, the CMS HCPCS Workgroup identifies redundancies 
across the HCPCS Level II national code set which reduces opportunities 
for duplicate billing. Because we are not aware of all the coding 
changes for the upcoming year when we publish our proposed rules, we do 
not address the coding changes in the proposed rule. Any interested 
party that disagrees with the coding actions for the Level II 
Alphanumeric HCPCS codes is welcome to submit a request to CMS to 
review the matter by submitting an application using CMS' standard 
procedures. The application will be considered as part of CMS' standard 
code review process, including an opportunity for public comment in 
reaction to a published preliminary HCPCS coding decision. The 
application can be downloaded from this CMS Web site: https://www.cms.gov/MedHCPCSGenInfo/01a_Application_Form_and_Instructions.asp#TopOfPage.
b. Nasal Sinus Endoscopy (APC 0075)
    For CY 2012, we proposed to assign CPT codes 31295 (Nasal/sinus 
endoscopy, surgical; with dilation of maxillary sinus ostium (e.g., 
balloon dilation), transnasal or via canine fossa), 31296 (Nasal/sinus 
endoscopy, surgical; with dilation of frontal sinus ostium (e.g., 
balloon dilation), and 31297 (Nasal/sinus endoscopy, surgical; with 
dilation of sphenoid sinus ostium (e.g., balloon dilation) to APC 0075 
(Level V Endoscopy Upper Airway).
    Comment: One commenter on the CY 2012 OPPS/ASC proposed rule 
objected to the assignment of CPT codes 31295, 31296, and 31297 to APC 
0075 because the commenter believed that the payment rate for APC 0075 
substantially underpays providers. Commenters on the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71800) relating to the interim 
APC assignments and/or status indicators of HCPCS codes identified with 
comment indicator ``NI'' in Addendum B to that final rule with comment 
period addressed the same issue. The commenters suggested that instead 
of assigning CPT codes 31295, 31296, and 31297 to APC 0075, CMS create 
a new device-dependent APC for these three CPT codes. Or, if CMS does 
not decide to create a new device-dependent APC, the commenters 
suggested that the three CPT codes should instead be assigned to one of 
four alternative APCs. The commenters believed that assigning these 
codes to APCs 0056 (Level II Foot Musculoskeletal Procedures), 0083 
(Level I Endovascular Revascularization of the Lower Extremity), or 
0114 (Thyroid/Lymphadenectomy Procedures) would be justified because 
the payment rates for these APCs more closely reflect the costs 
associated with CPT codes 31295, 31296, and 31297. Commenters also 
suggested that another option would be to assign these CPTs to the new 
technology APC 1525 (New Technology--Level XXV ($3500-$4000)) until 
more claims data are accumulated and an appropriate clinical APC can be 
assigned.
    Response: We do not agree that CPT codes 31295, 31296, and 31297 
should be assigned to a new device-dependent APC. When assigning 
procedures to an APC, we first consider the clinical and resource 
characteristics of a procedure and determine the most appropriate APC 
assignment. We believe that the most clinically appropriate APC is APC 
0075, which includes other nasal and sinus endoscopy procedures. The 
APCs suggested by the commenters (APCs 0056, 0083, and 0114) are 
clinically unrelated to the procedures described by CPT codes 31295, 
31296, and 31297. Regarding the resource costs of the procedures in 
question, the commenters asserted costs of approximately $4,000 for 
these procedures, which are currently assigned to the highest paying 
clinically appropriate APC (APC 0075), which is level 5 out of 5 levels 
of APCs for ``endoscopy upper airway.'' The highest median cost of all 
of the procedures assigned to APC 0075 is approximately $4,000. 
Therefore, even the non-claims data-based cost estimate for these 
procedures offered by the commenters is within the approximate range 
(although on the high end of the range) of median costs for procedures 
assigned to APC 0075. Therefore, we believe that, until we have claims 
data to better inform an APC assignment, the current APC assignment is 
the most appropriate. We have no further information at this time that 
indicates that a device-dependent APC, the assignment of status 
indicator ``S'' instead of status indicator ``T,'' or a new technology 
APC would be more appropriate at this time. Once OPPS claims data are 
available for these procedures, we will reevaluate their APC 
assignments, as we do for all procedures on an ongoing and annual 
basis.
c. Bioimpedance Spectroscopy (APC 0097)
    CPT code 0239T (Bioimpedance spectroscopy (BIS), measuring 100 
frequencies or greater, direct measurement of extracellular fluid 
differences between the limbs) was effective January 1, 2011. In 
accordance with our standard policy, we assessed the properties of the 
service as CPT code 0239T was defined by the AMA's CPT Editorial Board. 
We assigned it to the APC that we believed to have the most similar 
clinical characteristics and resource requirements. In the case of CPT 
code 0239T, we assigned bioimpedance spectroscopy to APC 0099 
(Electrocardiogram/Cardiography). For CY 2012, we proposed to continue 
to assign CPT code 0239T, for which we had no claims data on which to 
calculate a median cost, to APC 0099 for CY 2012. We proposed a median 
cost of approximately $28 for APC 0099.
    Comment: One commenter objected to the proposed assignment of CPT 
code 0239T to APC 0099 for CY 2012 on the basis that the proposed 
payment rate for APC 0099 would be inadequate to pay hospitals' costs 
and, therefore, would jeopardize beneficiary access to the service. The 
commenter stated that BIS is a method to aid surgeons and oncologists 
in the pre-surgical assessment and post-operative monitoring of 
unilateral lymphedema of the arm. The commenter also stated that BIS is 
an aid for therapists to assess and monitor the measurement of extra 
cellular fluid volume differences between the arms during the treatment 
phase for early stage lymphedema. The commenter stated that BIS is not 
a diagnostic test but rather an aid to the physician in the clinical 
assessment of the patient because the results require interpretation by 
the physician and review of previous results for clinical relevance.
    The commenter asked that CMS reassign CPT code 0239T from APC 0099 
to APC 0096 (Level II Noninvasive Physiologic Studies). The commenter 
stated that CPT code 239T is not similar to 93701 (Bioimpedance-derived 
physiologic cardiovascular analysis), which the commenter assumed was 
the CMS rationale for also placing 0239T into APC 0099. Instead the 
commenter indicated that CPT code 239T is more similar in resource 
time, for which the commenter stated that physician time is a proxy to 
CPT code 93924 (Noninvasive physiologic studies of lower extremity 
arteries, at rest and following treadmill stress testing, (i.e., 
bidirectional Doppler waveform or volume plethysmography recording and 
analysis at rest with ankle/brachial indices immediately after and at 
timed intervals following performance of a standardized protocol on a 
motorized treadmill plus recording of time of onset of claudication or 
other symptoms, maximal walking time, and time to

[[Page 74277]]

recovery) complete bilateral study). The commenter stated that the work 
description for CPT code 93924 of setting the patient up, taking 
diagnostic measurements, and analyzing and interpreting the records is 
similar to the work involved for CPT code 0239T and, therefore, CPT 
code 0239T should be assigned to APC 0096 rather than to APC 0099. The 
commenter also stated that the resource time for CPT code 0239T is 
similar to the resource time, using physician time as a proxy, for CPT 
code 99214 (Office or other outpatient visit for the evaluation and 
management of an established patient, which requires at least 2 of 
these 3 key components: A detailed history; A detailed examination; 
Medical decision making of moderate complexity). The commenter believed 
that because CPT code 99214 is assigned to APC 0606, which has a median 
cost of approximately $99, CPT code 0239T should be assigned to an APC 
with a comparable payment rate. In addition, the commenter stated that 
the proposed payment for APC 0099 is not adequate to compensate 
hospitals for what the commenter indicated are the cost of the 
necessary machine (approximately $27,000) and supplies (approximately 
$50 per unit). The commenter stated that compensation under APC 0099 
would not be adequate and without adequate compensation, hospitals 
would not provide the service.
    Response: We have no CY 2010 claims data for the service reported 
by CPT code 239T because the CPT code is new for CY 2011. Therefore, 
under our longstanding policy, we assigned the new code to the APC that 
we believed to be most similar clinically and with regard to 
homogeneity of hospital resources. Specifically, we assigned HCPCS code 
0239T to APC 0099 for CY 2011, and we proposed to continue that 
assignment for CY 2012. We disagree with the commenter that BIS is not 
a diagnostic service because the service is used for the diagnosis of a 
clinical condition. However, after examination of the information 
furnished by the commenter, we agree with the commenter that CPT code 
0239T appears to be somewhat dissimilar in resource utilization to the 
services assigned to APC 0099. However, we do not agree with the 
commenters that CPT code 0239T should be assigned to APC 0096 because 
we do not believe that CPT code 0239T rises to the same level of 
complexity as codes that are assigned to APC 0096. For example, we 
believe that CPT code 93924, to which the commenters compared CPT code 
239T, reports a service that is more complex clinically and more costly 
to hospitals than the service reported by CPT code 0239T. Similarly, we 
believe that there is neither clinical similarity nor similarity of 
hospital resources between the services reported by CPT code 0239T, 
which is used to diagnose lymphedema and CPT code 99214, which is an 
established patient outpatient visit.
    Although we do not believe that CPT code 0239T should be assigned 
to APC 0096, we believe that CPT code 0239T is sufficiently more 
complex than the services that are assigned to APC 0099 that it would 
be more appropriately placed in APC 0097, based on its clinical 
homogeneity and resource similarity to other procedures in APC 0097. 
For example, we believe that CPT code 0239T is more similar to CPT code 
93922 (Limited bilateral noninvasive physiologic studies of upper or 
lower extremity arteries, (eg, for lower extremity: ankle/brachial 
indices at distal posterior tibial and anterior tibial/dorsalis pedis 
arteries plus bidirectional, Doppler waveform recording and analysis at 
1-2 levels, or ankle/brachial indices at distal posterior tibial and 
anterior tibial/dorsalis pedis arteries plus volume plethysmography at 
1-2 levels, or ankle/brachial indices at distal posterior tibial and 
anterior tibial/dorsalis pedis arteries with transcutaneous oxygen 
tension measurements at 1-2 levels)), which is assigned to APC 0097, 
both clinically and in resource requirements, than to CPT code 93924. 
Therefore, we are reassigning CPT code 0239T from APC 0099 to APC 0097, 
which has a final median cost of approximately $65 for CY 2012. We will 
reassess the APC placement for CPT code 0239T when we have claims data 
for services furnished on and after January 1, 2011, the effective date 
for CPT code 0239T.
d. Autologous Blood Salvage (APC 0345)
    For CY 2012, we proposed to assign CPT code 86891 (Autologous blood 
or component, collection processing and storage; intra- or 
postoperative salvage) to APC 0345 (Level I Transfusion Laboratory 
Procedures).
    Comment: One commenter objected to the assignment of CPT code 86891 
to APC 0345 because the commenter believed that the payment rate for 
APC 0345 underpays providers. The commenter stated that the reason for 
the inappropriately low payment is that CPT 86891 would never appear on 
a single procedure claim. The commenter suggested that this service 
should be further analyzed and a more appropriate payment level 
established based upon analysis using external data. The commenter 
further stated that the current way in which the groupings and payment 
levels for services under APCs are calculated does not appropriately 
address the autologous blood salvage service performed at hospitals.
    Response: The calculated median cost for CPT code 86891 based on 
2010 claims data for this final rule with comment period is 
approximately $21 based on 124 single procedure claims out of 332 total 
claims. The calculated median cost of approximately $21 for CPT code 
86891 is within the range of the median costs of the other procedures 
assigned to APC 0345, and there is no violation of the 2 times rule. 
Therefore, assignment of CPT code 86891 to APC 0345 satisfies the APC 
assignment requirements of clinical and resource homogeneity. We do not 
agree that additional analysis of external data is necessary. We set 
the payment rates for APCs using our standard OPPS methodology based on 
relative costs from hospital outpatient claims and the most recent cost 
report data that are available. We have no reason to believe that our 
claims and cost report data, as reported by hospitals, do not 
accurately reflect hospitals' costs of the services assigned to APC 
0345, including the service described by CPT code 86891. Furthermore, 
as the service described by CPT code 86891 is a transfusion laboratory 
procedure, this service is appropriately assigned to APC 0345, which is 
titled ``Level I Transfusion Laboratory Procedures'' and includes other 
transfusion laboratory procedures. Therefore, we are finalizing our 
proposal to assign CPT code 86891 to APC 0345 for CY 2012, which has a 
final rule median cost of approximately $15 for CY 2012.

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

[[Page 74278]]

the date on which pass-through payment is effective for the category. 
The date on which a pass-through category is in effect is the first 
date on which pass-through payment may be made for any medical device 
that is described by such category. We propose and finalize the dates 
for expiration of pass-through status for device categories as part of 
the OPPS annual update.
    We also have an established policy to package the costs of the 
devices 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 new device categories eligible for pass-
through payment. These device categories are described by HCPCS code 
C1749 (Endoscope, retrograde imaging/illumination colonoscope device 
(implantable)), which we announced in the October 2010 OPPS Update 
(Transmittal 2050, Change Request 7117, dated September 17, 2010); and 
HCPCS codes C1830 (Powered bone marrow biopsy needle), and C1840 (Lens, 
intraocular (telescopic)), which were made effective for pass-through 
payment October 1, 2011, and announced in Transmittal 2296, Change 
Request 7545, dated September 2, 2011. There are no categories for 
which we proposed expiration of pass-through status in CY 2011. If we 
create new device categories for pass-through payment status during the 
remainder of CY 2011, 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.
b. CY 2012 Policy
    As stated above, section 1833(t)(6)(B)(iii) of the Act requires 
that, under the OPPS, a category of devices be eligible for 
transitional pass-through payments for at least 2, but not more than 3 
years. Device pass-through category C1749 was established for pass-
through payments on October 1, 2010, and will have been eligible for 
pass-through payments for more than 2 years but less than 3 years as of 
the end of CY 2012. Therefore, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42242), we proposed an expiration date for pass-through payment 
for device category C1749 of December 31, 2012. Therefore, under our 
proposal, beginning January 1, 2013, device category C1749 will no 
longer be eligible for pass-through payments. We will propose 
expiration dates for pass-through payment for device categories C1830 
and C1840 in a future rulemaking.
    Comment: Two commenters indicated that there was only one currently 
approved device for pass-through payment, noting that in the CY 2012 
OPPS/ASC proposed rule, we stated that there was only one device 
category eligible for pass-through payment for CY 2012. These 
commenters opined that there has been a decrease in the number of 
categories eligible for pass-through payment over the past several 
years, and encouraged CMS to approve additional device categories for 
technologies that meet the criteria for pass-through payments. One 
commenter recommended that CMS reevaluate the criteria and approval 
process for device category pass-through eligibility. The commenter 
also recommended that CMS annually publish a list of all pass-through 
applications filed with CMS, along with CMS' determinations and 
rationale for the resulting decisions.
    Response: As indicated, we currently have three device categories 
eligible for pass-through payment, rather than one category as stated 
in the CY 2012 proposed rule, and we believe this shows that we have a 
robust device pass-through evaluation and approval process. The number 
of device pass-through categories eligible for payment will always 
vary, and we believe that the number of active device pass-through 
categories eligible for pass-through payment at any time is a function 
of the quality of applications under consideration, that is, whether 
they fully meet the device pass-through criteria, rather than a 
function of our criteria and approval process, which we believe to be 
appropriate. As we stated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71922), we will take the recommendation to 
publish a list of all pass-through applications filed with us under 
advisement as we consider our device pass-through criteria and process 
in the future.
    After consideration of the public comments we received, we are 
finalizing our proposal of an expiration date for pass-through payment 
for device category C1749 of December 31, 2012. Therefore, beginning 
January 1, 2013, device category C1749 will no longer be eligible for 
pass-through payments. We remind the public that as of January 1, 2013, 
device category C1749 will still be active for the billing and 
reporting of devices and their charges along with the HCPCS codes of 
the procedures with which they are used. When billing for procedures 
utilizing devices that have active device codes, hospitals are required 
to report the codes for the devices on their claims for the procedure.
2. Provisions for Reducing Transitional Pass-Through Payments to Offset 
Costs Packaged Into APC Groups
a. Background
    We have an established policy to estimate the portion of each APC 
payment rate that could reasonably be attributed to the cost of the 
associated devices that are eligible for pass-through payments (66 FR 
59904). We deduct from the pass-through payments for identified device 
categories eligible for pass-through payments an amount that reflects 
the portion of the APC payment amount that we determine is associated 
with the cost of the device, defined as the device APC offset amount, 
as required by section 1833(t)(6)(D)(ii) of the Act. We have 
consistently employed an established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
the cost of an associated device eligible for pass-through payment, 
using claims data from the period used for the most recent 
recalibration of the APC rates (72 FR 66751 through 66752). We 
establish and update the applicable device APC offset amounts for 
eligible pass-through device categories through the transmittals that 
implement the quarterly OPPS updates.
    We publish a list of all procedural APCs with the CY 2011 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/HospitalOutpatientPPS/01_overview.asp. The 
dollar amounts are used as the device APC offset amounts. In addition, 
in accordance with our established practice, the device APC offset 
amounts in a related APC are used in order to evaluate whether the cost 
of a device in an application for a new device category for pass-
through payment is not insignificant in relation to the APC payment 
amount for the service related to the category of devices, as specified 
in our regulations at Sec.  419.66(d).
    As of CY 2009, the costs of implantable biologicals without pass-
through status are packaged into the payment for the procedures in 
which they are inserted or implanted because implantable biologicals 
without pass-through status are not separately paid

[[Page 74279]]

(73 FR 68633 through 68636). For CY 2010, we finalized a new policy to 
specify that the pass-through evaluation process and pass-through 
payment methodology for implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice; also referred to as ``implantable biologicals'') 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. 
As a result, for CY 2010, we included implantable biologicals in our 
calculation of the device APC offset amounts (74 FR 60476). We 
calculated and set the device APC offset amount for a newly established 
device pass-through category, which could include a newly eligible 
implantable biological, beginning in CY 2010 using the same methodology 
we have historically used to calculate and set device APC offset 
amounts for device categories eligible for pass-through payment (72 FR 
66751 through 66752), with one modification. Because implantable 
biologicals are considered devices rather than drugs for purposes of 
pass-through evaluation and payment under our established policy, the 
device APC offset amounts include the costs of implantable biologicals. 
For CY 2010, we also finalized a policy to utilize the revised device 
APC offset amounts to evaluate whether the cost of an implantable 
biological in an application for a new device category for pass-through 
payment is not insignificant in relation to the APC payment amount for 
the service related to the category of devices. Further, for CY 2010, 
we no longer used the ``policy-packaged'' drug APC offset amounts for 
evaluating the cost significance of implantable biological pass-through 
applications under review and for setting the APC offset amounts that 
would apply to pass-through payment for those implantable biologicals, 
effective for new pass-through status determinations beginning in CY 
2010 (74 FR 60463).
    For CY 2011, we continued our policy that the pass-through 
evaluation process and pass-through payment methodology for implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) and that are newly approved for 
pass-through status beginning on or after January 1, 2010, be the 
device pass-through process and payment methodology only.
b. CY 2012 Policy
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42243), we proposed to 
continue our policy, for CY 2012, that the pass-through evaluation 
process and pass-through payment methodology for implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) and that are newly approved for 
pass-through status beginning on or after January 1, 2010, be the 
device pass-through process and payment methodology only. The rationale 
for this policy is provided in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60471 through 60477). We also proposed to 
continue our established policies for calculating and setting the 
device APC offset amounts for each device category eligible for pass-
through payment. In addition, we proposed to continue to review each 
new device category on a case-by-case basis to determine whether device 
costs associated with the new category are already packaged into the 
existing APC structure. If device costs packaged into the existing APC 
structure are associated with the new category, we proposed to deduct 
the device APC offset amount from the pass-through payment for the 
device category. As stated earlier, these device APC offset amounts 
also would be used in order to evaluate whether the cost of a device in 
an application for a new device category for pass-through payment is 
not insignificant in relation to the APC payment amount for the service 
related to the category of devices (Sec.  419.66(d)).
    For CY 2012, we also proposed to continue our policy established in 
CY 2010 to include implantable biologicals in our calculation of the 
device APC offset amounts. In addition, we proposed to continue to 
calculate and set any device APC offset amount for a new device pass-
through category that includes a newly eligible implantable biological 
beginning in CY 2012 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, as we first finalized and implemented for CY 2010.
    In addition, we proposed to update, on the CMS Web site at http://www.cms.gov/HospitalOutpatientPPS, the list of all procedural APCs with 
the final CY 2012 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 2012 device 
pass-through payment applications and by CMS in reviewing those 
applications.
    In summary, for CY 2012, consistent with the policy established for 
CY 2010, we proposed to continue the following policies related to 
pass-through payment for devices: (1) Treating 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 on or after January 1, 2010, as devices for purposes of the OPPS 
pass-through evaluation process and payment methodology; (2) including 
implantable biologicals in calculating the device APC offset amounts; 
(3) using the device APC offset amounts to evaluate whether the cost of 
a device (defined to include implantable biologicals) 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; and (4) reducing device pass-through payments 
based on device costs already included in the associated procedural 
APCs, when we determine that device costs associated with the new 
category are already packaged into the existing APC structure.
    Comment: Several commenters recommended that all biological 
therapies, including implantable biologicals that are approved by the 
FDA under biological license applications (BLAs), be treated as drugs 
for pass-through payment status for CY 2012. The commenters claimed 
that Congress intended that all biologicals approved by the FDA under a 
BLA be paid under the current SCOD payment system, including according 
to the drug pass-through provisions. Another commenter requested that 
CMS clarify its policy to state that the device pass-through criteria 
apply only to biologicals with an FDA approved indication or 
indications that are only surgically implanted. This commenter believed 
that the current regulation is unclear regarding how CMS would evaluate 
pass-through eligibility of a biological that has indications in which 
the biological is surgically implanted for one indication and 
nonimplantable for another indication. The commenter recommended that 
CMS revise the regulations text at 42 CFR 419.64(a)(4) so that if 
refers to ``a biological that is not always surgically implanted into 
the body.''
    Response: As stated in the CY 2010 OPPS/ASC final rule with comment 
period and reiterated in the CY 2011 OPPS/ASC final rule with comment 
period, we evaluate implantable biologicals that function as, and are 
substitutes for, implantable devices for OPPS payment purposes. This is 
done

[[Page 74280]]

regardless of their FDA approval route, the intent of which is to 
ensure their safety and effectiveness through appropriate scientific 
review (74 FR 60476; 75 FR 71924).
    We do not agree with the commenters who asserted that Congress 
intended biologicals approved under BLAs to be paid under the statutory 
provisions that apply to SCODs, including the pass-through provisions. 
Moreover, as we stated in the CY 2010 and CY 2011 OPPS/ASC final rules 
with comment period, Congress did not specify in the statute that we 
must pay for implantable biologicals as biologicals rather than 
devices, if these products that function as medical devices also meet 
our criteria for payment as devices (74 FR 60476; 75 FR 71924). We 
continue to believe that implantable biologicals are devices for the 
purposes of OPPS payment, and therefore that it is appropriate for us 
to treat implantable biologicals as implantable devices and not as 
nonimplantable biologicals.
    We appreciate the commenter's request that we clarify our meaning 
of the regulation text at 42 CFR 419.64(a)(4)(iii), which states that a 
biological for pass-through status purposes must meet the following 
condition (among others): ``biological that is not surgically implanted 
or inserted into the body.'' By this regulatory language, we mean to 
exclude from consideration for drug and biological pass-through status 
any biological that has an indication such that it may function as a 
surgically implanted or inserted biological, even if there are also 
other indications in which the biological is not surgically implanted 
or inserted.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue the policy 
to specify that the pass-through evaluation process and pass-through 
payment methodology for implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) and that are newly approved for pass-through status on or 
after January 1, 2010, be the device pass-through process and payment 
methodology only. We also are finalizing our other proposals, without 
modification, to continue the following policies regarding device 
offsets: (1) Including implantable biologicals in calculating the 
device APC offset amounts; (2) using the device APC offset amounts to 
evaluate whether the cost of a device (defined to include implantable 
biologicals) 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; and (3) 
reducing device pass-through payments based on device costs already 
included in the associated procedural APCs, when we determine that 
device costs associated with the new category are already packaged into 
the existing APC structure.

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

1. Background
    In recent years, there have been several field actions on and 
recalls of medical devices as a result of implantable device failures. 
In many of these cases, the manufacturers have offered devices without 
cost to the hospital or with credit for the device being replaced if 
the patient required a more expensive device. In order to ensure that 
payment rates for procedures involving devices reflect only the full 
costs of those devices, our standard ratesetting methodology for 
device-dependent APCs uses only claims that contain the correct device 
code for the procedure, do not contain token charges, do not contain 
the ``FB'' modifier signifying that the device was furnished without 
cost or with a full credit, and do not contain the ``FC'' modifier 
signifying that the device was furnished with partial credit. As 
discussed in section II.A.2.d.(1) of this final rule with comment 
period, as we proposed, we are continuing to use our standard 
ratesetting methodology for device-dependent APCs for CY 2012.
    To ensure equitable payment when the hospital receives a device 
without cost or with full credit, in CY 2007, we implemented a policy 
to reduce the payment for specified device-dependent APCs by the 
estimated portion of the APC payment attributable to device costs (that 
is, the device offset) when the hospital receives a specified device at 
no cost or with full credit (71 FR 68071 through 68077). Hospitals are 
instructed to report no cost/full credit cases using the ``FB'' 
modifier on the line with the procedure code in which the no cost/full 
credit device is used. In cases in which the device is furnished 
without cost or with full credit, the hospital is instructed to report 
a token device charge of less than $1.01. In cases in which the device 
being inserted is an upgrade (either of the same type of device or to a 
different type of device) with a full credit for the device being 
replaced, the hospital is instructed to report as the device charge the 
difference between its usual charge for the device being implanted and 
its usual charge for the device for which it received full credit. In 
CY 2008, we expanded this payment adjustment policy to include cases in 
which hospitals receive partial credit of 50 percent or more of the 
cost of a specified device. Hospitals are instructed to append the 
``FC'' modifier to the procedure code that reports the service provided 
to furnish the device when they receive a partial credit of 50 percent 
or more of the cost of the new device.
    We reduce the OPPS payment for the implantation procedure by 100 
percent of the device offset for no cost/full credit cases when both a 
specified device code is present on the claim and the procedure code 
maps to a specified APC. Payment for the implantation procedure is 
reduced by 50 percent of the device offset for partial credit cases 
when both a specified device code is present on the claim and the 
procedure code maps to a specified APC. Beneficiary copayment is based 
on the reduced payment amount when either the ``FB'' or the ``FC'' 
modifier is billed and the procedure and device codes appear on the 
lists of procedures and devices to which this policy applies. We refer 
readers to the CY 2008 OPPS/ASC final rule with comment period for more 
background information on the ``FB'' and ``FC'' payment adjustment 
policies (72 FR 66743 through 66749).
2. APCs and Devices Subject to the Adjustment Policy
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42244 through 42245), 
we proposed for CY 2012 to continue the existing policy of reducing 
OPPS payment for specified APCs by 100 percent of the device offset 
amount when a hospital furnishes a specified device without cost or 
with a full credit and by 50 percent of the device offset amount when 
the hospital receives partial credit in the amount of 50 percent or 
more of the cost for the specified device. Because the APC payments for 
the related services are specifically constructed to ensure that the 
full cost of the device is included in the payment, we stated in the CY 
2012 OPPS/ASC proposed rule (76 FR 42244) that we continue to believe 
it is appropriate to reduce the APC payment in cases in which the 
hospital receives a device without cost, with full credit, or with 
partial credit, in order to provide equitable payment in these cases. 
(We refer readers to section II.A.2.d.(1) of this final rule with 
comment period for a description of our standard ratesetting 
methodology for device-dependent APCs.) Moreover, the payment for these 
devices comprises a

[[Page 74281]]

large part of the APC payment on which the beneficiary copayment is 
based, and we continue to believe it is equitable that the beneficiary 
cost sharing reflects the reduced costs in these cases.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42244), we also 
proposed to continue using the three criteria established in the CY 
2007 OPPS/ASC final rule with comment period for determining the APCs 
to which this policy applies (71 FR 68072 through 68077). Specifically: 
(1) All procedures assigned to the selected APCs must involve 
implantable devices that would be reported if device insertion 
procedures were performed; (2) the required devices must be surgically 
inserted or implanted devices that remain in the patient's body after 
the conclusion of the procedure (at least temporarily); and (3) the 
device offset amount must be significant, which, for purposes of this 
policy, is defined as exceeding 40 percent of the APC cost. We also 
proposed to continue to restrict the devices to which the APC payment 
adjustment would apply to a specific set of costly devices to ensure 
that the adjustment would not be triggered by the implantation of an 
inexpensive device whose cost would not constitute a significant 
proportion of the total payment rate for an APC. We stated in the CY 
2012 OPPS/ASC proposed rule (76 FR 42244) that we continue to believe 
these criteria are appropriate because free devices and device credits 
are likely to be associated with particular cases only when the device 
must be reported on the claim and is of a type that is implanted and 
remains in the body when the beneficiary leaves the hospital. We 
believe that the reduction in payment is appropriate only when the cost 
of the device is a significant part of the total cost of the APC into 
which the device cost is packaged, and that the 40-percent threshold is 
a reasonable definition of a significant cost.
    As indicated in the CY 2012 OPPS/ASC proposed rule (76 FR 42244 
through 42245), we examined the offset amounts calculated from the CY 
2012 proposed rule data and the clinical characteristics of APCs to 
determine whether the APCs to which the no cost/full credit and partial 
credit device adjustment policy applied in CY 2011 continue to meet the 
criteria for CY 2012, and to determine whether other APCs to which the 
policy did not apply in CY 2011 would meet the criteria for CY 2012. 
Based on the CY 2010 claims data available for the proposed rule, we 
did not propose any changes to the APCs and devices to which this 
policy applies. However, as discussed in section II.A.2.e.(6) of the 
proposed rule, we proposed to delete APC 0418 (Insertion of Left 
Ventricular Pacing Electrode) for CY 2012 and, therefore, proposed to 
remove this APC from the list of APCs to which the no cost/full credit 
and partial credit device adjustment policy would apply in CY 2012.
    Table 24 of the CY 2012 OPPS/ASC proposed rule (76 FR 42245) listed 
the proposed APCs to which the payment adjustment policy for no cost/
full credit and partial credit devices would apply in CY 2012 and 
displayed the proposed payment adjustment percentages for both no cost/
full credit and partial credit circumstances. We proposed that the no 
cost/full credit adjustment for each APC to which this policy would 
continue to apply would be the device offset percentage for the APC 
(the estimated percentage of the APC cost that is attributable to the 
device costs that are already packaged into the APC). We also proposed 
that the partial credit device adjustment for each APC would continue 
to be 50 percent of the no cost/full credit adjustment for the APC. 
Table 25 of the CY 2012 OPPS/ASC proposed rule (76 FR 42245) listed the 
proposed devices to which the payment adjustment policy for no cost/
full credit and partial credit devices would apply in CY 2012. We 
stated in the CY 2012 proposed rule (76 FR 42244) that we would update 
the lists of APCs and devices to which the no cost/full credit and 
partial credit device adjustment policy would apply for CY 2012, 
consistent with the three criteria discussed earlier in this section, 
based on the final CY 2010 claims data available for the CY 2012 OPPS/
ASC final rule with comment period.
    Comment: One commenter asserted that the proposed full offset 
amount of 60 percent and proposed partial offset amount of 30 percent 
for APC 0425 is not supported by real world cost data. The commenter 
suggested that, based on its data on resource costs for the devices 
used in the procedures assigned to APC 0425, the full offset amount for 
this APC should be no greater than 40 percent. The commenter argued 
that a 60-percent offset would result in significant financial hardship 
to certain facilities and possibly lead to diminishing patient access 
to critical devices.
    Response: We do not agree with the commenter that the CY 2012 
proposed device offset percentage for APC 0425 is inaccurate. As we 
described in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71926), the device cost is estimated from the device HCPCS codes 
present on hospital claims and charges in the lines for four specific 
revenue codes: 275 (Medical/Surgical Supplies: Pacemaker); 276 
(Medical/Surgical Supplies: Intraocular lens); 278 (Medical/Surgical 
Supplies: Other implants); and 624 (Medical/Surgical Supplies: FDA 
investigational devices). The commenter did not provide the ``real 
world cost data'' upon which it based its assertion that the full 
offset amount for APC 0425 should be no greater than 40 percent. 
Therefore, we do not know why there would be a discrepancy between that 
estimate and our estimated device offset percentage of approximately 60 
percent stated in the proposed rule that was based on actual hospital 
cost as calculated from hospital claims as described above. We have no 
reason to believe that this device offset percentage does not 
accurately reflect the percent of cost attributable to devices in APC 
0425. Therefore, we do not agree that it is necessary to limit the 
device offset percentage for no cost/full credit cases for APC 0425 to 
40 percent, as the commenter suggested.
    Comment: One commenter asked for clarification of CMS' policy for 
instances when a device upgrade occurs and the original device is 
refunded at full cost and the upgraded device is charged at full cost. 
According to the commenter, the new device is often more expensive than 
the original device, thus yielding additional device acquisition costs. 
The commenter believes that the ``FC'' modifier should be used in this 
situation.
    Response: As stated in the Medicare Claims Processing Manual (Pub. 
100-04, Chapter 4, Section 61.3.2), when a hospital replaces a device 
with a more expensive device and receives a credit in the amount that 
the device being replaced would otherwise cost, the hospital must 
append modifier ``-FB'' to the procedure code (not on the device code) 
that reports the service provided to replace the device. The hospital 
must charge the difference between its usual charge for the device 
being implanted and its usual charge for the device for which it 
received credit. This charge should be billed in the covered charge 
field. As we stated in the CY 2009 OPPS final rule with comment period 
(73 FR 68630), we do not agree that we need to modify the no cost/full 
credit and partial credit device adjustment policy to account for the 
cost of more expensive replacement devices when manufacturers provide 
device upgrades. We continue to believe that making the full APC 
payment would result in significant overpayment because, as described 
above, we use only those claims that reflect the full costs of devices 
in ratesetting for device-

[[Page 74282]]

dependent APCs. In cases where a hospital incurs a cost for a device 
upgrade, the difference between the cost of the replacement device and 
the full credit the hospital receives for the device being replaced 
would likely be much less than the full cost of the device that is 
included in the device-dependent APC payment rate. To provide the full 
APC payment in these cases would favor a device upgrade, rather than 
replacement with a comparable device, in warranty or recall cases where 
the surgical procedure to replace the device is only medically 
necessary because of the original defective device, for which the 
manufacturer bears responsibility. Moreover, we also are concerned that 
a new policy to apply a smaller APC payment percentage reduction in an 
upgrade case, if we were eventually able to estimate such a percentage 
from sufficient claims data, could also favor device upgrades, rather 
than replacement with a comparable device in those situations for which 
the upgrade is only being provided because the old model failed (and 
for which the manufacturer provides a full credit) but is no longer 
available for use in the replacement procedure. We recognize that, in 
some cases, the estimated device cost and, therefore, the amount of the 
payment reduction will be more or less than the cost a hospital would 
otherwise incur for a no cost/full credit device. However, because 
averaging is inherent in a prospective payment system, we do not 
believe this is inappropriate. Therefore, we continue to believe that 
the full device offset reduction should be made when hospitals receive 
full credit for the cost of a replaced device against the cost of a 
more expensive replacement device.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposals, without modification, to continue the 
established no cost/full credit and partial credit adjustment policies.
    Table 30 below lists the APCs to which the payment adjustment 
policy for no cost/full credit and partial credit devices will apply in 
CY 2012 and displays the final payment adjustment percentages for both 
no cost/full credit and partial credit circumstances. Table 31 below 
lists the devices to which no cost/full credit and partial credit 
device adjustment policy will apply for CY 2012, consistent with the 
three selection criteria discussed earlier in this section, based on 
the final CY 2010 claims data available for this final rule with 
comment period. For CY 2012, OPPS payments for implantation procedures 
to which the ``FB'' modifier is appended are reduced by 100 percent of 
the device offset for no cost/full credit cases when both a device code 
listed in Table 31 below, is present on the claim, and the procedure 
code maps to an APC listed in Table 30 below. OPPS payments for 
implantation procedures to which the ``FC'' modifier is appended are 
reduced by 50 percent of the device offset when both a device code 
listed in Table 31 is present on the claim and the procedure code maps 
to an APC listed in Table 30. Beneficiary copayment is based on the 
reduced amount when either the ``FB'' modifier or the ``FC'' modifier 
is billed and the procedure and device codes appear on the lists of 
procedures and devices to which this policy applies.
    We note that, as discussed in section II.A.2.e.(6) of this final 
rule with comment period, we are finalizing our proposal to delete APC 
0418 for CY 2012 and, therefore, will remove this APC from the list of 
APCs to which the no cost/full credit and partial credit device 
adjustment policy will apply in CY 2012.
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V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals (also referred to as biologics). As enacted by the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 
1999 (Pub. L. 106-113), this provision requires the Secretary to make 
additional payments to hospitals for current orphan drugs, as 
designated under section 526 of the Federal Food, Drug, and Cosmetic 
Act (Pub. L. 107-186); current drugs and biologicals and brachytherapy 
sources used for the treatment of cancer; and current 
radiopharmaceutical drugs and biologicals. For those drugs and 
biologicals referred to as ``current,'' the transitional pass-through 
payment began on the first date the hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and biologicals that were not being paid for as an HOPD 
service as of December 31, 1996, and whose cost is ``not 
insignificant'' in relation to the OPPS payments for the procedures or 
services associated with the new drug or biological. For pass-through 
payment purposes, radiopharmaceuticals are included as ``drugs.'' Under 
the statute, transitional pass-through payments for a drug or 
biological described in section 1833(t)(6)(C)(i)(II) of the Act can be 
made for a period of at least 2 years, but not more than 3 years, after 
the product's first payment as a hospital outpatient service under 
Medicare Part B. Proposed CY 2012 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 referenced in section 
XVII. of the proposed rule and this final rule with comment period and 
available via the Internet.
    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.
    As we noted in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68633), the Part B drug CAP program was postponed beginning in 
CY 2009 (Medicare Learning Network (MLN) Matters Special Edition 0833, 
available via the Web site: http://www.cms.gov). As of publication of 
this final rule with comment period, the postponement of the Part B 
drug CAP program remains in effect, and there is no effective CAP 
program rate for pass-through drugs and biologicals as of January 1, 
2009. Consistent with what we indicated in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71928), if the program is reinstituted 
during CY 2012 and Part B drug CAP rates become available, we would 
again use the Part B drug CAP rate for pass-through drugs and 
biologicals if they are a part of the Part B drug CAP program. 
Otherwise, we would continue to use the rate that would be paid in the 
physician's office setting for all drugs and biologicals with pass-
through status.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64, which 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/McrPartBDrugAvgSalesPrice.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through 
payment amount for drugs and biologicals to be zero based on our 
interpretation that the ``otherwise applicable Medicare OPD fee 
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or 
section 1847B of the Act, if the drug or biological is covered under a 
competitive acquisition contract). We concluded for those years that 
the resulting difference between these two rates would be zero. For CYs 
2008 and 2009, we estimated the OPPS pass-through payment amount for 
drugs and biologicals to be $6.6 million and $23.3 million, 
respectively. For CY 2010, we estimated the OPPS pass-through payment 
estimate for drugs and biologicals to be $35.5 million. For CY 2011, we 
estimated the OPPS pass-through payment for drugs and biologicals to be 
$15.5 million. Our OPPS pass-through payment estimate for drugs and 
biologicals in CY 2012 is $19 million, which is discussed in section 
VI.B. of this final rule with comment period.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2011
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42246 through 42247), 
we proposed that the pass-through status of 19 drugs and biologicals 
would expire on December 31, 2011, as listed in Table 26 of the 
proposed rule (76 FR 42246 through 42247). 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, 2011. These drugs and 
biologicals were approved for pass-through status on or before January 
1, 2010. With the exception of those groups of drugs and biologicals 
that are always packaged when they do not have pass-through status, 
specifically diagnostic radiopharmaceuticals, contrast agents, and 
implantable biologicals, our standard methodology for providing payment 
for drugs and biologicals with expiring pass-through status in an 
upcoming calendar year is to determine the product's estimated per day 
cost and compare it with the OPPS drug packaging threshold for that 
calendar year (which is $75), as discussed further in section V.B.2. of 
this final rule with comment period. If the drug's or biological's 
estimated per day cost is less than or equal to the applicable OPPS 
drug packaging threshold, we would package payment for the drug or 
biological into the payment for the associated procedure in the 
upcoming calendar year. If the estimated per day cost of the drug or 
biological is greater than the OPPS drug packaging threshold, we would 
provide

[[Page 74287]]

separate payment at the applicable relative ASP-based payment amount 
(which is ASP+4 percent for CY 2012, as discussed further in section 
V.B.3. of this final rule with comment period). Section V.B.2.d. of 
this final rule with comment period discusses the packaging of all 
nonpass-through contrast agents, diagnostic radiopharmaceuticals, and 
implantable biologicals.
    Comment: A number of commenters requested that CMS continue pass-
through payments for a third year for certain drugs that, as of 
December 31, 2011, will have received pass-through payments for at 
least 2 years and no more than 3 years and which CMS proposed to remove 
from pass-through status in Table 26 of the CY 2012 OPPS/ASC proposed 
rule (76 CR 42246). Several commenters stated that the volume for 
products for which CMS proposed to expire pass-through status had been 
low for some portion of the pass-through period, and asserted that a 
third year of pass-through would permit CMS to collect more accurate 
and complete cost data on the products. Other commenters stated that 
the costs associated with certain drugs for which CMS proposed to 
expire pass-through status are high, so packaging the product in an APC 
is ``not appropriate.'' Several commenters urged CMS to adopt a 3-year 
pass-through period for all eligible products. One commenter requested 
that CMS grant an additional year of pass-through payments for the 
product described by HCPCS code C9248 (Injection, clevidipine butyrate, 
1 mg) that was removed from the pass-through list on December 31, 2010, 
because the product had been subject to a 10-month long voluntary 
manufacturer's recall during its pass-through period.
    Response: As described in section V.A.1 of this final rule with 
comment period, section 1833(t)(6)(C)(i)(II) of the Act permits CMS to 
make pass-through payments for a period of at least 2 years, but not 
more than 3 years, after the product's first payment as a hospital 
outpatient service under Medicare Part B. We believe this period of 
payment facilitates dissemination of these new products into clinical 
practice and for the collection of hospital claims data reflective of 
their costs for future OPPS ratesetting. Our longstanding practice has 
been to provide pass-through payment for a period of 2 to 3 years, with 
expiration of pass-through status proposed and finalized through the 
annual rulemaking process. Each year, when proposing to expire the 
pass-through status of certain drugs and biologicals, we examine our 
claims data for these products. We observe that hospitals typically 
have incorporated these products into their chargemasters based on the 
utilization and costs observed in our claims data. Under the existing 
pass-through policy, which has been generally supported by commenters, 
we begin pass-through payment on a quarterly basis that depends on when 
applications are submitted to us for consideration and, because we 
expire pass-through status only on an annual basis, there is no way to 
ensure that all pass-through drugs and biologicals receive pass-through 
payment for a full 3 years, while also providing pass-through payment 
for no more than 3 years as the statute requires. Further, based on our 
review of available data, we are confident that the period of time for 
which the products listed in Table 26 of the CY 2012 OPPS proposed rule 
(76 CR 42246) received pass-through payments is adequate for CMS to 
collect sufficient data to make a packaging determination and/or an APC 
assignment in CY 2012. We further note that, consistent with the Act, 
each of these products has received pass-through status for at least 2 
years, but not more than 3 years. As noted in section V.A.1. of this 
final rule with comment period, when a product's pass-through status 
expires, it is either packaged by CMS into an APC if it is either a 
relatively low-cost product that does not exceed the packaging 
threshold or is ``policy packaged'', or, if it is a relatively high-
cost product, it is paid separately on the basis of the product's ASP 
(we refer readers to section V.B.3. of this final rule with comment 
period for more details regarding our payment policy for separately 
payable drugs). Because our policies for drugs with expiring pass-
through status recognize products' relative costliness and establish 
either separate or bundled payment as appropriate, based on such 
costliness, we disagree with commenters that certain relatively high 
cost products currently receiving pass-through payment would not be 
adequately paid if taken off pass-through, and as a result should 
continue with such status.
    Regarding the request for a third year of pass-through status for 
the product described by HCPCS code C9248 (Injection, clevidipine 
butyrate, 1 mg) which was subject to a 10-month recall during its pass-
through period and for which pass-through status expired on December 
31, 2010, we note that because CMS expires pass through status on an 
annual basis, if CMS were to extend the pass-through period for the 
product through CY 2012, as requested by the commenters, this would 
result in the pass-through period being in excess of 3 years; this 
result is not permitted under the statute.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to expire the pass-
through status of the 19 drugs and biologicals listed in Table 32 
below. Table 32 lists the drugs and biologicals for which pass-through 
status will expire on December 31, 2011, the status indicator, and the 
assigned APC for CY 2012.
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3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2012
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42247 through 42249), 
we proposed to continue pass-through status in CY 2012 for 33 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, 2011. These drugs and biologicals, which were approved 
for pass-through status between April 1, 2010 and July 1, 2011, were 
listed in Table 27 of the proposed rule (76 FR 42248 through 42249). 
The APCs and HCPCS codes for these drugs and biologicals were assigned 
status indicator ``G'' in Addenda A and B, which are referenced in 
section XVII. of the proposed rule and this final rule with comment 
period and available via the Internet.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a CAP under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and the year established under such 
section as calculated and adjusted by the Secretary) and the portion of 
the otherwise applicable OPD fee schedule that the Secretary determines 
is associated with the drug or biological. Payment for drugs and 
biologicals with pass-through status under the OPPS is currently made 
at the physician's office payment rate of ASP+6 percent. We believe it 
is consistent with the statute to continue to provide payment for drugs 
and biologicals with pass-through status at a rate of ASP+6 percent in 
CY 2012, the amount that drugs and biologicals receive under section 
1842(o) of the Act. Thus, for CY 2012, 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 2012. Therefore, the difference between ASP+6 percent and 
ASP+4 percent that we proposed to pay for nonpass-through separately 
payable drugs under the CY 2012 OPPS would be the CY 2012 pass-through 
payment amount for these drugs and biologicals. In the case of pass-
through contrast agents and diagnostic radiopharmaceuticals, the 
difference between ASP+6 percent and the ``policy-packaged'' drug APC 
offset amount for the associated clinical APC in which the drug or 
biological is utilized would be the CY 2012 pass-through payment amount 
for these policy-packaged products.
    We note that we proposed to expire pass-through status for the 
remaining three implantable biologicals approved on or before January 
1, 2010, under pass-through status as a drug or biological. Therefore, 
as described in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60476) and in this final rule with comment period, implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) will be evaluated under the 
device pass-through process and paid according to the device payment 
methodology. Payment for nonpass-through implantable biologicals would 
continue to be packaged into the payment for the associated procedure 
as described in section V.B.2.d. of this final rule with comment 
period.
    In addition, we proposed to continue to update pass-through payment 
rates on a quarterly basis on the CMS Web site during CY 2012 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). If the Part B drug CAP is 
reinstated during CY 2012, and a drug or biological that has been 
granted pass-through status for CY 2012 becomes covered under the Part 
B drug CAP, we proposed to provide pass-though payment at the Part B 
drug CAP rate and to make the adjustments to the payment rates for 
these drugs and biologicals on a quarterly basis, as appropriate.
    As is our standard methodology, we annually review new permanent 
HCPCS codes and delete temporary HCPCS C-codes if an alternate 
permanent HCPCS code is available for purposes of OPPS billing and 
payment. We specifically review drugs with pass-through status for CY 
2012 that will change from C-code to permanent J-code for CY 2012. For 
our CY 2012 review, we have determined that HCPCS code J1557 
(Injection, immune globulin (Gammaplex), intravenous, non-lyophilized 
(e.g. liquid), 500 mg) describes the product reported under HCPCS code 
C9270 (Injection, immune globulin (Gammaplex), intravenous, non-
lyophilized (e.g. liquid), 500 mg); HCPCS code J0894 (Injection, 
denosumab, 1 mg) describes the product reported under HCPCS code C9272 
(Injection, denosumab, 1 mg); HCPCS code J0840 (Crotalidae Polyvalent 
Immune Fab (Ovine), 1 vial) describes the product reported under HCPCS 
code C9274 (Crotalidae Polyvalent Immune Fab (Ovine), 1 vial); HCPCS 
code J9043 (Injection, cabazitaxel, 1 mg) describes the product 
reported under HCPCS code C9276 (Injection, cabazitaxel, 1 mg); HCPCS 
code J0221 (Injection, alglucosidase alfa (Lumizyme), 1 mg) describes 
the product reported under HCPCS code C9277 (Injection, alglucosidase 
alfa (Lumizyme), 1 mg); HCPCS code J9179 (Injection, eribulin

[[Page 74290]]

mesylate, 1 mg) describes the product reported under HCPCS code C9270 
(Injection, eribulin mesylate, 1 mg); HCPCS code J2507 (Injection, 
pegloticase, 1 mg) describes the product reported under HCPCS code 
C9281 (Injection, pegloticase, 1 mg); HCPCS code J0712 (Injection, 
ceftaroline fosamil, 10 mg) describes the product reported under HCPCS 
code C9282 (Injection, ceftaroline fosamil, 10 mg); HCPCS code J0131 
(Injection, acetaminophen, 10 mg) describes the product reported under 
HCPCS code C9283 (Injection, acetaminophen, 10 mg); and, HCPCS code 
J9228 (Injection, ipilimumab, 1 mg) describes the product reported 
under HCPCS code C9284 (Injection, ipilimumab, 1 mg).
    In CY 2012, as is consistent with our CY 2011 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 2012, 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: Many commenters supported CMS' proposal to continue 
providing pass-through payments for drugs, biological, and 
radiopharmaceuticals. One commenter stated that it viewed the provision 
of pass-through payments as a ``temporary solution,'' and asserted that 
the global marketplace for Molybdenum and other medical isotopes could 
make historical payment data an inadequate indicator of costs. One 
commenter recommended that CMS require manufacturers to submit ASP data 
for all therapeutic radiopharmaceuticals currently paid under the OPPS.
    Response: We appreciate the commenters' support for our pass-
through payment policy. Although we acknowledge that pass-through 
payments are, by statute, ``temporary'' (section 1833(t)(6)(C)(i)(II) 
of the Act permits CMS to make pass-through payments only for a period 
of at least 2 years, but not more than 3 years), we disagree with the 
commenter's assertion that historical payment data are an inadequate 
indicator of costs. We permit radiopharmaceutical manufacturers to 
voluntarily submit ASP data to us for therapeutic radiopharmaceuticals, 
and for diagnostic radiopharmaceuticals with pass-through status. These 
data are updated regularly, are as current as possible (the most 
recently available ASP data used for this final rule with comment 
period are from October 2011), and are an important component of 
payment. Therefore, we believe that CMS' use of recent ASP data, 
together with the most recently available cost and claims data, are 
adequately responsive to changes in global prices for Molybdenum and 
other medical isotopes.
    We do not believe, however, that requiring manufacturers to submit 
ASP data for all therapeutic radiopharmaceuticals currently paid under 
the OPPS is appropriate. As we stated in the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60524 through 60525), the challenges 
involved in reporting ASP for a radiopharmaceutical are significant, 
given the variety of manufacturing processes in some cases. Therefore, 
due to the fact that the added administrative burden of direct 
reporting outweighs the expected benefits, and given the relative 
accuracy of hospital claims data regarding such drugs, payment based on 
mean unit cost from historical hospital claims data offers the best 
proxy for average hospital acquisition cost and associated handling 
costs for a radiopharmaceutical in the absence of ASP. If ASP 
information is unavailable for a therapeutic radiopharmaceutical, 
meaning that a manufacturer is not willing or not able to submit ASP 
information, we will provide payment based on the mean unit cost of the 
product that is applicable to payment rates for the year the nonpass-
through therapeutic radiopharmaceutical is administered.
    Comment: Several commenters supported CMS' proposal to provide 
payment at ASP+6 percent for drugs, biologicals, contrast agents, and 
radiopharmaceuticals that are granted pass-through status. One 
commenter approved of the proposal to use the ASP methodology that 
would provide payment based on WAC if ASP information is not available, 
and payment at 95 percent of AWP if WAC information is not available. 
Some commenters requested that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through status.
    Response: As discussed above, the statutorily mandated pass-through 
payment for pass-through drugs and biologicals for CY 2012 generally 
equals the amount determined under section 1842(o) of the Act minus the 
portion of the otherwise applicable APC payment that CMS determines is 
associated with the drug or biological. Therefore, the pass-through 
payment is determined by subtracting the otherwise applicable payment 
amount under the OPPS (determined to be ASP+4 percent for CY 2012) from 
the amount determined under section 1842(o) of the Act (ASP+6 percent).
    Regarding the comments that CMS should provide an additional 
payment for radiopharmaceuticals that are granted pass-through status, 
we note that for CY 2012, consistent with our CY 2011 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 2012, we 
proposed to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS. We have routinely provided a 
single payment for drugs, biologicals, and radiopharmaceuticals under 
the OPPS to account for the acquisition and pharmacy overhead costs, 
including compounding costs. We continue to believe that a single 
payment is appropriate for diagnostic radiopharmaceuticals with pass-
through status in CY 2012, and that the payment rate of ASP+6 percent 
(or payment based on the ASP methodology) is appropriate to provide 
payment for both the radiopharmaceutical's acquisition cost and any 
associated nuclear medicine handling and compounding costs. We refer 
readers to section V.B.3. of this final rule with comment period for 
further discussion of payment for therapeutic radiopharmaceuticals 
based on ASP information submitted by manufacturers and the CMS Web 
site at:

[[Page 74291]]

http://www.cms.gov/HospitalOutpatientPPS/.
    After consideration of the comments we received, we are finalizing 
our proposal to provide payment for both diagnostic and therapeutic 
radiopharmaceuticals that are granted pass-through status based on the 
ASP methodology. If a diagnostic or therapeutic radiopharmaceutical 
receives pass-through status during CY 2012, 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 V.B.2.d. of this final rule 
with comment period, over the last 4 years, we implemented a policy 
whereby payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals is 
packaged into payment for the associated procedure. In the CY 2012 
OPPS/ASC proposed rule (76 FR 42247 through 42248), we proposed to 
continue the packaging of these items, regardless of their per day 
cost. As stated earlier, pass-through payment is the difference between 
the amount authorized under section 1842(o) of the Act (or, if the drug 
or biological is covered under a CAP under section 1847B of the Act, an 
amount determined by the Secretary equal to the average price for the 
drug or biological for all competitive acquisition areas and the year 
established under such section as calculated and adjusted by the 
Secretary) and the portion of the otherwise applicable OPD fee schedule 
that the Secretary determines is associated with the drug or 
biological. Because payment for a drug that is either a diagnostic 
radiopharmaceutical or a contrast agent (identified as a ``policy-
packaged'' drug, first described in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68639)) 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 2011, we proposed to continue 
to set the associated copayment amount for pass-through diagnostic 
radiopharmaceuticals and contrast agents that would otherwise be 
packaged if the item did not have pass-through status to zero for CY 
2012. The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical or contrast agent, after taking into 
account any applicable payment offset for the item due to the device or 
``policy-packaged'' APC offset policy, is the item's pass-through 
payment, which is not subject to a copayment according to the statute. 
Therefore, we proposed to not publish a copayment amount for these 
items in Addenda A and B to the proposed rule (which are referenced in 
section XVII. of the proposed rule and this final rule with comment 
period and available via the Internet on the CMS Web site).
    Comment: Several commenters supported the CY 2012 proposal to 
continue to set the associated copayment amounts for pass-through 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals that would otherwise be packaged if the product did not 
have pass-through status to zero. The commenters noted that this policy 
is consistent with statutory requirements and provides cost-saving 
benefits to beneficiaries.
    Response: We appreciate the commenters' support of our proposal. As 
discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42248), we 
believe that, for drugs and biologicals that are ``policy-packaged,'' 
the copayment for the nonpass-through payment portion of the total OPPS 
payment for this subset of drugs and biologicals is accounted for in 
the copayment 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, we believe that the copayment 
amount should be zero for drugs and biologicals that are ``policy-
packaged,'' including diagnostic radiopharmaceuticals.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to set the associated copayment 
amount for pass-through diagnostic radiopharmaceuticals and contrast 
agents that would otherwise be packaged if the item did not have pass-
through status to zero for CY 2012.
    The 33 drugs and biologicals that we proposed to continue on pass-
through status for CY 2012 or that have been granted pass-through 
status as of July 2011 were displayed in Table 27 of the proposed rule 
(76 FR 42248 through 42249). We note that, for CY 2010 and the first 
two quarters of CY 2011, HCPCS code J1572 (Injection, immune globulin, 
(flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. 
liquid), 500 mg) was assigned a status indicator of ``K,'' meaning that 
this product was paid separately as a nonpass-through separately 
payable drug. Beginning on July 1, 2011, HCPCS code J1572 is assigned a 
status indicator of ``G'' and will be given pass-through status for at 
least 2, but not more than 3 years. The payment rate reflecting a pass-
through payment amount of ASP+6 percent was not included in Addenda A 
and B of the proposed rule because these Addenda solely reflect codes 
and prices effective as of the second quarter of CY 2011, or April 
2011. The 38 drugs and biologicals that we are continuing on pass-
through status for CY 2012 or that have been granted pass-through 
status as of January 2012 are displayed in Table 33.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR30NO11.056


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[GRAPHIC] [TIFF OMITTED] TR30NO11.057

BILLING CODE 4120-01-C
4. Provisions for Reducing Transitional Pass-Through Payments for 
Diagnostic Radiopharmaceuticals and Contrast Agents To Offset Costs 
Packaged Into APC Groups
a. Background
    Prior to CY 2008, diagnostic radiopharmaceuticals and contrast 
agents were paid separately under the OPPS if their mean per day costs 
were greater than the applicable year's drug packaging threshold. In CY 
2008 (72 FR 66768), we began a policy of packaging payment for all 
nonpass-through diagnostic radiopharmaceuticals and contrast agents as 
ancillary and supportive items and services into their

[[Page 74294]]

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 2012, we 
proposed to continue to package payment for all nonpass-through 
diagnostic radiopharmaceuticals and contrast agents, as discussed in 
section V.B.2.d. 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 
(or the Part B drug CAP rate) and the otherwise applicable OPD fee 
schedule amount. There is currently one radiopharmaceutical with pass-
through status under the OPPS, HCPCS code A9584 (Iodine I-123 
ioflupane, diagnostic, per study dose, up to 5 millicuries). This 
product, which is presently referred to using HCPCS code A9584, was 
granted pass-through status using HCPCS code C9406 beginning July 1, 
2011, and we proposed that it continue receiving pass-through status in 
CY 2012. We currently apply the established radiopharmaceutical payment 
offset policy to pass-through payment for this product. As described 
earlier in section V.A.3. of this final rule with comment period, we 
proposed that new pass-through diagnostic radiopharmaceuticals would be 
paid at ASP+6 percent, while those without ASP information would be 
paid at WAC+6 percent or, if WAC is not available, payment would be 
based on 95 percent of the product's most recently published AWP.
    Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we deduct from the pass-
through payment for 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 cost from single procedure claims in the APC after 
removing the cost for ``policy-packaged'' drugs divided by the cost 
from single procedure claims in the APC).
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 
through 60484), we finalized a policy to redefine ``policy-packaged'' 
drugs as only nonpass-through diagnostic radiopharmaceuticals and 
contrast agents, as a result of the policy discussed in sections V.A.4. 
and V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60471 through 60477 and 60495 through 60499, respectively) that 
treats nonpass-through implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) and implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) with newly 
approved pass-through status beginning in CY 2010 or later as devices, 
rather than drugs. To determine the actual APC offset amount for pass-
through diagnostic radiopharmaceuticals that takes into consideration 
the otherwise applicable OPPS payment amount, we multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the 
nuclear medicine procedure with which the pass-through diagnostic 
radiopharmaceutical is used and, accordingly, reduce the separate OPPS 
payment for the pass-through diagnostic radiopharmaceutical by this 
amount.
    Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71934 through 71936), we finalized a 
policy to require hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures when the diagnostic radiopharmaceutical is 
received at no cost/full credit. These instructions are contained 
within the I/OCE CMS specifications on the CMS Web site at http://www.cms.gov/OutpatientCodeEdit/02_OCEQtrReleaseSpecs.asp#TopOfPage. 
For CY 2012 and future years, we proposed to continue to require 
hospitals to append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic radiopharmaceutical is received at no 
cost/full credit. In addition, we proposed to continue to require that 
when a hospital bills with an ``FB'' modifier with the nuclear medicine 
scan, the payment amount for procedures in the APCs listed in Table 28 
of the proposed rule (76 FR 42250) would be reduced by the full 
``policy-packaged'' offset amount appropriate for diagnostic 
radiopharmaceuticals. Finally, we also proposed to continue to require 
hospitals to report a token charge of less than $1.01 in cases in which 
the diagnostic radiopharmaceutical is furnished without cost or with 
full credit.
    Comment: Several commenters supported CMS for continuing to require 
that hospitals append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic pharmaceutical is received at no cost/
full credit.
    Response: We appreciate the commenters' support for this proposed 
policy.
    Comment: One commenter recommended that CMS extend modifier ``FB'' 
to all procedures involving nuclear medicine in which all diagnostic 
radiopharmaceuticals are received at no cost or full credit. Further, 
the commenter recommended that CMS consider adopting this policy for 
all contrast-enhanced procedures in which the contrast agent is 
provided at no cost/full credit. The commenter stated that CMS could 
then publish a list of appropriate APCs to which contrast-enhanced 
procedures are assigned in a calendar year, and hospitals would then be 
required to list the ``FB'' modifier with the appropriate APC for the 
contrast-enhanced procedure; payment, according to the commenter, could 
then be reduced by a policy-packaged offset amount for contrast agents. 
As in our policy for reporting of diagnostic radiopharmaceuticals in 
nuclear medicine procedures, the commenter suggested that CMS also 
require hospitals report a token charge of less than $1.01 in cases in 
which the contrast agent is furnished without cost or with full credit. 
The commenter asserted that requiring hospitals to report modifier 
``FB'' for contrast agents received at no cost/full credit would lead 
to more accurate payment and would lead to greater consistency between 
drugs.
    Response: In the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71934 through 71936), we discussed our proposed and finalized 
policy requiring that hospitals append modifier ``FB'' to specified 
nuclear medicine procedures when the diagnostic pharmaceutical is 
received at no cost/full credit. The policy, which was finalized in the 
CY

[[Page 74295]]

2011 final rule with comment period and implemented in CY 2011, was 
prompted by questions from hospitals inquiring how to properly bill for 
diagnostic radiopharmaceuticals obtained free of charge, typically in 
cases when the radiopharmaceutical had been provided to the hospital as 
a free sample. Although we have not received similar billing questions 
from hospitals regarding contrast agents, and have no indications about 
how widespread the practice of a manufacturer is of providing 
``sample'' contrast agents at no cost to a hospital, we agree with the 
commenter that requiring modifier ``FB'' in such circumstances would 
lead to more consistency between drugs and, potentially, to more 
accurate payment. As is the case with diagnostic radiopharmaceuticals, 
CMS also annually posts a proposed and final list of APCs to which a 
contrast offset may be applicable. We could foresee this list being a 
possible element of a future policy establishing a modifier ``FB'' 
reporting policy, policy-packaged offset amount, and token charge 
reporting requirement.
    However, we note that contrast agents are different in some regards 
from diagnostic radiopharmaceuticals. Contrast agents are, in general, 
substantially less costly than diagnostic radiopharmaceuticals and are 
subject to a higher level of competition from generic competitors; this 
combination of lower price and higher potential for generic 
substitution may lead to fewer instances of manufacturers providing 
hospitals with free samples. Furthermore, many radiopharmaceuticals 
have a very limited shelf life, often requiring procurement for a 
specific patient or very narrow window. Contrast agents, on the other 
hand, have longer shelf lives, making it much more likely that 
``wastage'' from a large vial could be used to reduce or eliminate the 
costs for a subsequent patient. Splitting single dose vials can be 
acceptable in certain situations and may create ``free'' contrast agent 
for a patient that does not economically justify an ``FB'' adjustment 
by the hospital. These complexities may reduce the utility of the 
``FB'' modifier for contrast agents.
    Regardless of the differences and similarities between diagnostic 
radiopharmaceutical products, and notwithstanding any possible policy 
merits of treating these two types of products similarly with regards 
to modifier ``FB,'' in the CY 2012 OPPS/ASC proposed rule, we did not 
propose to extend the modifier ``FB'' policy to contrast agents. 
However, we are interested in receiving comments from hospitals, 
manufacturers and other interested parties regarding the possible 
application of modifier ``FB'' to contrast agents when the product is 
received at no cost/full credit to the hospital, the establishment of a 
policy-packaged offset amount for contrast agents, and possible 
reporting of a token charge of less than $1.01 in cases in which the 
contrast agent is furnished without cost/full credit. Although we are 
not accepting the commenter's recommendation that CMS extend the 
modifier ``FB'' policy to contrast agents received at no cost/full 
credit to a hospital because it was not proposed by CMS in CY 2012, we 
anticipate considering these modifications for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue requiring 
hospitals to append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic radiopharmaceutical is received at no 
cost/full credit in CY 2012. In addition, 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. Finally, 
we also will continue to require hospitals to report a token charge of 
less than $1.01 in cases in which the diagnostic radiopharmaceutical is 
furnished without cost or with full credit.
    For CY 2011, we finalized a policy to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described above. For CY 2012, we 
proposed to continue to apply the diagnostic radiopharmaceutical offset 
policy to payment for pass-through diagnostic radiopharmaceuticals.
    Comment: One commenter requested that CMS post all data used to 
calculate the offset amounts and stated that, without these amounts, 
the public cannot make comments on the accuracy and appropriateness of 
CMS' calculation of radiopharmaceutical costs packaged into the nuclear 
medicine APC or the corresponding offset amounts for pass-through 
radiopharmaceuticals.
    Response: The exact data used to calculate all of the proposed and 
final payment rates, including the associated offset amounts, for the 
CY 2012 OPPS are available for purchase under a CMS data use agreement 
through the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS. 
This Web site includes information about purchasing the ``OPPS Limited 
Data Set,'' which now includes the additional variables previously 
available only in the OPPS Identifiable Data Set, including ICD-9-CMS 
diagnosis codes and revenue code payment amounts. We typically have not 
posted the offset amounts by APC until publication of the final rule 
because we assign services to APCs based on our estimate of their full 
resource cost, including, but not limited to, packaged diagnostic 
radiopharmaceuticals. The offset amount is 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 and has no 
bearing on APC assignment.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue applying the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42249 through 42250).
    Table 34 below displays the APCs to which nuclear medicine 
procedures will be assigned in CY 2012 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.

[[Page 74296]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.058

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 
(or the Part B drug CAP rate) and the otherwise applicable OPD fee 
schedule amount. There is currently one contrast agent with pass-
through status under the OPPS: HCPCS code C9275 (Injection, 
hexaminolevulinate hydrochloride, 100 mg, per study dose). HCPCS code 
C9275 was granted pass-through status beginning January 1, 2011, and 
was proposed to continue with pass-through status in CY 2012. As 
described in section V.A.3 of the proposed rule, we proposed that new 
pass-through contrast agents would be paid at ASP+6 percent, while 
those without ASP information would be paid at WAC+6 percent or, if WAC 
is not available, payment would be based on 95 percent of the product's 
most recently published AWP.
    We believe that a payment offset is necessary in order to provide 
an appropriate transitional pass-through payment for contrast agents 
because all of these items are packaged when they do not have pass-
through status. In accordance with our standard offset methodology, in 
the CY 2012 OPPS/ASC proposed rule (76 FR 42250 through 42251), we 
proposed for CY 2012 to deduct from the payment for pass-through 
contrast agents an amount that reflects the portion of the APC payment 
associated with predecessor contrast agents, in order to ensure no 
duplicate contrast agent payment is made.
    In CY 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 2012, as we 
did in CY 2011, we proposed to continue to apply this same policy to 
contrast agents. Specifically, we proposed to utilize the ``policy-
packaged'' drug offset fraction for clinical APCs calculated as 1 minus 
(the cost from single procedure claims in the APC after removing the 
cost for ``policy-packaged'' drugs divided by the cost from single 
procedure claims in the APC). In CY 2010, we finalized a policy

[[Page 74297]]

to redefine ``policy-packaged'' drugs as only nonpass-through 
diagnostic radiopharmaceuticals and contrast agents (74 FR 60495 
through 60499). 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 2012 to recognize that when a contrast agent with 
pass-through status is billed with any procedural APC listed in Table 
29 of the proposed rule, a specific offset based on the procedural APC 
would be applied to payments for the contrast agent to ensure that 
duplicate payment is not made for the contrast agent.
    We did not receive any public comments on our proposal to deduct, 
from the payment for pass-through contrast agents, an amount that 
reflects the portion of the APC payment associated with predecessor 
contrast agents in order to ensure no duplicate contrast agent payment 
is made. We are finalizing, as proposed, our policy to deduct from the 
payment for pass-through contrast agents an amount that reflects the 
portion of the APC payment for pass-through contrast agents, as 
described in the CY 2012 OPPS/ASC proposed rule (76 FR 42250 through 
42251). We also are finalizing the proposed CY 2012 pass-through 
contrast agent offset policy to specify the procedural APCs to which 
offsets for pass through contrast agents would apply. In addition, as 
we proposed, for this final rule with comment period, procedural APCs 
for which we expect a contrast agent offset could be applicable in the 
case of a pass-through contrast agent have been identified 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 (74 FR 60483 through 60484). We are finalizing this 
methodology for CY 2012 to continue to recognize that, when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 35, 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/HospitalOutpatientPPS 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.
    Procedural APCs for which we expect a contrast offset could be 
applicable in the case of a pass-through contrast agent have been 
identified 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 proposed threshold cost for application 
of a contrast agent offset policy is described in detail in the CY 2010 
OPPS/ASC final rule with comment period (70 FR 60483 through 60484). 
For CY 2012, we proposed to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 29 of the proposed rule (76 FR 42251), a specific offset based 
on the procedural APC would be applied to payment for the contrast 
agent to ensure that duplicate payment is not made for the contrast 
agent.
    We did not receive any public comments regarding this proposal and, 
therefore, are adopting it for CY 2012 without modification.

[[Page 74298]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.059

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

1. Background
    Under the CY 2011 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.

[[Page 74299]]

(Transmittal A-01-133, issued on November 20, 2001, explains in greater 
detail the rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Section 1833(t)(16)(B) of the Act set the threshold for 
establishing separate APCs for drugs and biologicals at $50 per 
administration for CYs 2005 and 2006. Therefore, for CYs 2005 and 2006, 
we paid separately for drugs, biologicals, and radiopharmaceuticals 
whose per day cost exceeded $50 and packaged the costs of drugs, 
biologicals, and radiopharmaceuticals whose per day cost was equal to 
or less than $50 into the procedures with which they were billed. For 
CY 2007, the packaging threshold for drugs, biologicals, and 
radiopharmaceuticals that were not new and did not have pass-through 
status was established at $55. For CYs 2008 and 2009, the packaging 
threshold for drugs, biologicals, and radiopharmaceuticals that were 
not new and did not have pass-through status was established at $60. 
For CY 2010, the packaging threshold for drugs, biologicals, and 
radiopharmaceuticals that were not new and did not have pass-through 
status was established at $65. For CY 2011, the packaging threshold for 
drugs, biologicals, and radiopharmaceuticals that were not new and did 
not have pass-through status was established at $70. The methodology 
used to establish the $55 threshold for CY 2007, the $60 threshold for 
CYs 2008 and 2009, the $65 threshold for CY 2010, the $70 threshold for 
CY 2011, and our proposed approach for CY 2012 are discussed in more 
detail in section V.B.2.b. of this final rule with comment period.
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; and for CY 2011, we set the packaging threshold at $70.
    Following the CY 2007 methodology, in the CY 2012 OPPS/ASC proposed 
rule, 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 2012 and rounded the resulting 
dollar amount ($77.63) to the nearest $5 increment, which yielded a 
figure of $80, which we proposed as the packaging threshold for CY 
2012. In performing this calculation, we used the most recent forecast 
of the quarterly index levels for the PPI for Pharmaceuticals for Human 
Use (Prescription) (Bureau of Labor Statistics (BLS) series code 
WPUSI07003) from CMS' Office of the Actuary (OACT). (We note that we 
did not propose a change to the PPI that is used to calculate the 
threshold for CY 2012; rather, this change in terminology reflects a 
change to the BLS naming convention for this series.) We refer below to 
this series generally as the PPI for Prescription Drugs.
    We chose this PPI as it reflects price changes associated with the 
average mix of all pharmaceuticals in the overall economy. In addition, 
we chose this price series because it is publicly available and 
regularly published, improving public access and transparency. 
Forecasts of the PPI for Prescription Drugs are developed by IHS Global 
Insight, Inc., a nationally recognized economic and financial 
forecasting firm. As actual inflation for past quarters replaced 
forecasted amounts, the PPI estimates for prior quarters have been 
revised (compared with those used in the CY 2007 OPPS/ASC final rule 
with comment period) and have been incorporated into our calculation. 
Based on the calculations described above, we proposed a packaging 
threshold for CY 2012 of $80. (For a more detailed discussion of the 
OPPS drug packaging threshold and the use of the PPI for Prescription 
Drugs, we refer readers to the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68085 through 68086).)
b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42252 through 42253), 
we calculated on a HCPCS code-specific basis the per day cost of all 
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals 
(collectively called ``threshold-packaged'' drugs) that had a HCPCS 
code in CY 2010 and were paid (via packaged or separate payment) under 
the OPPS in order to determine their proposed CY 2012 packaging status. 
We used data from CY 2010 claims processed before January 1, 2011 for 
this calculation. However, we did not perform this calculation for 
those drugs and biologicals with multiple HCPCS codes that include 
different dosages as described in section V.B.2.c. of this final rule 
with comment period or for diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals that we proposed to continue to 
package in CY 2012, as discussed in section V.B.2.d. of this final rule 
with comment period.
    In order to calculate the per day costs for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals to determine their 
proposed packaging status in CY 2012, we used the methodology that was 
described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 
through 42724) and finalized in the CY 2006 OPPS final rule with 
comment period (70 FR 68636 through 70 FR 68638). For each drug and 
nonimplantable biological HCPCS code, we used an estimated payment rate 
of ASP+4 percent (which is the payment rate we proposed for separately 
payable drugs and nonimplantable biologicals for CY 2012, as discussed 
in more detail in section V.B.3.b. of the proposed rule and this final 
rule with comment period) to calculate the CY 2012 proposed rule per 
day costs. We used the manufacturer submitted ASP data from the fourth 
quarter of CY 2010 (data that were used for payment purposes in the 
physician's office setting, effective April 1, 2011) to determine the 
proposed rule per day cost.

[[Page 74300]]

    As is our standard methodology, for CY 2012 we proposed to use 
payment rates based on the ASP data from the fourth quarter of CY 2010 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
were referenced in section XVII. of the proposed rule and available via 
the Internet) because these are the most recent data available for use 
at the time of development of the proposed rule. These data were also 
the basis for drug payments in the physician's office setting, 
effective April 1, 2011. 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 2010 hospital claims data to 
determine their per day cost. We proposed to package items with a per 
day cost less than or equal to $80 and identified items with a per day 
cost greater than $80 as separately payable. Consistent with our past 
practice, we crosswalked historical OPPS claims data from the CY 2010 
HCPCS codes that were reported to the CY 2011 HCPCS codes that we 
displayed in Addendum B of the proposed rule (which was referenced in 
section XVII. of the proposed rule and available via the Internet) for 
payment in CY 2012.
    Comment: The majority of commenters objected to the proposed 
increase in the OPPS packaging threshold to $80 for CY 2012. Many 
stated that the $10 increase in the threshold from CY 2011 was larger 
than expected because recent increases in the packaging threshold have 
occurred in $5 increments. Several 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 $70 for CY 2012. One commenter, in particular, 
suggested that CMS freeze the packaging threshold at $70 for at least 3 
years. Many commenters objected to the use of a packaging threshold 
under the OPPS when one is not used for physician's office payment. 
These commenters expressed concern that the packaging threshold may 
impede beneficiary access to lower cost packaged drugs in the HOPD 
setting. A few commenters suggested that CMS limit increases in the 
packaging threshold amount to the market basket update for the year. 
One commenter also recommended that CMS not round up the threshold 
amount to the nearest $5 increment and, instead, defer increases in the 
threshold until changes in prices exceed $5.
    Some commenters believed that eliminating the packaging threshold 
and paying separately for all drugs in the HOPD setting would allow a 
more accurate calculation of the separately payable payment amount for 
drugs (otherwise referred to as the ASP+X calculation).
    Response: As discussed in detail in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66757 through 66758), the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68643), the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60485 through 60487), and the CY 
2011 final rule with comment period (75 FR 71940 through 71943), we 
continue to believe that unpackaging payment for all drugs, biologicals 
and radiopharmaceuticals is inconsistent with the concept of a 
prospective payment system and that such a change could create an 
additional reporting burden for hospitals. The OPPS and the MPFS that 
applies to physician's services are fundamentally different payment 
systems with essential differences in their payment policies and 
structures. Specifically, the OPPS is a prospective payment system 
based on the concept of payment for groups of services that share 
clinical and resource characteristics. Payment is made under the OPPS 
according to prospectively established payment rates that are related 
to the relative costs of hospital resources for services. When 
physician's services are furnished in an office setting, they are paid 
under the MPFS, which is a fee schedule based on the realative value of 
each component. Under the MPFS, separate payment is made for each 
service provided in the physician's office; when individual drugs are 
furnished in the physician's office, they are generally paid under the 
ASP methodology. In contrast, the OPPS includes various drugs within a 
prospective payment system, where payment for certain drugs is packaged 
into the associated procedure payment for the APC group. Given the 
fundamental differences in the way payment is made in an HOPD and a 
physician's office setting, differences in payment are to be expected.
    In general, we do not believe that our packaging methodology under 
the OPPS results in limited beneficiary access to drugs because 
packaging is a fundamental component of a prospective payment system 
that accounts for the cost of certain items and services in larger 
payment bundles, recognizing that some clinical cases may be more 
costly and others less costly, but that, on average, OPPS payment is 
appropriate for the services provided. The growing utilization 
associated with packaged drugs and biologicals in our claims data 
suggests Medicare beneficiaries have sufficient access to these items.
    We note that, in CYs 2005 and 2006, the statutorily mandated drug 
packaging threshold was set at $50, and we continue to believe that it 
is appropriate to continue a modest drug packaging threshold for the CY 
2012 OPPS for the reasons set forth below. As stated in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68086), we believe that 
packaging certain items is a fundamental component of a prospective 
payment system, that packaging these items does not lead to beneficiary 
access issues and does not create a problematic site of service 
differential, that the packaging threshold is reasonable based on the 
initial establishment in law of a $50 threshold for the CY 2005 OPPS, 
that updating the $50 threshold is consistent with industry and 
government practices, and that the PPI for Prescription Drugs is an 
appropriate mechanism to gauge Part B drug inflation. Therefore, 
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 2012 or to eliminate or to freeze the 
packaging threshold at $70.
    We disagree with the commenters who suggested that CMS should limit 
increases in the outpatient drug packaging threshold amount to the 
market basket update for the year. As stated above, we continue to 
believe that updating the $50 threshold is consistent with industry and 
government practices and that the PPI for Prescription Drugs is an 
appropriate mechanism to gauge Part B drug inflation. As we stated in 
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085), we 
believe that the PPI for Prescription Drugs reflects price changes at 
the wholesale or manufacturer stage. Because OPPS payment rates for 
drugs and biologicals are generally based on the ASP data that are 
reported by their manufacturers, we believe that the PPI for 
Prescription Drugs is an appropriate price index to use to update the 
packaging threshold for CY 2007 and beyond.
    In contrast, the market basket update contains numerous price 
proxies, including, but not limited to, proxies for wages and salaries, 
utilities, and

[[Page 74301]]

nonlabor-related expenses, that are not related to price increases for 
prescription drugs. Therefore, we believe that the market basket as a 
whole is not an appropriate mechanism for determining the outpatient 
drug packaging threshold amount. Within the calculation of the market 
basket update, we use the PPI for Prescription Drugs specifically to 
measure the price growth for prescription drugs, but price changes for 
prescription drugs are only one component of price changes for the 
numerous items and services hospitals purchase. Additionally, we 
disagree with the commenters' suggestion that we not round up the 
packaging threshold to the nearest $5 increment and, instead, defer any 
increases in the threshold until changes in prices exceed $5. We note 
that we equally round up or round down to the nearest $5 increment, and 
we continue to believe that rounding to the nearest $5 increment more 
accurately updates the 2005 statutorily mandated drug packaging 
threshold.
    Finally, we believe that our continued application of the 
methodology initially adopted in CY 2007 to update the drug packaging 
threshold does not inhibit our ability to pay accurately for drugs and 
biologicals. We have made several refinements to the ASP+X drug payment 
methodology under the OPPS for nonpass-through drugs and biologicals 
over the past several years to improve its accuracy. During that time, 
we have continued to implement our established methodology for annually 
updating the drug packaging threshold. For CY 2010, we finalized an 
overhead adjustment methodology for determining payment for separately 
payable drugs without pass-through status while we have continued to 
consistently apply the methodology described above to update the drug 
packaging threshold.
    Since publication of the CY 2012 OPPS/ASC proposed rule, consistent 
with our policy of updating the packaging threshold with more recently 
available data for the final rule, we have again followed the CY 2007 
methodology for CY 2012 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 2012. We then rounded the resulting dollar updated dollar 
amount ($77.44) to the nearest $5 increment, which yielded a figure of 
$75. We note that this calculation, by using the most recent forecast 
of the quarterly PPI index levels, resulted in a decrease in the 
trended dollar amount from $77.63 in the CY 2012 proposed rule to 
$77.44 for this final rule with comment period. Because it is our 
policy to round the dollar amount to the nearest $5 increment, the 
slight decrease in the trended dollar amount has resulted in a reduced 
packaging threshold, from $80 in the proposed rule, to a final CY 2012 
packaging threshold of $75. Therefore, after consideration of the 
public comments we received, and consistent with our established 
methodology for establishing the packaging threshold using the most 
recent PPI forecast data, we are adopting a CY 2012 packaging threshold 
of $75.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of HCPCS codes for drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals for the final rule with comment 
period. We note that it is also our policy to make an annual packaging 
determination for a HCPCS code only when we develop the OPPS/ASC final 
rule with comment period for the update year. Only HCPCS codes that are 
identified as separately payable in the final rule with comment period 
are subject to quarterly updates. For our calculation of per day costs 
of HCPCS codes for drugs and nonimplantable biologicals in this CY 2012 
OPPS/ASC final rule with comment period, we proposed to use ASP data 
from the first quarter of CY 2011, 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, 2011, along with 
updated hospital claims data from CY 2010. We note that we also 
proposed to use these data for budget neutrality estimates and impact 
analyses for this CY 2012 OPPS/ASC final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
nonimplantable biologicals included in Addenda A and B to this final 
rule with comment period are based on ASP data from the second quarter 
of CY 2011. 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, 2011. These physician's office 
payment rates will then be updated in the January 2012 OPPS update, 
based on the most recent ASP data to be used for physician's office and 
OPPS payment as of January 1, 2012. For items that do not currently 
have an ASP-based payment rate as proposed, we recalculate their mean 
unit cost from all of the CY 2010 claims data and updated cost report 
information available for this CY 2012 final rule with comment period 
to determine their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in 
this CY 2012 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 median cost fluctuates relative to the 
proposed CY 2012 OPPS drug packaging threshold and the drug's payment 
status (packaged or separately payable) in CY 2011. Specifically, 
consistent with our historical practice, we applied the following 
policies to these HCPCS codes for drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals whose relationship to the $75 drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2011 and that were proposed for separate 
payment in CY 2012, and that then have per day costs equal to or less 
than $75, based on the updated ASPs and hospital claims data used for 
this CY 2012 final rule with comment period, will continue to receive 
separate payment in CY 2012.
     HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2011 and that are proposed for separate payment in 
CY 2012, and that then have per day costs equal to or less than $75, 
based on the updated ASPs and hospital claims data used for this CY 
2012 final rule with comment period, will remain packaged in CY 2012.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we proposed packaged payment in CY 2012 but then have per day 
costs greater than $75, based on the updated ASPs and hospital claims 
data used for this CY 2012 final rule with comment period, will receive 
separate payment in CY 2012.
    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 median cost 
fluctuates relative to the CY 2012 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2011. 
Therefore, we are

[[Page 74302]]

finalizing our proposal, without modification, for CY 2012.
    We note that HCPCS codes J2513 (Pentastarch 10% solution), J3310 
(Perphenazine injection), and J9351 (Topotecan) were paid separately 
for CY 2011 and were proposed for separate payment in CY 2012 and had 
final per day costs of less than the $75 drug packaging threshold, 
based on updated ASPs and the CY 2010 hospital claims data available 
for this CY 2012 final rule with comment period. Therefore, HCPCS codes 
J2513, J3310, and J9351 will continue to be paid separately in CY 2012 
according to the established methodology set forth above.
    In addition, we proposed to provide separate payment for HCPCS code 
J2597 (Inj desmopressin acetate) in CY 2012, which was packaged in CY 
2011. Using updated ASPs and the CY 2010 hospital claims data available 
for this final rule with comment period, HCPCS code J2597 now has a per 
day cost of less than $75. In accordance with our established policy 
for such cases, for CY 2012, we are packaging payment for HCPCS code 
J2597.
    We also proposed to package HCPCS codes 90378 (Rsv ig, im, 50mg), 
J0364 (Apomorphine hydrochloride), J1324 (Enfuvirtide injection), J1642 
(Inj heparin sodium per 10 u), J1644 (Inj heparin sodium per 1000u), 
J1756 (Iron sucrose injection), J2700 (Oxacillin sodium injeciton), 
J3030 (Sumatriptan succinate/6 MG), J9070 (Cyclophosphamide 100 MG 
inj), J9185 (Fludarabine phosphate inj), J9206 (Irinotecan injection), 
J9390 (Vinorelbine tartrate inj), and Q4103 (Oasis burn matrix) . Using 
updated ASPs and the CY 2010 hospital claims data available for this 
final rule with comment period, HCPCS codes 90378, J0364, J1324, J1642, 
J1644, J1756, J2700, J3030, J9070, J9185, J9206, J9390, and Q4103 now 
have per day costs greater than $75. In accordance with our established 
policy for such cases, for CY 2012 we will pay for HCPCS codes 90378, 
J0364, J1324, J1642, J1644, J1756, J2700, J3030, J9070, J9185, J9206, 
J9390, and Q4103 separately.
    Finally, because we did not have claims data for HCPCS code J9213 
(Interferon alfa-2a inj) in the CY 2012 OPPS/ASC proposed rule, we had 
proposed a status indicator of ``E'' for this product in CY 2012. 
However, since publication of the proposed rule, we have received 
claims data and, because the per day cost for this product of 
approximately $70 is less than the final $75 CY 2012 packaging 
threshold, the product is packaged and has a CY 2012 status indicator 
of ``N.''
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60485 
through 60489), we implemented a policy to treat oral and injectable 
forms of 5-HT3 antiemetics comparably to all other threshold packaged 
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals 
under our standard packaging methodology of packaging drugs with a per 
day cost less than $65. In the CY 2012 OPPS/ASC proposed rule (76 FR 
42252), we proposed for CY 2012 to continue our policy of not exempting 
these 5-HT3 antiemetic products from our standard packaging 
methodology. For CY 2012, we proposed to package payment for all of the 
5-HT3 antiemetics except palonosetron hydrochloride, which for CY 2012 
has an estimated per day cost, from the CY 2010 claims data, above the 
proposed CY 2012 drug packaging threshold. Our rationale for this 
policy is outlined in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60487 through 60488).
    Comment: Several commenters suggested that CMS reinstate its policy 
of separate payment for 5-HT3 antiemetics, which are a class of drugs 
often used as part of an anti-cancer treatment regimen to treat nausea.
    Response: We continue to believe that use of these antiemetics is 
an integral part of an anti-cancer treatment regimen and that OPPS 
claims data demonstrate their increasingly common hospital outpatient 
utilization. As we stated in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60488), we no longer believe that a specific 
exemption to our standard drug payment methodology is necessary to 
ensure access to the most appropriate antiemetic products for Medicare 
beneficiaries. We continue to believe that our analysis conducted in 
the CY 2010 OPPS/ASC proposed rule on 5-HT3 antiemetics (74 FR 35320), 
along with the historical stability in prescribing patterns for these 
products and the availability of generic alternatives for several of 
these products, allow us to continue our policy of specifically not 
exempting these products from the OPPS drug packaging threshold.
    Comment: One commenter recommended that CMS not package any drugs 
used in anti-cancer regimens.
    Response: We disagree with the commenter for the reasons mentioned 
above. We believe that packaging certain items, including items used in 
anti-cancer regimens, is a fundamental component of a prospective 
payment system, and is an essential feature that distinguishes a 
prospective payment system from a fee schedule. We do not believe that 
packaging drugs used in an anti-cancer regimen or in outpatient 
treatment of other significant diseases leads to beneficiary access 
issues. This finding is confirmed by our analysis of hospital claims 
data in which we have found that beneficiaries appear to have adequate 
access to cancer treatments, as is signified by ongoing volume growth 
in cancer-related APCs and stability in prescribing products for anti-
cancer drugs such as 5-HT3 antiemetics, for which CMS has continued to 
observe volume growth, even after we ended our multiyear exemption from 
the packaging threshold for these products. In summary, after 
consideration of the public comments we received, we are finalizing our 
proposal to continue our policy of not exempting 5-HT3 antiemetics from 
the drug packaging threshold for CY 2012. In addition, we are not 
providing any exceptions to the standard drug packaging methodology for 
any class of drugs, including anti-cancer therapies, for CY 2012. 
However, we note that the 5-HT3 antiemetic product described by HCPCS 
code J2469 (palonosetron hydrocholride) has a CY 2012 estimated per day 
cost, from the CY 2010 claims data, above the CY 2012 drug packaging 
threshold and, therefore, will receive separate payment in CY 2012.
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

[[Page 74303]]

methodology for determining a code's packaging status for a given 
update year. However, we also stated that we planned to closely follow 
our claims data to ensure that our annual packaging determinations for 
the different HCPCS codes describing the same drug or biological did 
not create inappropriate payment incentives for hospitals to report 
certain HCPCS codes instead of others.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 
through 60491), we finalized a policy to make a single packaging 
determination for a drug, rather than an individual HCPCS code, when a 
drug has multiple HCPCS codes describing different dosages. We analyzed 
CY 2008 claims data for the HCPCS codes describing different dosages of 
the same drug or biological that were newly recognized in CY 2008 and 
found that our claims data would result in several different 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 2012, 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 2012 OPPS/ASC proposed rule (76 FR 42253 through 42255), 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 2012.
    For CY 2012, 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 2010 claims data 
and our pricing information at ASP+4 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. All HCPCS codes 
listed in Table 30 of the proposed rule (76 FR 42254 through 42255) had 
ASP pricing information available for the CY 2012 OPPS/ASC proposed 
rule. Therefore, we multiplied the weighted average ASP+4 percent per 
unit payment amount across all dosage levels of a specific drug or 
biological by the estimated units per day for all HCPCS codes that 
describe each drug or biological from our claims data to determine the 
estimated per day cost of each drug or biological at less than or equal 
to $80 (whereupon all HCPCS codes for the same drug or biological would 
be packaged) or greater than $80 (whereupon all HCPCS codes for the 
same drug or biological would be separately payable).
    Although we did not receive any public comments regarding this 
methodology, as noted in section V.B.2.b. of this final rule with 
comment period, the final CY 2012 drug packaging threshold is $75, and 
not $80 as had been proposed in the CY 2012 OPPS proposed rule. 
Therefore, in preparation for the CY 2012 final rule with comment 
period, we again aggregated both our CY 2010 claims data and our 
pricing information at ASP+4 percent across all of the HCPCS codes that 
describe each distinct drug or biological in order to determine the 
mean units per day of the drug or biological in terms of the HCPCS code 
with the lowest dosage descriptor for those drugs listed in Table 30 of 
the proposed rule (76 FR 42254 through 42255). We then multiplied the 
weighted average ASP+4 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 $75 (whereupon all HCPCS codes for 
the same drug or biological would be packaged) or greater than $75 
(whereupon all HCPCS codes for the same drug or biological would be 
separately payable). In repeating this analysis, we found that two 
products for which we had proposed a CY 2012 status indicator of ``N,'' 
HCPCS J1642 (Injection, heparin sodium (heparin lock flush), per 10 
units) and J1644 (Injection, heparin sodium, per 1000 units) had a 
recalculated per day cost in excess of the $75 packaging threshold. 
Therefore, HCPCS J1642 and J1644 are assigned status indicator ``K'' 
and will be separately payable in CY 2012.
    With the exception of the changed status indicators for HCPCS J1642 
and J1644, we are adopting as final the proposed packaging status of 
each drug and biological HCPCS code to which the aforementioned 
methodology applies. The products affected are displayed in Table 36 
below.
BILLING CODE 4120-01-P

[[Page 74304]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.060


[[Page 74305]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.061


[[Page 74306]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.062

BILLING CODE 4120-01-C
d. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast 
Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs and 
Devices)
    Prior to CY 2008, the methodology of calculating a product's 
estimated per day cost and comparing it to the annual OPPS drug 
packaging threshold was used to determine the packaging status of 
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for 
our CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009, we adopted a policy that packaged the payment for nonpass-
through

[[Page 74307]]

implantable biologicals into payment for the associated surgical 
procedure on the claim (73 FR 68633 through 68636). We refer to 
diagnostic radiopharmaceuticals and contrast agents collectively as 
``policy-packaged'' drugs and implantable biologicals as devices 
because, in CY 2010, we began to treat implantable biologicals as 
devices for all OPPS payment purposes.
    According to our regulations at Sec.  419.2(b), as a prospective 
payment system, the OPPS establishes a national payment rate that 
includes operating and capital-related costs that are directly related 
and integral to performing a procedure or furnishing a service on an 
outpatient basis including, but not limited to, implantable 
prosthetics, implantable durable medical equipment, and medical and 
surgical supplies. Packaging costs into a single aggregate payment for 
a service, encounter, or episode-of-care is a fundamental principle 
that distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Prior to CY 2008, we noted that the proportion of drugs, 
biologicals, and radiopharmaceuticals that were separately paid under 
the OPPS had increased in recent years, a pattern that we also observed 
for procedural services under the OPPS. Our final CY 2008 policy that 
packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, regardless of their per day 
costs, contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    As discussed in more detail in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645 through 68649), we presented several 
reasons supporting our initial policy to package payment of diagnostic 
radiopharmaceuticals and contrast agents into their associated 
procedures on a claim. Specifically, we stated that we believed 
packaging was appropriate because: (1) The statutorily required OPPS 
drug packaging threshold has expired; (2) we believe that diagnostic 
radiopharmaceuticals and contrast agents function effectively as 
supplies that enable the provision of an independent service; and (3) 
section 1833(t)(14)(A)(iii) of the Act requires that payment for 
specified covered outpatient drugs (SCODs) be set prospectively based 
on a measure of average hospital acquisition cost.
    For these reasons, we believe it is appropriate to continue to 
treat diagnostic radiopharmaceuticals and contrast agents differently 
from SCODs for CY 2012. Therefore, in the CY 2012 OPPS/ASC proposed 
rule (76 FR 42255 through 42256), we proposed to continue packaging 
payment for all contrast agents and diagnostic radiopharmaceuticals, 
collectively referred to as ``policy-packaged'' drugs, regardless of 
their per day costs, for CY 2012. We also proposed to continue to 
package the payment for diagnostic radiopharmaceuticals into the 
payment for the associated nuclear medicine procedure and to package 
the payment for contrast agents into the payment of the associated 
echocardiography imaging procedure, regardless of whether the agent met 
the OPPS drug packaging threshold. We refer readers to the CY 2010 
OPPS/ASC final rule with comment period for a detailed discussion of 
nuclear medicine and echocardiography services (74 FR 35269 through 
35277).
    Comment: Several commenters objected to CMS' proposal to package 
payment for all diagnostic radiopharmaceuticals and contrast agents in 
CY 2012. A number of commenters stated that diagnostic 
radiopharmaceuticals and contrast agents with per day costs over the 
proposed OPPS drug packaging threshold are defined as SCODs and, 
therefore, should be assigned separate APC payments. In particular, the 
commenters questioned CMS' authority to classify groups of drugs, such 
as diagnostic radiopharmaceuticals and contrast agents, and implement 
packaging and payment policies that do not reflect their status as 
SCODs. Several comments disagreed with CMS' labeling of 
radiopharmaceuticals as supplies and stated instead that they should be 
treated as other SCODs. The commenters recommended that diagnostic 
radiopharmaceuticals should be subject to the same per day cost drug 
packaging threshold that applies to other drugs, in order to determine 
whether their payment would be packaged or made separately.
    Response: As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66766), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60497), and the CY 2011 final rule with comment 
period (75 FR 71949), we continue to believe that diagnostic 
radiopharmaceuticals and contrast agents are different from other drugs 
and biologicals for several reasons. We note that the statutorily 
required OPPS drug packaging threshold has expired, and we continue to 
believe that diagnostic radiopharmaceuticals and contrast agents 
function effectively as supplies that enable the provision of an 
independent service and are always ancillary and supportive to an 
independent service, rather than themselves serving as the therapeutic 
modality. We packaged their payment in CYs 2008, 2009, 2010, and 2011 
as ancillary and supportive services in order to provide incentives for 
greater efficiency and to provide hospitals with additional flexibility 
in managing their resources. In order for payment to be packaged, it is 
not necessary that all products be interchangeable in every case, and 
we recognized that, in some cases, hospitals may utilize higher cost 
products and, in some cases, lower cost products, taking into 
consideration the clinical needs of the patient and efficiency 
incentives. While we recognize this variability from case to case, on 
average under a prospective payment system, we expect payment to pay 
appropriately for the services furnished. In the past, we have 
classified different groups of drugs for specific payment purposes, as 
evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 
antiemetics and their exemption from the drug packaging threshold. We 
note that we treat diagnostic radiopharmaceuticals and contrast agents 
as ``policy-packaged'' drugs because our policy is to package payment 
for all of the products in the category.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we also began packaging the payment for all nonpass-through 
implantable biologicals into payment for the associated surgical 
procedure because we consider these products to always be ancillary and 
supportive to independent services, similar to implantable 
nonbiological devices that are always packaged. Therefore, we currently 
package payment for nonpass-through implantable biologicals, also known 
as devices that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) into the body. As we stated in 
the CY 2012 OPPS/ASC proposed rule (76 FR 42256), we continue to 
believe that payment should be packaged for nonpass-through implantable 
biologicals for CY 2012.
    Although our final CY 2009 policy (which we are continuing for CY 
2012 as discussed below) packages payment for all diagnostic 
radiopharmaceuticals,

[[Page 74308]]

contrast agents, and nonpass-through implantable biologicals into the 
payment for their associated procedures, we are continuing to provide 
payment for these items in CY 2012 based on a proxy for average 
acquisition cost, as we did in CY 2009. We continue to believe that the 
line-item estimated cost for a diagnostic radiopharmaceutical, contrast 
agent, or nonpass-through implantable biological in our claims data is 
a reasonable approximation of average acquisition and preparation and 
handling costs for diagnostic radiopharmaceuticals, contrast agents, 
and nonpass-through implantable biologicals, respectively. As we 
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68645), we believe that hospitals have adapted to the CY 2006 coding 
changes for radiopharmaceuticals and responded to our instructions to 
include charges for radiopharmaceutical handling in their charges for 
the radiopharmaceutical products. Further, because the standard OPPS 
packaging methodology packages the total estimated cost of each 
radiopharmaceutical, contrast agent, or nonimplantable biological on 
each claim (including the full range of costs observed on the claims) 
with the cost of associated procedures for ratesetting, this packaging 
approach is consistent with considering the average cost for 
radiopharmaceuticals, contrast agents, or nonpass-through implantable 
biologicals, rather than the median cost. In addition, as we noted in 
the CY 2009 OPPS/ASC final rule with comment period (72 FR 68646), 
these drugs, biologicals, or radiopharmaceuticals for which we have not 
established a separate APC and therefore, for which payment would be 
packaged rather than separately provided under the OPPS, are considered 
to not be SCODs. Similarly, drugs and biologicals with per day costs of 
less than $75 in CY 2012 that are packaged and for which a separate APC 
has not been established also are not SCODs. This reading is consistent 
with our final payment policy whereby we package payment for diagnostic 
radiopharmaceuticals, contrast agents, and nonpass-through implantable 
biologicals and provide payment for these products through payment for 
their associated procedures.
    Comment: Several commenters disagreed with the proposal to 
distinguish between diagnostic and therapeutic radiopharmaceuticals for 
payment purposes under the OPPS. The commenters noted that CMS' 
identification of HCPCS code A9544 (Iodine I-131 tositumomab, 
diagnostic, per study dose) as a diagnostic radiopharmaceutical is 
inappropriate because this radiopharmaceutical functions as a 
dosimetric radiopharmaceutical and not as a diagnostic 
radiopharmaceutical. A few commenters explained that this particular 
radiopharmaceutical product is used as part of a therapeutic regimen 
and, therefore, should be considered therapeutic for OPPS payment 
purposes.
    Response: As discussed above and in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60498), and the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71949), we classified each radiopharmaceutical 
into one of the two groups according to whether its long descriptor 
contained the term ``diagnostic'' or ``therapeutic''. HCPCS code A9544 
contains the term ``diagnostic'' in its long code descriptor. 
Therefore, according to our established methodology, we continue to 
classify it as diagnostic for the purposes of CY 2012 OPPS payment. 
While we understand that this item is provided in conjunction with 
additional supplies, imaging tests, and therapeutic 
radiopharmaceuticals for patients already diagnosed with cancer, we 
continue to believe that the purpose of administering the product 
described by HCPCS code A9544 is diagnostic in nature. As we first 
stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66641), we continue to believe that the product described by HCPCS code 
A9544 is a diagnostic radiopharmaceutical. While it is not used to 
necessarily diagnose a general disease state, it is used to determine 
whether future therapeutic services would be beneficial to the patient 
and to determine how to proceed with therapy. We note that this is no 
different than the use of a lab test to guide therapy; the fact that 
the diagnostic test, a service which provides information, is used to 
guide therapy does not make it a therapeutic service, one which 
intended to improve a patient's clinical condition. While a group of 
associated services may be considered a therapeutic regimen by some 
commenters, HCPCS code A9544 is provided in conjunction with a series 
of nuclear medicine imaging scans. Many nuclear medicine studies using 
diagnostic radiopharmaceuticals are provided to patients who already 
have an established diagnosis. We continue to consider HCPCS code A9544 
to be diagnostic because this item is provided for the purpose of 
conducting a diagnostic imaging procedure and is used to identify the 
proposed dose of the therapeutic agent to be provided at a later time.
    Comment: Some commenters recommended using the ASP methodology to 
make payment for nonpass-through diagnostic radiopharmaceuticals, 
noting that it would be inconsistent for CMS to treat diagnostic 
radiopharmaceuticals as ``drugs'' for pass-through payment purposes and 
provide payment for diagnostic radiopharmaceuticals that have pass-
through status based on the ASP methodology, and, then, after the 
diagnostic radiopharmaceutical's pass-through payment status expires, 
package the costs included in historical hospital claims data, rather 
than use the ASP methodology to pay for the product and treat the drug 
as a supply. A few commenters suggested that diagnostic 
radiopharmaceuticals could be paid separately as therapeutic 
radiopharmaceuticals are paid, which would allow manufacturers to 
voluntarily submit ASP data, and then default to the mean unit cost 
when ASP data are unavailable. One commenter asserted that CMS, by 
paying separately for diagnostic radiopharmaceuticals, could reduce 
Medicare program expenditures through reduced outlier payments, 
decreased variability in packaged costs, and more accurate payments for 
nuclear medicine procedures. The commenter stated that this would occur 
at ``only a modest cost'' to the OPPS.
    Response: As we stated above, the statutorily required OPPS drug 
packaging threshold has expired, and we continue to believe that 
diagnostic radiopharmaceuticals and contrast agents are always 
ancillary and supportive to an independent service, rather than 
services themselves as the therapeutic modality. We disagree with 
commenters who suggest that nonpass-through diagnostic 
radiopharmaceuticals should be paid under the ASP methodology, that 
nonpass-through diagnostic radiopharmaceuticals should be paid as pass-
through drugs and biologicals, or that nonpass-through diagnostic 
radiopharmaceuticals should be paid similarly to therapeutic 
radiopharmaceuticals. We continue to believe that nonpass-through 
diagnostic radiopharmaceuticals and contrast agents function 
effectively as supplies that enable the provision of an independent 
service. As we noted in the CY 2009 OPPS/ASC final rule with comment 
period (72 FR 68646) and restate above, drugs biologicals, or

[[Page 74309]]

radiopharmaceuticals for which we have not established a separate APC 
will receive packaged payment under the OPPS, and are considered to not 
be SCODs. We are continuing to provide payment for these items in CY 
2012 based on a proxy for average acquisition cost. We continue to 
believe that the line-item estimated cost for a diagnostic 
radiopharmaceutical, contrast agent, or nonpass-through implantable 
biological in our claims data is a reasonable approximation of average 
acquisition and preparation and handling costs for diagnostic 
radiopharmaceuticals, contrast agents and nonpass-through implantable 
biologicals, respectively.
    Further, as we have stated above, we believe that packaging costs 
into a single aggregate payment for a service, encounter, or episode-
of-care is a fundamental principle that distinguishes a prospective 
payment system from a fee schedule. Our policy of packaging payment for 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals into the payment for the primary procedure or service with 
which they are associated encourages hospital efficiencies and also 
enables hospitals to manage their resources with maximum flexibility. 
Paying separately for diagnostic radiopharmaceuticals, contrast agents, 
or implantable biologicals, when each of these items is ancillary and 
supportive to an independent service, is contrary to this principle of 
a prospective payment system. Moreover, we note that SCODs, the payment 
methodology for which the commenters suggest that CMS adopt for 
diagnostic radiopharmaceuticals and contrast agents, receive OPPS 
payments based on the ASP+X methodology, which has consistently 
resulted in payment rates for SCODs that are equal to some amount 
greater than 100 percent of average sales price for these products; in 
CY 2012, as discussed in section V.B.3.b. of this final rule with 
comment period, SCODs will receive payment equal to 104 percent of ASP 
(ASP+4). We do not agree that payment for diagnostic 
radiopharmaceuticals and contrast agents, were it equal to the SCOD 
reimbursement amount calculated using the ASP+X methodology (or ASP+4 
in CY 2012), could reduce outlier payments or APC variability to an 
extent sufficient enough to offset higher payment rates for these 
products under the ASP+X methodology. Finally, we do not agree with the 
commenter's assertion that separate payment for diagnostic 
radiopharmaceuticals would result in more accurate payment for these 
products. When CMS discussed possible ASP-based payment for diagnostic 
radiopharmaceuticals in the proposed and final rules for OPPS in CY 
2006 (70 FR 68653 through 68657), numerous public commenters advised 
CMS that radiopharmaceuticals are formulated, distributed, compounded, 
and administered in unique distribution channels that preclude the 
determination of ASP relevant to a radiopharmaceutical HCPCS code. 
Further, commenters advised CMS that the manufacturer has no way to 
calculate the ASP of the end product patient dose and, consequently, 
could not supply CMS with accurate ASP data. In the intervening period 
between the CY 2006 final rule with comment period and the present, 
diagnostic radiopharmaceutical use has become more widespread, and 
their formulation more complex. Moreover, we believe that the phenomena 
described by commenters (including radiopharmaceutical manufacturers) 
in the comment period preceding the CY 2006 OPPS final rule, including 
the many preparatory and compounding steps between manufacturer and the 
patient's bedside, remain an impediment to manufacturers' calculations 
of accurate ASP, and thus accurate payment, for these products. 
Therefore, we do not believe that diagnostic radiopharmaceuticals 
should be paid separately under the OPPS such that manufacturers 
voluntarily can submit ASP data and then default to mean unit cost when 
ASP data are unavailable. We believe they are appropriately packaged 
into a single aggregate payment for the accompanying service provided.
    Comment: A few commenters recommended that CMS provide separate 
payment for all diagnostic radiopharmaceuticals with a median per day 
cost greater than $200. The commenters believed that this 
recommendation is most consistent with the APC Panel's recommendation 
to CMS at the Panel's September 2007 meeting (described below). One 
commenter recommended that if CMS does not adopt the recommended $200 
packaging threshold for diagnostic radiopharmaceuticals, that CMS adopt 
alternate packaging criteria providing separate payment when the cost 
of the product is greater than the total APC payment or when the 
coefficient of variation of the radiopharmaceutical exceeds a certain 
threshold.
    Response: As we stated in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60499), at the September 2007 APC Panel meeting, 
the APC Panel recommended that CMS package radiopharmaceuticals with a 
median per day cost of less than $200 but pay separately for 
radiopharmaceuticals with a median per day cost of $200 or more. In the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66638), we did 
not accept the APC Panel's recommendation, citing an inability to 
determine an empirical basis for paying separately for 
radiopharmaceuticals with a median per day cost in excess of $200. 
Instead, as proposed, for CY 2008, we finalized the packaging of 
payment for all diagnostic radiopharmaceuticals. Consistent with the CY 
2012 OPPS/ASC proposed rule, for this final rule with comment period, 
we continue to believe that diagnostic radiopharmaceuticals are 
ancillary and supportive to the nuclear medicine procedures in which 
they are used and that their costs should be packaged into the primary 
procedures with which they are associated. We do not believe it would 
be appropriate to set a cost threshold for packaging diagnostic 
radiopharmaceuticals because, regardless of their per day cost, they 
are always supportive of an independent procedure that is the basis for 
administration of the diagnostic radiopharmaceutical. We also do not 
believe that it is appropriate to consider alternate packaging criteria 
for nonpass-through diagnostic radiopharmaceuticals. We continue to 
believe that, regardless of their per-day cost, these items are always 
supportive of an independent procedure that is the basis for 
administration of the diagnostic radiopharmaceutical. Therefore, our 
policy of packaging costs for these products into an associated APC 
continues to be the approach best suited for use in a prospective 
payment system.
    Further, we note that the OPPS, as a prospective payment system, 
already includes the costs associated with diagnostic 
radiopharmaceuticals into the APCs for which the product is ancillary 
or supportive. We believe that the cost associated with a given product 
at a given point in time is immaterial because the OPPS, as a 
prospective payment system with payments based on average costs 
associated with a covered procedure, already takes into account both 
higher and lower input costs associated with that procedure. We also 
note that the OPPS, like many of Medicare's prospective payment 
systems, has policies in place to provide hospitals with additional 
outlier payments for certain high-cost cases whose costs exceed certain 
thresholds. This system of outliers already provides hospitals (or, in 
the case of partial hospitalization services, community

[[Page 74310]]

mental health centers) with additional reimbursement to offset costs 
that are high relative to the prospective payment amount, regardless of 
whether the costs are associated with radiopharmaceuticals or another 
relatively high-cost element in the patient's course of care.
    Comment: Several commenters requested that CMS provide the public 
with data detailing how the full costs of diagnostic 
radiopharmaceuticals and contrast agents are reflected in procedural 
APC payments.
    Response: The exact data used to calculate all of the proposed and 
final APC assignments and rates, including costs associated with 
diagnostic radiopharmaceuticals and contrast agents, for the CY 2012 
OPPS are available for purchase under a CMS data use agreement through 
the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS. This Web 
site includes information about purchasing the ``OPPS Limited Data 
Set,'' which now includes the additional variables previously available 
only in the OPPS Identifiable Data Set, including ICD-9-CMS diagnosis 
codes and revenue code payment amounts. We typically have not posted 
the offset amounts by APC until publication of the final rule because 
we assign services to APCs based on our estimate of their full resource 
cost, including, but not limited to, packaged diagnostic 
radiopharmaceuticals.
    In CY 2009, we adopted a final policy to package payment for all 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) like our 
longstanding policy that packaged payment for all implantable 
nonbiological devices without pass-through status. We finalized a 
policy in CY 2010 to package payment for nonpass-through implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) into the body, considering them 
to be devices.
    For CY 2012, we proposed to continue to package payment for 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
body, considering them to be devices. Three of the products with 
expiring pass-through status for CY 2012 are biologicals that, 
according to their FDA-approved indications, are only surgically 
implanted. These products are described by HCPCS codes C9361 (Collagen 
matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter 
length), C9362 (Porous purified collagen matrix bone void filler 
(Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc), and C9364 
(Porcine implant, Permacol, per square centimeter). Like the two 
implantable biologicals with expiring pass-through status in CY 2011 
that were discussed in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71948 through 71950), we believe that the three 
biologicals specified above with expiring pass-through status for CY 
2012 differ from other biologicals paid under the OPPS in that they 
specifically function as surgically implanted devices. As a result of 
our proposed packaged payment methodology for nonpass-through 
implantable biologicals, we proposed to package payment for HCPCS codes 
C9361, C9362, and C9364 and assign them status indicator ``N'' for CY 
2012. In addition, any new biologicals without pass-through status that 
are surgically inserted or implanted (through a surgical incision or a 
natural orifice) would be packaged in CY 2012. Moreover, for nonpass-
through biologicals that may sometimes be used as implantable devices, 
we continue to instruct hospitals to not bill separately for the HCPCS 
codes for the products when used as implantable devices. This reporting 
ensures that the costs of these products that may be, but are not 
always, used as implanted biologicals are appropriately packaged into 
payment for the associated implantation procedures. We received no 
comments regarding our proposed packaging of nonpass-through 
implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) into the body.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposals, without modification, to continue to 
package payment for all nonpass-through diagnostic radiopharmaceuticals 
and contrast agents, and implantable biologicals that are surgically 
inserted or implanted into the body through a surgical incision or a 
natural orifice, regardless of their per day costs. Given the inherent 
function of contrast agents and diagnostic radiopharmaceuticals as 
ancillary and supportive to the performance of an independent procedure 
and the similar functions of implantable biologicals and nonbiological 
devices as integral to and supportive of the separately paid surgical 
procedures in which either may be used, we continue to view the 
packaging of payment for contrast agents, diagnostic 
radiopharmaceuticals, and implantable biologicals as a logical 
expansion of packaging payment for drugs and biologicals. In addition, 
as we initially established in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66768), we will continue to identify diagnostic 
radiopharmaceuticals specifically as those Level II HCPCS codes that 
include the term ``diagnostic'' along with a radiopharmaceutical in 
their long code descriptors, and therapeutic radiopharmaceuticals as 
those Level II HCPCS codes that include the term ``therapeutic'' along 
with a radiopharmaceutical in their long code descriptors. We believe 
that the current descriptors accurately discriminate between those 
pharmaceuticals which are used to gather information and those which 
are intended to improve the patient's medical condition.
    In addition, any new biological lacking pass-through status that is 
surgically inserted or implanted through a surgical incision or natural 
orifice would be packaged in CY 2012. For three biologicals with 
expiring pass-through status and which differ from other biologicals 
paid under the OPPS in that they specifically function as surgically 
implanted devices, we are finalizing our proposal to package the 
products described by HCPCS code C9361, C9362, and C9364 and assign 
them status indictor ``N'' for this final rule with comment period.
    We also are finalizing our proposal to package payment for contrast 
agents into the payment of the associated echocardiography imaging 
procedure, regardless of whether the agent met the OPPS drug packaging 
threshold. We refer readers to section III.D.1.e. of this final rule 
with comment period for more information on CMS' final echocardiography 
payment policy. For more information on how we set CY 2012 payment 
rates for nuclear medicine procedures in which diagnostic 
radiopharmaceuticals are used and echocardiography services provided 
with and without contrast agents, we refer readers to the CY 2010 OPPS/
ASC final rule with comment period for a detailed discussion of nuclear 
medicine and echocardiography services (74 FR 35269 through 35277).
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

[[Page 74311]]

payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (SCOD) is a covered outpatient 
drug, as defined in section 1927(k)(2) of the Act, for which a separate 
APC has been established and that either is a radiopharmaceutical agent 
or is a drug or biological for which payment was made on a pass-through 
basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs''. 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 sections 1842(o) and 1847A of the Act.
    Section 1833(t)(14)(E) of the Act provides for an adjustment in 
OPPS payment rates for overhead and related expenses, such as pharmacy 
services and handling costs. Section 1833(t)(14)(E)(i) of the Act 
required MedPAC to study pharmacy overhead and related expenses and to 
make recommendations to the Secretary regarding whether, and if so how, 
a payment adjustment should be made to compensate hospitals for 
overhead and related expenses. Section 1833(t)(14)(E)(ii) of the Act 
authorizes the Secretary to adjust the weights for ambulatory procedure 
classifications for SCODs to take into account the findings of the 
MedPAC study.
    In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we 
discussed the June 2005 report by MedPAC regarding pharmacy overhead 
costs in HOPDs and summarized the findings of that study:
     Handling costs for drugs, biologicals, and 
radiopharmaceuticals administered in the HOPD are not insignificant;
     Little information is available about the magnitude of 
pharmacy overhead costs;
     Hospitals set charges for drugs, biologicals, and 
radiopharmaceuticals at levels that reflect their respective handling 
costs; and
     Hospitals vary considerably in their likelihood of 
providing services that utilize drugs, biologicals, or 
radiopharmaceuticals with different handling costs.
    As a result of these findings, MedPAC developed seven drug 
categories for pharmacy and nuclear medicine handling costs based on 
the estimated level of hospital resources used to prepare the products 
(70 FR 42729). Associated with these categories were two 
recommendations for accurate payment of pharmacy overhead under the 
OPPS.
    1. CMS should establish separate, budget neutral payments to cover 
the costs hospitals incur for handling separately payable drugs, 
biologicals, and radiopharmaceuticals.
    2. CMS should define a set of handling fee APCs that group drugs, 
biologicals, and radiopharmaceuticals based on attributes of the 
products that affect handling costs; CMS should instruct hospitals to 
submit charges for these APCs and base payment rates for the handling 
fee APCs on submitted charges reduced to costs.
    In response to the MedPAC findings, in the CY 2006 OPPS proposed 
rule (70 FR 42729), we discussed our belief that, because of the varied 
handling resources required to prepare different forms of drugs, it 
would be impossible to exclusively and appropriately assign a drug to a 
certain overhead category that would apply to all hospital outpatient 
uses of the drug. Therefore, our CY 2006 OPPS proposed rule included a 
proposal to establish three distinct Level II HCPCS C-codes and three 
corresponding APCs for drug handling categories to differentiate 
overhead costs for drugs and biologicals (70 FR 42730). We also 
proposed: (1) To combine several overhead categories recommended by 
MedPAC; (2) to establish three drug handling categories, as we believed 
that larger groups would minimize the number of drugs that may fit into 
more than one category and would lessen any undesirable payment policy 
incentives to utilize particular forms of drugs or specific preparation 
methods; (3) to collect hospital charges for these HCPCS C-codes for 2 
years; and (4) to ultimately base payment for the corresponding drug 
handling APCs on CY 2006 claims data available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal regarding pharmacy overhead and 
urged us not to finalize this policy, as it would be administratively 
burdensome for hospitals to establish charges for HCPCS codes for 
pharmacy overhead and to report them. Therefore, we did not finalize 
this proposal for CY 2006. Instead, we established payment for 
separately payable drugs and biologicals at ASP+6 percent, which we 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). 
Hereinafter, we refer to this methodology as our standard drug payment 
methodology. We concluded that payment for drugs and biologicals and 
pharmacy overhead at a combined ASP+6 percent rate would serve as an 
acceptable proxy for the combined acquisition and overhead costs of 
each of these products.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we finalized our proposed policy to provide a single payment of 
ASP+6 percent for the hospital's acquisition cost for the drug or 
biological and all associated pharmacy overhead and handling costs. The 
ASP+6 percent rate that we finalized was higher than the equivalent 
average ASP-based amount calculated from claims of ASP+4 percent 
according to our standard drug payment methodology, but we adopted 
payment at ASP+6 percent for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD and awaited the 
accumulation of CY 2006 data as discussed in the CY 2006 OPPS/ASC final 
rule with comment period.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead

[[Page 74312]]

costs while continuing our efforts to improve the available data. We 
also proposed to instruct hospitals to remove the pharmacy overhead 
charge for both packaged and separately payable drugs and biologicals 
from the charge for the drug or biological and report the pharmacy 
overhead charge on an uncoded revenue code line on the claim. We 
believed that this would provide us with an avenue for collecting 
pharmacy handling cost data specific to drugs in order to package the 
overhead costs of these items into the associated procedures, most 
likely drug administration services. Similar to the public response to 
our CY 2006 pharmacy overhead proposal, the overwhelming majority of 
commenters did not support our CY 2008 proposal and urged us to not 
finalize this policy (72 FR 66761). At its September 2007 meeting, the 
APC Panel recommended that hospitals not be required to separately 
report charges for pharmacy overhead and handling and that payment for 
overhead be included as part of drug payment. The APC Panel also 
recommended that CMS continue to evaluate alternative methods to 
standardize the capture of pharmacy overhead costs in a manner that is 
simple to implement at the organizational level (72 FR 66761).
    Because of concerns expressed by the APC Panel and public 
commenters, we did not finalize the proposal to instruct hospitals to 
separately report pharmacy overhead charges for CY 2008. Instead, in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we 
finalized a policy of providing payment for separately payable drugs 
and biologicals and their pharmacy overhead at ASP+5 percent as a 
transition from their CY 2007 payment of ASP+6 percent to payment based 
on the equivalent average ASP-based payment rate calculated from 
hospital claims according to our standard drug payment methodology, 
which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with 
comment period. Hospitals continued to include charges for pharmacy 
overhead costs in the line-item charges for the associated drugs 
reported on claims.
    For CY 2009, we proposed to pay separately payable drugs and 
biologicals at ASP+4 percent, including both SCODs and other drugs 
without CY 2009 OPPS pass-through status, based on our standard drug 
payment methodology. We also continued to explore mechanisms to improve 
the available data. We proposed to split the ``Drugs Charged to 
Patients'' cost center into two cost centers: One for drugs with high 
pharmacy overhead costs and one for drugs with low pharmacy overhead 
costs (73 FR 41492). We noted that we expected that CCRs from the 
proposed new cost centers would be available in 2 to 3 years to refine 
OPPS drug cost estimates by accounting for differential hospital markup 
practices for drugs with high and low overhead costs. After 
consideration of the public comments received and the APC Panel 
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide 
payment for separately payable nonpass-through drugs and biologicals 
based on costs calculated from hospital claims at a 1-year transitional 
rate of ASP+4 percent, in the context of an equivalent average ASP-
based payment rate of ASP+2 percent calculated according to our 
standard drug payment methodology from the final rule claims data and 
cost report data. We did not finalize our proposal to split the single 
standard ``Drugs Charged to Patients'' cost center into two cost 
centers largely due to concerns raised by hospitals about the 
associated administrative burden. Instead, we indicated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68659) that we would 
continue to explore other potential approaches to improve our drug cost 
estimation methodology, thereby increasing payment accuracy for 
separately payable drugs and biologicals.
    In response to our proposals for the CY 2008 and CY 2009 OPPS, a 
group of pharmacy stakeholders (hereinafter referred to as the pharmacy 
stakeholders), including some cancer hospitals, some pharmaceutical 
manufacturers, and some hospital and professional associations, 
commented that we should pay an acquisition cost of ASP+6 percent for 
separately payable drugs, should substitute ASP+6 percent for the 
packaged cost of all packaged drugs and biologicals on procedure 
claims, and should redistribute the difference between the aggregate 
estimated packaged drug cost in claims and payment for all drugs, 
including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They indicated that 
this approach would preserve the aggregate drug cost observed in the 
claims data, while significantly increasing payment accuracy for 
individual drugs and procedures by redistributing drug cost from 
packaged drugs. Their suggested approach would provide a separate 
overhead payment for each separately payable drug or biological at one 
of three different levels, depending on the pharmacy stakeholders' 
assessment of the complexity of pharmacy handling associated with each 
specific drug or biological (73 FR 68651 through 68652). Each 
separately payable drug or biological HCPCS code would be assigned to 
one of the three overhead categories, and the separate pharmacy 
overhead payment applicable to the category would be made when each of 
the separately payable drugs or biologicals was paid.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we 
acknowledged the limitations of our data and our availability to find a 
method to improve that data in a way that did not impose unacceptable 
administrative burdens on providers. Accepting that charge compression 
was a reasonable but unverifiable supposition, we proposed to 
redistribute between one-third and one-half of the estimated overhead 
cost associated with coded packaged drugs and biologicals with an ASP. 
This proposed redistribution resulted in our proposal to pay for the 
acquisition and pharmacy overhead costs of separately payable drugs and 
biologicals that did not have pass-through payment status at ASP+4 
percent. We calculated estimated overhead cost for coded packaged drugs 
and biologicals by determining the difference between the aggregate 
claims cost for coded packaged drugs and biologicals with an ASP and 
the ASP dollars (ASP multiplied by the drug's or biological's units in 
the claims data) for those same coded drugs and biologicals. This 
difference was our estimated overhead cost for coded packaged drugs and 
biologicals.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 35333), 
we stated that we believed that between one-third and one-half of the 
estimated $395 million total in pharmacy overhead costs included in our 
claims data for coded packaged drugs and biologicals with reported ASP 
data, specifically approximately $150 million of those costs, should be 
attributed to separately payable drugs and biologicals. We stated that 
the $150 million serves as the adjustment for the pharmacy overhead 
costs of separately payable drugs and biologicals. As a result, we also 
proposed to reduce the costs of coded drugs and biologicals that are 
packaged into payment for procedural APCs to offset the $150 million 
adjustment to payment for separately payable drugs and biologicals. In 
addition, we proposed that any redistribution of pharmacy overhead cost 
that may arise from the CY 2010 final rule with comment period data 
would occur only from some drugs and biologicals to other drugs and 
biologicals, thereby maintaining the

[[Page 74313]]

estimated total cost of drugs and biologicals that we calculate based 
on the charges and costs reported by hospitals on claims and cost 
reports. As a result of this approach, no redistribution of cost would 
occur from other services to drugs and biologicals or vice versa.
    Using our CY 2010 proposed rule data, and applying our longstanding 
methodology for calculating the total cost of separately payable drugs 
and biologicals in our claims compared to the ASP dollars for the same 
drugs and biologicals, without applying the proposed overhead cost 
redistribution, we determined that the estimated aggregate cost of 
separately payable drugs and biologicals (status indicators ``K'' and 
``G''), including acquisition and pharmacy overhead costs, was 
equivalent to ASP-2 percent. Therefore, under the standard methodology 
for establishing payment for separately payable drugs and biologicals, 
we would have paid for those drugs and biologicals at ASP-2 percent for 
CY 2010, their equivalent average ASP-based payment rate. We also 
determined that the estimated aggregate cost of coded packaged drugs 
and biologicals with an ASP (status indicator ``N''), including 
acquisition and pharmacy overhead costs, was equivalent to ASP+247 
percent.
    While we had no way of assessing whether this current distribution 
of overhead cost to coded packaged drugs and biologicals with an ASP 
was appropriate, we acknowledged in the CY 2010 OPPS/ASC final rule 
with comment period (74 FR 60499 through 60518) that the established 
method of converting billed charges to costs had the potential to 
``compress'' the calculated costs to some degree. Further, we 
recognized that the attribution of pharmacy overhead costs to packaged 
or separately payable drugs and biologicals through our standard drug 
payment methodology of a combined payment for acquisition and pharmacy 
overhead costs depends, in part, on the treatment of all drugs and 
biologicals each year under our annual drug packaging threshold. 
Changes to the packaging threshold may result in changes to payment for 
the overhead cost of drugs and biologicals that do not reflect actual 
changes in hospital pharmacy overhead cost for those products. For 
these reasons, we stated that we believed some portion, but not all, of 
the total overhead cost that is associated with coded packaged drugs 
and biologicals (the difference between aggregate cost for those drugs 
and biologicals on the claims and ASP dollars for the same drugs and 
biologicals), should, at least for CY 2010, be attributed to separately 
payable drugs and biologicals based on our standard methodology.
    We acknowledged that the observed combined payment for acquisition 
and pharmacy overhead costs of ASP-2 percent for separately payable 
drugs and biologicals may be too low and ASP+247 percent for coded 
packaged drugs and biologicals with reported ASP data in the CY 2010 
claims data may be too high (74 FR 35327 and 35328). In addition, we 
stated that we believed that the pharmacy stakeholders' recommendation 
to set packaged drug and biological dollars to ASP+6 percent was 
inappropriate, given our understanding that an equal allocation of 
indirect overhead costs among packaged and separately payable drugs and 
biologicals would lead to a higher observed ASP+X percent than ASP+6 
percent for packaged drugs and biologicals. Further, we indicated that 
indirect overhead costs that are common to all drugs and biologicals 
have no relationship to the cost of an individual drug or biological or 
to the complexity of the handling, preparation, or storage of that 
individual drug or biological. Therefore, we indicated that we believed 
that indirect overhead cost alone for an inexpensive drug or biological 
which would be packaged could be far in excess of the ASP for that 
inexpensive product. We also explained that layered on these indirect 
costs are direct costs of staff, supplies, and equipment that are 
directly attributable only to the storage, handling, preparation, and 
distribution of drugs and biologicals and which do vary, sometimes 
considerably, depending upon the drug being furnished.
    Therefore, we stated that a middle ground would represent the most 
accurate redistribution of pharmacy overhead cost. Our assumption was 
that approximately one-third to one-half of the total pharmacy overhead 
cost currently associated with coded packaged drugs and biologicals in 
the CY 2008 claims data offered a more appropriate allocation of drug 
and biological cost to separately payable drugs and biologicals (74 FR 
35328). One third of the $395 million of pharmacy overhead cost 
associated with packaged drugs and biologicals was $132 million, 
whereas one-half was $198 million.
    Within the one-third to one-half parameters, we proposed that 
reallocating $150 million in drug and biological cost observed in the 
claims data from coded packaged drugs and biologicals with an ASP to 
separately payable drugs and biologicals for CY 2010 would more 
appropriately distribute pharmacy overhead cost among packaged and 
separately payable drugs and biologicals. Based on this redistribution, 
we proposed a CY 2010 payment rate for separately payable drugs and 
biologicals of ASP+4 percent. Redistributing $150 million represented a 
reduction in cost of coded packaged drugs and biologicals with reported 
ASP data in the CY 2010 proposed rule claims data of 27 percent.
    We also proposed that any redistribution of pharmacy overhead cost 
that may arise from CY 2010 final rule data would occur only from some 
drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals in our 
claims data (no redistribution of cost would occur from other services 
to drugs and biologicals or vice versa) (74 FR 35332). We further 
proposed that the claims data for 340B hospitals be included in the 
calculation of payment for drugs and biologicals under the CY 2010 
OPPS, and that hospitals that participate in the 340B program would be 
paid the same amounts for separately payable drugs and biologicals as 
hospitals that do not participate in the 340B program (74 FR 35332 
through 35333). Finally, we proposed that, in accordance with our 
standard drug payment methodology, the estimated payments for 
separately payable drugs and biologicals would be taken into account in 
the calculation of the weight scaler that would apply to the relative 
weights for all procedural services (but would not apply to separately 
payable drugs and biologicals) paid under the OPPS, as required by 
section 1833(t)(14)(H) of the Act (74 FR 35333).
    In the CY 2010 OPPS final rule with comment period, we adopted a 
transitional payment rate of ASP+4 percent based on a pharmacy overhead 
adjustment methodology for CY 2010 that redistributed $200 million from 
packaged drug and biological cost to separately payable drug cost. We 
refer readers to the CY 2010 OPPS/ASC final rule with comment period 
for a complete discussion of the pharmacy overhead adjustment 
methodology (74 FR 60499 through 60518). This $200 million included the 
proposed $150 million redistribution from the pharmacy overhead cost of 
coded packaged drugs and biologicals for which an ASP is reported and 
an additional $50 million dollars from the total uncoded drug and 
biological cost to separately payable drugs and biologicals as a 
conservative estimate of the pharmacy overhead cost of uncoded packaged 
drugs and biologicals that should be appropriately associated with

[[Page 74314]]

the cost of separately payable drugs and biologicals (74 FR 60517). We 
believed that our proposal to reallocate $150 million of costs from 
coded packaged drugs and biologicals, or one-third of the pharmacy 
overhead costs of these products, based upon the claims data available 
for the CY 2010 final rule, to separately payable drugs and biologicals 
was appropriate (74 FR 60511). We also acknowledged that, to some 
unknown extent, there are pharmacy overhead costs being attributed to 
the items and services reported under the pharmacy revenue code without 
HCPCS codes that are likely pharmacy overhead for separately payable 
drugs. Therefore, we reallocated $50 million or 8 percent of the total 
cost of uncoded packaged drug and biological cost in order to represent 
the pharmacy overhead cost of uncoded packaged drugs and biologicals 
that should be appropriately associated with the cost of separately 
payable drugs and biologicals. This was an intentionally conservative 
estimate as we could not identify definitive evidence that uncoded 
packaged drug and biological cost included a pharmacy overhead amount 
comparable to that of coded packaged drugs and biologicals with an ASP. 
We stated that we could not know the amount of overhead associated with 
these drugs without making significant assumptions about the amount of 
pharmacy overhead cost associated with the drug and biologicals 
captured by these uncoded packaged drug costs (74 FR 60511 through 
60513).
    We noted t